Tribunal affirms Adjudicating Authority decision on Corporate Debtor's operation as going concern

The Tribunal upheld the Adjudicating Authority's decision, dismissing the appeal and emphasizing the Corporate Debtor's operation as a going concern. It highlighted that gratuity claims would be settled in accordance with the Code when due, finding no irregularities in the Authority's ruling. The Tribunal stressed the necessity of a subsisting claim for inclusion in the Stakeholders Consultation Committee, affirming that workmen/employees without such claims cannot be part of the SCC. The Liquidator was directed to promptly reconstitute the SCC to comply with regulations.

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Issues Involved:
1. Refund of Liquidator's fee.
2. Inclusion of a representative of workmen/employees in the Stakeholders Consultation Committee (SCC).
3. Recovery of Rs. 26 crore paid to financial creditors.
4. Locus standi of the applicant.
5. Conflict of interest between the Liquidator and Central Bank of India.
6. Proper constitution of the SCC.

Issue-wise Detailed Analysis:

1. Refund of Liquidator's Fee:
The Learned Adjudicating Authority noted that the prayer for refund of the Liquidator's fee of Rs. 1.5 crore had become infructuous as the refund had already occurred via cheque dated 03.11.2020 under compelling circumstances.

2. Inclusion of a Representative of Workmen/Employees in the SCC:
The Authority denied the inclusion of a representative of workmen/employees in the SCC, stating that the workers did not have a subsisting claim. It emphasized the symbiotic relationship between Regulations 31 and 31A of the Liquidation Regulations, asserting that inclusion in the SCC is contingent upon inclusion in the list of stakeholders.

The Appellant argued that the Liquidator must include a representative of the Workmen/Employees in the SCC regardless of whether they have a subsisting claim. The Appellant contended that the Liquidator wrongfully rejected their claims for the notice period, citing Section 33(7) of the Insolvency and Bankruptcy Code, 2016, which states that liquidation does not constitute notice of discharge if the business continues during liquidation. The Appellant also highlighted that the Liquidator included six financial creditors in the SCC, exceeding the permissible limit of four under Regulation 31-A.

The Respondent countered that the Liquidator had filed a list of stakeholders based on verified claims and that the Appellant's claim for leave encashment and notice period salary was rejected, with no appeal filed against this decision as per Section 42 of the Code. The Respondent maintained that inclusion in the SCC is subject to the existence of claims under Regulation 31.

The Tribunal upheld the decision of the Adjudicating Authority, noting that the Appellant did not challenge the rejection of their claims and that Regulations 31 and 31-A must be read together, indicating that without a subsisting claim, workmen/employees cannot be included in the SCC.

3. Recovery of Rs. 26 Crore Paid to Financial Creditors:
The Authority did not accede to the prayer for directing the Liquidator to recover Rs. 26 crore paid to financial creditors, as the order dated 26.06.2020, whose implementation was sought, was under challenge before the Hon'ble NCLAT. However, financial creditors were directed to file affidavits within fifteen days regarding keeping the amounts distributed to them in an interest-bearing account.

4. Locus Standi of the Applicant:
The Authority affirmed the applicant's locus standi to file the application, clarifying that Section 50 of the Maharashtra Public Trust Act, 1950, applies only to suits and not to the present proceedings. It also noted that objections regarding locus were not raised in the Liquidator's reply and appeared to be an afterthought.

5. Conflict of Interest:
The Authority observed a potential conflict of interest between the Liquidator and the Central Bank of India, noting that the interests of both parties were not completely aligned concerning the present application.

6. Proper Constitution of the SCC:
The Authority directed the Liquidator to reconstitute the SCC immediately in accordance with Regulation 31A read with Regulation 31 of the Liquidation Regulations, as the SCC constituted with all nine financial creditors violated Regulation 31A(2).

Conclusion:
The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order. It emphasized that the Corporate Debtor is being conducted as a going concern and that claims of gratuity would be paid as per the provisions of the Code when they arise. The Tribunal found no illegality or infirmity in the Adjudicating Authority's order.

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