2023 (1) TMI 1190 - AT - Insolvency and Bankruptcy

Tribunal Rejects Insolvency Application, Dismisses Appeal, Questions Default Evidence

Surendra Singh Hada & Ors Versus Arfat Petrochemicals Pvt Ltd And Arfat Petrochemicals Pvt Ltd Versus Surendra Singh Hada & Ors

The Tribunal found the Section 9 application under the Insolvency and Bankruptcy Code unmaintainable as the corporate debtor had not defaulted in payment ... Maintainability of application filed under sections 33 and 34 of the IBC in relation to a previously sanctioned scheme for rehabilitation of the sick company JKSL under SICA - Whether the Adjudicating Authority was correct in giving liberty to the operational creditors to file application under section 33(3) of IBC? - HELD THAT:- The judgment in Pramod Kumar Pathak [2022 (12) TMI 613 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has clearly noticed the judgment of Hon’ble Supreme Court in the matter of Spartek Ceramics India Ltd. [2018 (10) TMI 1660 - SUPREME COURT] where it was held that Judgment of NCLAT holding that the appeal filed by the Central Government in that case not maintainable in view of the fact that the Notification dated 24.05.2017 travels beyond the scope of the removal of difficulties provision is correct - Thus, it is amply clear that the notification dated 24.5.2017 issued by Central Government goes beyond the remit of removal of difficulties provision of IBC. Thus, liberty given by the Adjudicating authority in the Impugned Order to the operational creditor to file an application under section 33(3) of IBC is erroneous. While holding such a view we also note that the Adjudicating Authority in passing the Impugned Order has not noticed the law laid down by the Hon’ble Supreme Court in the matter of Spartek Ceramics India Ltd. Whether the operational debt claimed by the appellants Surendra Singh Hada and Ors.is an ‘operational debt’ as defined in IBC and whether it is in default and due for payment by the corporate debtor? - HELD THAT:- Whether the operational debt claimed by the appellants Surendra Singh Hada and Ors.is an ‘operational debt’ as defined in IBC and whether it is in default and due for payment by the corporate debtor - the claims of workers were being paid under the monitoring and supervision of retired Hon’ble Justice Mr. N.N. Mathur appointed by the State Government of Rajasthan. The substance of these public notices is that those workers/employees who have not received their past payment as admissible under the Tripartite Labour Settlement Agreements dated 9.10.2002 and 22.10.2002 should contact the Personnel Department of APPL, Kota, Acrylit Plant to receive the cheques of their due payments on any day between 1.6.2008 and 31.5.2009. Obviously, the issue of payment of past dues of former workers/employees of JKSL was being honoured by APPL and also overseen by the State Government of Rajasthan through Hon’ble Justice Mr. N.N. Mathur. When we take a holistic view of the matter of payment of past dues to ex-employees, it is clear that there is no clarity about the past dues as to what was paid and what remained unpaid and also the default on the part of the corporate debtor APPL is not established, since right from 2007 onwards the corporate debtor and earlier JKSL has continued to make sincere efforts to pay such past dues. We are, therefore, quite clear that the default in payment of past dues as claimed by the Appellants Surendra Singh Hada and Others is not established in the present case. The Impugned Order insofar as it gives liberty to the purported operational creditor Surendra Singh Hada and 125 other employees to file application under section 33(3) of the IBC is not in accordance with law - It is thus concluded that in their application under section 9 the appellants Surendra Singh Hada & Ors. have not been able to establish that the corporate debtor APPL committed a default which is ascribable to APPL in payment of any past dues of the ex-workers. Appeal disposed off. Issues Involved:1. Maintainability of the Section 9 application under the Insolvency and Bankruptcy Code (IBC).2. Liberty granted to file an application under Section 33(3) of the IBC.3. Compliance with the Tripartite Labour Settlement Agreements (TLSAs).4. Jurisdiction of the National Company Law Tribunal (NCLT) concerning the sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act (SICA).Detailed Analysis:1. Maintainability of the Section 9 Application:The Appellants Surendra Singh Hada & Ors. filed a Section 9 application under the IBC for the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor APPL, citing non-payment of dues as per the TLSAs. The Learned Counsel for the Appellants argued that the claims of workmen and employees were not paid by APPL despite the TLSAs and that the period of limitation should exclude the duration SICA was in effect. However, the Tribunal found that the sanctioned rehabilitation scheme for JKSL was approved and implemented, and the issue of non-payment of past dues was addressed by the Hon'ble High Court of Rajasthan, which appointed a caretaker to ensure payments. The Tribunal noted that the Appellants failed to avail themselves of the opportunity to receive their dues under the supervision of the appointed caretaker. Therefore, the Tribunal concluded that the corporate debtor had not committed any default in payment of debt, rendering the Section 9 application unmaintainable.2. Liberty to File Application under Section 33(3) of IBC:The Tribunal addressed whether the Adjudicating Authority was correct in granting liberty to the operational creditors to file an application under Section 33(3) of the IBC. The Tribunal referred to the judgment of the Hon'ble Supreme Court in the Spartek Ceramics India Ltd. case, which held that the notification issued by the Central Government exceeded the scope of the 'removal of difficulties' provision. The Tribunal concluded that the liberty given by the Adjudicating Authority to file an application under Section 33(3) of the IBC was erroneous and not in accordance with the law.3. Compliance with the Tripartite Labour Settlement Agreements (TLSAs):The Appellants argued that APPL defaulted in payment of dues as per the TLSAs. The Tribunal noted that the implementation of the sanctioned rehabilitation scheme was monitored, and payments were made under the supervision of a retired Hon'ble Justice appointed by the State Government of Rajasthan. The Tribunal found evidence of public notices inviting workers to claim their dues and concluded that APPL made sincere efforts to pay the past dues. The Tribunal held that there was no clear evidence of default by the corporate debtor in payment of operational debt, thus dismissing the claims of the Appellants.4. Jurisdiction of NCLT concerning the Sanctioned Rehabilitation Scheme under SICA:The Tribunal examined whether NCLT had jurisdiction to entertain issues arising from the sanctioned rehabilitation scheme approved by the erstwhile BIFR. The Tribunal referred to various judgments, including the Spartek Ceramics India Ltd. case, which established that matters relating to the execution/implementation of a previously sanctioned rehabilitation scheme under SICA are not liable to be dealt with under the IBC. The Tribunal concluded that NCLT does not have jurisdiction to review or adjudicate issues related to the sanctioned rehabilitation scheme under SICA.Conclusion:The Tribunal set aside the Impugned Order in its entirety, determining that the Section 9 application was not maintainable, the liberty to file under Section 33(3) of IBC was erroneous, and there was no established default in payment of operational debt by the corporate debtor. The appeal was disposed of without any order as to costs.