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2019 (8) TMI 530
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.... 2. The Petitioner submits that he was employed with Corporate Debtor from 19.07.1991 to 31.08.2016, he was drawing a monthly gross salary of Rs. 84,463/- at the time of retirement and the said dues were acknowledged by the Deputy General Manager (Finance) of the Corporate Debtor by his letter dated 12.10.2016. The following is the content of the letter dated 12.10.2016 written by the Corporate Debtor to the Petitioner. FIN/ESTB/2016 DATE: 12/10/2016 H. S. PINGE, EX-DMG(QA) SR.No.5429/419 Sub: Pending dues Sir, With reference to your note dated 29/08/2016 we are furnishing the information required by you, as follows 1. Dues towards Gratuity as on 31/08/2016 - Rs. 1000000/- 2. Dues towards pending salary (Month wise) as on 31/08/2016 month Sal. Includes med. reimb Med. Reimb. Net Salary Jul, 2014 53930 53930 Nov, 2014 68180 2093 66087 Dec, 2014 67080 67080 Jan, 2015 67730 67730 Feb, 2015 67640 67640 Mar, 2015 67740 67740 Apr, 2015 67830 67830 May, 2015 67830 67830....
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.... Lakhs only) with simple interest @6% per annum with effect from date of entitlement of gratuity till the actual date of payment to Shri Harsh Srinivas Pinge within 30 days of receipt of this notice with an intimation thereof to the undersigned. Given under my hand and seal on this day, the 31st of January 2017 (REMIS TIRU) Authority under Payment of Gratuity Act, 1972 And Regional Labour Commissioner, (Central), Pune Copy to :- Shri Harsh Srinivas Pinge, Sukhada, 32/1, Sahajanand Society, Behind Gandhi Bhavan, Kothrud, Pune - 411038. He is advised to contact the employer for collecting the payment. SD/- Regional Labour Commissioner, (Central), Pune 4. With the above letters the Petitioner claims that Corporate Debtor is liable to pay the Petitioner his retirement dues and the payment of gratuity as the same is their statutory liability in terms of Payment of Gratuity Act, 1972. 5. The Petitioner issued Demand Notice to the Corporate Debtor u/s 8 of the Code on 20.07.2017 demanding a sum of Rs. 16,86,442/-. The Petitioner further issued another Demand Notice to the Corporate Debtor on 22.01....
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....nstitution, State Monopoly in respect of trade or business must be presumed to the reasonable and in the interests of general public so far as Art. 19 (1) (g) is concerned. ii. Rajasthan State Electricity Board Vs Mohan Lal and Others (AIR 1967 SC 1857), which says that Electricity Board of Rajasthan is "State" within the definition of Article 12, under the expression "other authorities", wherein interpretation of Rule of ejusdem generics is not applicable. iii. Indian Airlines Corporation Vs Sukhdeo Rai (AIR 1971 SC 1828), this judgment laid down that, organizations like ONGC, LIC and etc are "Authorities" within the meaning of Article 12. Furthermore, rules and regulations framed by these statutory corporations have the force of law, their employees have statutory status and are entitled to declaration of being employed when their dismissal or removal is in contravention of statutory provisions. iv. Sukhdeo Singh and Others Vs Bhagatram Sardar Singh Raghuvanshi and Another (AIR 1975 SC 1331)herein, question was raised whether order for removal from service contrary to regulations framed under Act of 1959, Act of 1943 and Act of 1956 would enable employe....
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....ies could not vitiate sale or justify allegation of mala fide. Therefore, it was held that sale was not vitiated by any unfairness or arbitrariness. x. Executive Committee of U.P. State Warehousing Corporation Vs Chandra Kiran Tyagi (AIR 1970 SC 1244)In this case, the question was whether order terminating Respondent (Employees) services was nullity. It was held that employees had their rights safeguarded by Insurance Act with order issued by Central Government and it cast statutory obligation on Life Insurance Corporation to adopt particular procedure if services of those employees were to be terminated. Therefore, by not complying with provisions of Clause 10 of order of Central Government, which was really related to Section 11 of Act, Life Insurance Corporation should be considered to had acted in gross violation of mandatory provisions of statute . xi. Ajay Hasia Vs Khalid Mujib Sehravadi and Others (AIR 1981 SC 487), in this case, the Apex Court answered the question as to whether a Society Registered under the Society Registration Act is an "Authority" described under Article 12 of the Constitution. xii. Western Coalfield Limited (BACL) Vs Special ....
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....ase of dismissal on ground of misconduct, which further led to conviction on criminal charge. xxii. Shree Chamundi Mopeds Ltd Vs Church of South India Trust Association (1992) 3 SCC 1 xxiii. Real Value Appliances Ltd. VsCanara Bank and others (1998) 5 SCC 1 xxiv. Gujrat Steel Tube Co. Ltd. Vs Virchandbhai B. Shah & Others (1999) 8 SCC 11 xxv. Solidaire India Vs Fairgrowth Financial Services xxvi. Mardia Chemicals Pvt ltd and Others Vs Union of India and Others, thus judgment refers to "Lenders Liability", it referred to financial transactions governed under the Security Interest (Enforcement) Rules, 2002, it says that such transactions cannot be a one way affair, shutting out all possible remedies to borrowers and permitting assumptions of all drastic powers for speedy recovery of NPA's on part of banks. xxvii. Union of India and Naveen Jindal & Others (AIR 2004 SC 1559) xxviii. NGEF Limited Vs Chandra Developers and Others (2005) 8 SCC 219, this judgment says that Section 536 (2) ipso fact does not confer any power or jurisdiction to the Company Court for sale of assets of sick companies. xxix. Morgan Securiti....
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....ved. In this particular case,the Corporate Debtor has got huge assets and number of employees still working for the same. Admittedly, the amounts as claimed by the Petitioner are payable. Now the questions that arises for consideration are as follows :- (i) Whether CIRP can be initiated against a Govt. Company which is an instrumentality of the state as covered by many judgments of the Hon'ble Apex Court under Article 12 of the Constitution of India; (ii) Whether the IBC is an answer for the Petitioner and whether the admission of the Petition serves the objective for which the IBC is enacted; (iii) Whether the preamble of the Constitution of India which includes the word "socialistic" has any bearing on this petition and; (iv) Whether the admission of the Petition defeats the public purpose. After listening to the arguments of the both the sides and on perusal of all the documents placed on record, following are answers to the above QUESTION 1 & 2: 10. The concept of instrumentality of state has been very elaborately explained in the judgment of the Hon'ble Apex Court titled as R.D. Shetty Vs. International Airport Authority of In....
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....of public enterprises and carrying out other public functions. Ordinarily these functions could have been carried out by Government departmentally through its service personnel, but the instrumentality or agency of the corporations was resorted to in these cases having regard to the nature of the task to be performed. The corporations acting as instrumentality or agency of Government would obviously be subject to the same limitations in the field of constitutional and administrative law as Government itself, though in the eye of the law, they would be distinct and independent legal entities. If Government acting through its officers is subject to certain constitutional and public law limitations, it must follow a fortiori that Government acting through the instrumentality or agency of corporations should equally be subject to the same limitations. But the question is how to determine whether a corporation is acting as instrumentality or agency of Government. It is a question not entirely free from difficulty. 14. A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act 1956 or the Societi....
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....at it and that is, there is no reason even to expressly exempt the Govt. Companies because it is an instrumentality of the state and de-horsing the corporate character and independent entity, there is everything to say that the Govt. Companies are an instrumentality of the state or rather we can say that there an alter ego of the state itself and the result of the same is that the IBC cannot interfere with the state owned undertakings. In view of the above the point No.(i)& (ii)areanswered against the Petitioner as the Petitioner can have an alternate remedy in a civil court or by way of proceeding under Article 226 or 32 of the Constitution of India in an appropriate forum if so advised. QUESTION (iii)& (iv) 11. It is also important to note that the preamble of the constitution included the word "socialistic" at the time of 42nd Amendment to the Constitution. The Hon'ble Apex Court in its judgment titled "Excel Wear and Ors Vs Union of India and Ors" said the following: "24. We now proceed to deal with the rival contentions. But before we do so, we may make some general observations. Concept of socialism or a socialist state has undergone changes from time to tune f....
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....th big and small, holds the share. There are creditors and depositors and various other persons connected with or having dealings with the undertaking. Does socialism go to the extent of not looking to the interests of all such persons? In a State owned undertaking the Government or the Government Company is the owner. If they are compelled to close down, they probably may protect the labour by several other methods at their command, even, sometimes at the cost of the public exchequer. It may not be always advisable to do so but that is a different question. But in a private sector obviously the two matters involved in running it are not on the same footing. One part is the management of the business done by the owners or their representatives and the other is running the business for return to the owner not only for the purpose of meeting his livelihood orexpenses but also for the purpose of the growth of the national economy by formation of more and more capital. Does it stand to reason that by such rigorous provisions like those contained in the impugned sections all these interests should be completely or substantially ignored ? The questions posed are suggestive of the answers....
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....ame would create chaos. Therefore, the constitutional law doesn't permit any Insolvency Petition being maintained against a Government Undertaking owned by the President of India. 12. Herein it is important to mention that the Respondent is a Government Company as defined under section 2 (45) of the Companies Act, 2013, wherein 100% of its shares are being held by the President of India. Therefore, if upon filing of an Application under Sections 7, 8 and 9, and the same were to be admitted, recovery proceedings then would be said to have been initiated against the President of India, which cannot be allowed under the procedure of IBC. 13. The State, we have seen on various occasions, has either tried treating Financially Sick Companies or made sure that dues of the all its Creditors are duly paid.In a Welfare State like India, allowing Insolvency proceedings against an Agency of the Stateis like proceeding against the state itself and the same will set out a wrong precedent. 14. Hence the Petition is dismissed. SD/- Bhaskara Pantula Mohan Member (Judicial) Per: V. Nallasenapathy, Member (T) I have gone through the order of my Ld. Brother an....
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....Article 12 of the Constitution of India this Corporate Debtor is a 'State' and coming under the purview of 'other authorities' as mentioned in Article 12 of the Constitution of India, which is as below: "In this Part, unless the context otherwise requires, "the State'' includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India." d. under the doctrine of immunity of instrumentalities of the State, provided under the constitution of India, the properties of Union of India are exempted even from taxation and other charges. Applying the same analogy the properties of the Corporate Debtor cannot be interfered as provided under the Code. e. though it is a Government Company incorporated under the Companies Act but the status and Statute are different, all government companies are financed by government, Government Company is audited by the agencies appointed by the government etc., the Corporate Debtor is a state and hence the provisions of the Code cannot be applied to this Corporate Debtor. f. the C....
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....w whether the Corporate Debtor can be kept out of the purview of the Code. Section 3(7) of the Code provides that "'corporate person' means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider;" Section 3(8) of the Code provides that "'corporate debtor' means a corporate person who owes a debt to any person;", Section 2(20) of the Companies Act, 2013 provides that "Company means a company incorporated under this Act or under any previous company law" Section 4 of the Code provides that "This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.", Sect....
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....editor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under subsection (4), if any. Application for initiation of corporate insolvency resolution process by operational creditor. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. (6) The corp....
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..... It is to be noted that the Hon'ble NCLAT by an order dated 29.05.2019 approved the liquidation order passed by the New Delhi Bench of NCLAT in the case of "Hindustan Paper Corporation Officers & Supervisor Association & Ors. Vs Hindustan Paper Corporation Ltd. & Ors (Company Appeal (AT) (Insolvency) No. 585 of 2019)", wherein the Corporate Debtor is a public sector undertaking/ Govt. Company. iv. The Hon'ble NCLAT in the case of "Industrial Services vs Burn Standard Company Ltd. & Anr. (Company Appeal (AT) (Insolvency) No. 141 of 2018)" set aside the order of closure of the Company and the order of retrenchment dated 6th March, 2018 and remitted back the matter to NCLT, Kolkata for fresh consideration in accordance with law. Here also the Corporate Debtor is a public sector/Government undertaking. Hence there is no rhyme or reason to exclude the public sector/Government undertaking. d. The Adjudicating Authority under the Code is given a limited power to decide whether the Corporate Debtor is liable to pay the debt and defaulted in making the same. When the debt and default is proved the petition has to be admitted. The Corporate Debtor neither denied liability ....