TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 530
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....yed 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 Jun, 2015 69360 1652 67708 Jul, 2015 70140 248 69892 Aug, 2015 69890 69890 Sep, 2015 69890 69890 Oct, 2015 71540 71540 No....
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....y 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 22.01.2018 demanding a sum of Rs. 17,16,442/-. 6. The Petitioner filed Bank Certificate as required u/s 9(3)(c) of the Code to say that the has not received the payment from the Corporate Debtor after 17.09.2016.The Petitioner also filed affidavit u/s 9(3)(b) of the Code stating that no dispute has been raised by the Corporate Debtor. 7. The Ld. Senior Counsel for the Corporate Debtor filed reply dated 04.12....
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....cs 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 employees to declaration against statutory corporation of continuance in service or would give rise to claim damages, it was held that rules and regulations framed by appellants have force of law and statutory bodies have no free hand in framing conditions and terms of services of their employees, and that they are bound to apply terms and conditions as laid down in regulations Furthermore, employees are entitled to declaration of being in employment when dismissa....
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....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 Area Development Authority, Korba (1981 DGLS SC 469)In this case the issue was raised that, whether the demand for Property-tax made by respondent 1 on the appellant Companies legal and justified? It was held that the agreement which was entered into between the appellant Companies and respondent 1, the respondent 1 had waived its power of taxation. The Chairman of respondent 1, had acted beyond the scope of his authority in entering into the agreement with the appellant Companies, under which respondent....
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.... 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 Securities & Credit ltd. VsModi Rubber Ltd. xxx. Jay Engineering Works Ltd. Vs Industry Facilitation Council and Others. (2006) 8 SCC 677 xxxi. Tata Motors Limited Vs PharmaceuticalsProducts of India Ltd and others (2008) 7 SCC 617 xxxii. Union of India Vs R. Gandhi, President, Madras Bar Association xxxiii. Raheja Universal Limited Vs NRC Limited and Others (2012) 4 SCC 148 xxxiv. M/s Salem Textiles limited Vs Phoenix ARC Ltd (2013 Madras 229) xxxv. KSL and Industries Limited Vs Arihant Threads Limited & Others (2015) 1 SCC 166 9. I have heard the contentions raised by both the sides. In fac....
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....titution 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 India (AIR 1979 SC 1628)in the following lines: "13. Now, it is obvious that the Government which represents the executive authority of the State, may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency of juridical persons to carry out its functions. In the early days, when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge governmental functions, which were of traditional vintage. But as the tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that th....
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....ic 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 Societies Registration Act 1860. Where a Corporation is wholly controlled by Government not only in its policy making but also in carrying out the functions entrusted to it by the law establishing it or by the Charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working, subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is managed by a board of directors or committee of management in ac....
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....ION (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 from country to country and from thinkers tothinkers. But some basic concept still holds the field. In the case of Akadasi Padhan v. State of Orissa the question forconsideration was whether a law creating a State monopoly is valid under the latter part of Article 19(6) which was introduced by the (first Amendment) Act, 1951. While considering that question, it was pointed out by Gajendragadkar J., as he then was, at page 704: With the rise of the philosophy of Socialism, the doctrine of State ownership has been often discussed by political and economic thinkers. Broadly speaking, this discussion discloses a difference in approach. To the socialist, nationalisation or State ownership is a matter of ....
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....ers 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." (Emphasis Supplied) From the above it is clear that irrespective of the fact whether a company is earning profits or not and has the ability to pay debts or not, the survival of the company cannot be put in jeopardy and in view of the fact that the CIRP process virtually creates a situation where the activities of the company goes into the hands of a Resolution Professional. Here is a case merely because an employee who served the company for several years and had grown from the bottom to the top level not winding his long association with the Company which provided him bread and butter for so many years,had filed the above petition just because the undertaking is not presently in a position to pay his dues?....
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....ly 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 and I respectfully disagree with his views for the following reasons: 1. The contentions of the Corporate Debtor referred in para 7 supra cannot come in the way of admission of the Petition in view of the fact that debt and default is writ large in the Petition and the Corporate Debtor has not raised any dispute with regard to the liability. The Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (MANU/SC/1196/2017) held as below: "25. Therefore, the adjudicating authority, when examining an application Under Section 9 of the Act will have to determine: (i) Whether there is an "operational debt" as defined exceeding Rs. 1 lakh? (ii) Whether the documentary evidence furnished with ....
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....ode. 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 Corporate Debtor is trying to sell the land owned by it for payment of unpaid salary of employees and the Hon'ble Bombay High Court directed the company to sell the access land for payment of salary dues and the same is an assistance by the Central Government to dilute the company which proves that the government has full control over the authority of the Corporate Debtor. g. the extreme step of appointing of Insolvency Professional as contemplated in the code is not applicable to Government Companies and hence this petition has to be dismissed. h. the payment of Gratuity Act, Bonus Act, and other Industrial Acts are self contained code and if the Bankruptcy code is allowed to prevail over those acts, they are required to be amended and /or scraped. i. Government of India infused funds to the extent ....
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....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.", Section 5(20) of the Code provides that "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; Section 5(21) of the Code provides that "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; Section 9 of the Code provides that (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under subsection (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before t....
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....ority, 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 corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section. An ordinary scanning of the above provisions clearly reveals that the Corporate Debtor herein, being a company incorporated under the Companies Act, is a corporate person who owes operational debt to the Petitioner and hence the petition is maintainable against the Corporate Debtor under Section 9 of the Code. It is to be noted that the only exception given under Section 3(7) of the Code is for financial sector regulator. The legislature in its wisdom has not given any exception or exclusion to the public sector/Government undertakings. Further the intention of the legislature is very clear that the Government companies also fall within the ambit of the Code. This Adjudicating Authority cannot travel beyond the provision of law. Hence, the answer to the question supra is a big no. The contenti....
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....her 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 nor the default nor raised any dispute. The documents produced by the Petitioner clearly prove that the Corporate Debtor defaulted in making the payment of retirement benefits to the Petitioner. The Hon'ble Supreme Court has already upheld the Constitutional Validity of the Code in entirety in the case of "Swiss Ribbon Private Limited and Anr. vs Union of India and Anr. (2019 4 SCC 17)". This Adjudicating Authority is mandated only to look into three things before admitting a petition under Section 9, first debt, second occurrence of default and third the existence of dispute and nothing more. When these are looked into the petition deserves admission. There is no question of testing the constitutional validity of any provision of the Code by this Adjudicating Authority in the given circumstance and the same will be beyond the jurisdiction of this Tribunal. e. It is to be noted that the Government of India, on 09.11.2015 vide notification No. 16(25)/2004-Fin., had abolished the Boar....