Basavaraj Koujalagi & Ors vs Mr. Sumit Binani

[Arising out of order dated 03.05.2021 in I.A. No. 865/KB/2020 in CP (IB) No. 182/KB/2017 passed by the Ld. Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata)]

IN THE MATTER OF:

1. Basavraj Kaujalagi, 94 P Belur Industrial Area,

Dharwad, Karnataka.

2. Mailarigouda Patil,

94 P Belur Industrial Area,

Dharwad, Karnataka.

3. Gangappa Adinavar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

4. Mallikarjun Badigar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

5. Shyam Singanmalli,

94 P Belur Industrial Area,

Dharwad, Karnataka.

6. Siddalingappa Halemani,

94 P Belur Industrial Area,

Dharwad, Karnataka.

7. Veerappa Desai, 2

94 P Belur Industrial Area,

Dharwad, Karnataka.

8. Subramanya Jannadha Varma Sagi,

94 P Belur Industrial Area,

Dharwad, Karnataka.

9. Vinay Nagmule,

94 P Belur Industrial Area,

Dharwad, Karnataka.

10. Sunil Kulkarni, 94 P Belur Industrial Area,

Dharwad, Karnataka.

11. Vinayak Chvan,

94 P Belur Industrial Area,

Dharwad, Karnataka.

12. Ratnajji Shinde,

94 P Belur Industrial Area,

Dharwad, Karnataka.

13. Venkatesh Joshi,

94 P Belur Industrial Area,

Dharwad, Karnataka.

14. Paravattappa Nekar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

15. Ajjappa Nandi,

94 P Belur Industrial Area,

Dharwad, Karnataka.

16. Ranglal Ram,

Company Appeal (AT) (Insolvency) No. 731 of 2021 3

94 P Belur Industrial Area,

Dharwad, Karnataka.

17. Srikant ram,

94 P Belur Industrial Area,

Dharwad, Karnataka.

18. Ashwini Kumar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

19. Prakash Sah, 94 P Belur Industrial Area,

Dharwad, Karnataka.

20. Shambu Paswan,

94 P Belur Industrial Area,

Dharwad, Karnataka.

21. Virupaxi Machapur,

94 P Belur Industrial Area,

Dharwad, Karnataka.

22. Basavraj Jampannavar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

23. Deepak Kalal,

94 P Belur Industrial Area,

Dharwad, Karnataka.

24. Mounesh Pattar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

25. Binay Kumar Prajapati,

Company Appeal (AT) (Insolvency) No. 731 of 2021 4

94 P Belur Industrial Area,

Dharwad, Karnataka.

26. Baleshwar Das,

94 P Belur Industrial Area,

Dharwad, Karnataka.

27. Parveezahmed Shirhatti,

94 P Belur Industrial Area,

Dharwad, Karnataka.

28. Chandrashekar Lamani, 94 P Belur Industrial Area,

Dharwad, Karnataka.

29. Digambara R Daivanga,

94 P Belur Industrial Area,

Dharwad, Karnataka.

30. Sanjay Kumar Pathak,

94 P Belur Industrial Area,

Dharwad, Karnataka.

31. Sunilkumar Madekar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

32. Gopal Das,

94 P Belur Industrial Area,

Dharwad, Karnataka.

33. Vinayak Bevinmarad,

94 P Belur Industrial Area,

Dharwad, Karnataka.

34. Manjunath Masal,

Company Appeal (AT) (Insolvency) No. 731 of 2021 5

94 P Belur Industrial Area,

Dharwad, Karnataka.

35. Jyotish Paswan,

94 P Belur Industrial Area,

Dharwad, Karnataka.

36. Sadhu Ram,

94 P Belur Industrial Area,

Dharwad, Karnataka.

37. Mitan Das, 94 P Belur Industrial Area,

Dharwad, Karnataka.

38. Satyaprasad Kelsangdavar,

94 P Belur Industrial Area,

Dharwad, Karnataka.

39. Shakti Singh,

94 P Belur Industrial Area,

Dharwad, Karnataka.

40. Baramdev Ram,

94 P Belur Industrial Area,

Dharwad, Karnataka.

41. Dhananjay Undale,

94 P Belur Industrial Area,

Dharwad, Karnataka.

42. Ganesh S Ram,

94 P Belur Industrial Area,

Dharwad, Karnataka. ......Appellants.

Company Appeal (AT) (Insolvency) No. 731 of 2021 6

Versus Mr. Sumit Binani, Room No. 6, Commerce House, 2A, Ganesh Chandra Avenue, Kolkata - 700013. ........ Respondent

Present: For Appellant: Mr. Bharat Sood, Advocate.

For Respondent:- Mr. Arjun Asthana, Mr. Krishnaraj Thaker, Mr. Sidhartha Sharma and Ms. Anushka Sarkar, Advocates.

JUDGMENT

(08th September, 2022)

Justice Anant Bijay Singh;

This Appeal has been preferred by the Appellants was 42 in numbered

being aggrieved and dissatisfied by the order dated 03.05.2021 passed by the

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench,

Kolkata) in I.A. No. 865/KB/2020 in CP (IB) No. 182/KB/2017 whereby and

whereunder the Adjudicating Authority has dismissed the I.A. No.

865/KB/2020 filed by the workers for following reliefs:-

"a) The respondent/Liquidator be directed to disburse payment of dues of workers and employees of the Company working at Dharwad Plant of the company in Karnataka in a regular and timely manner;

b) The respondent/Liquidator be restrained by an order of injunction from taking any coercive steps for closing the operations of the company's plant at Dharwad, Karnataka;

Company Appeal (AT) (Insolvency) No. 731 of 2021 7

c) The respondent/Liquidator be restrained by an order of injunction from terminating, or taking any decision to terminate, the agreement between the company and Jeju Metals Private Limited as recorded in the letter dated 27.09.2019; and

d) A competent and independent agency be appointed to investigate the manner in which the respondent/Liquidator has been conducting his affairs as such Liquidator, and a report be called for from such agency;"

2. The facts giving rise to this Appeal are as follows:

a) The Appellants are the employees and worker of Gujarat NRE Coke

Limited ("the Company" or "Gujarat NRE"), in employment for the last twelve

years and working at the plant of the Company at Belur Industrial Area,

Dharwad, Karnataka.

b) The Company is in the business of manufacture of Low Ash Metallurgical

Coke ('met coke') and is one of the largest independent coke producers in India.

The coal and coke industry suffered a major setback since 2012 due to various

external factor, which impacted the performance of the Company. In spite of its

best efforts and due to continuous downturn in the industrial scenario, the

Company could not manage to revive its operations. This led to the loan

accounts of the Company turning into Non-Performing Assets (NPA).

c) Further case is that the Company filed an application under Section 10 of

the Insolvency and Bankruptcy Code, 2016 (for short "IBC"), which was

admitted. In due course, the Company was sent into liquidation vide order

dated 11.01.2018, and Mr. Sumit Binani, the respondent herein, was appointed

Company Appeal (AT) (Insolvency) No. 731 of 2021 8

as the Liquidator. The Liquidator was directed to dispose of the Company as a

going concern and in the event the process of sale as a going concern failed

during the three-month period specified in the said order, the process of sale of

assets of the Company was to be initiated in accordance with Section 33 of the

Code.

d) Further case is that the Appellants claim that while they tried heir best

to run the plant at Dharwad, they were unsuccessful due to the continuous

intervention and obstacles created by the Liquidator. The production at the

plant gradually declined and finally stopped for no fault of the appellants.

e) Jeju Metals Private Limited ("JMPL"), a company dealing in coal and coke

and one of the customers of the Company, expressed a desire to get its coal

processed at the Coke plant of the Gujarat NRE at Dharwad. It as mutually

agreed between the Company and JMPL that JMPL's coal would be processed

into metallurgical coke at the Dharwad plant of the Company with effect from

01.10.2019. Such arrangement was agreed on terms specified in the letter

dated 27.09.2019

f) Further case is that in terms of the aforesaid agreement, JMPL was to

pay consideration for the use of the production facilities at the Dharwad plant

of the Company at the rate of Rs. 200/- per metric ton of met coke produced

for the purpose, subject to a minimum of Rs. 40.00 lakh per month (processing

charges) plus all manufacturing expenses, such as, electricity power and fuel,

repair and maintenance, travelling and conveyance, except salary, wages and

contribution to security personnel expenses. The processing charges was

Company Appeal (AT) (Insolvency) No. 731 of 2021 9

agreed to be paid as a consideration for the Company providing JMPL with an

exclusive right to use the plant at Dharwad, the land and all related facilities.

g) Further case is that in order to ensure that there is no impediment faced

by JMPL in the process of conversion of coal into met coke, the Company also

agreed to provide it employees and workers presently in its employment for

such operation at the Dharwad plant. The agreement was agreed to be

terminated by either party by giving a prior notice of four months to the other

party. On behalf of the Company, the Respondent had issued the letter dated

27.09.2019, which was accepted by JMPL only with effect from 01.11.2019. As

per the agreement dated 27.07.2019 the Company, through its present

employees and workers, provides services for conversion of the coal into met

coke using the manufacturing facilities at the Dharwad plant. For the period

November, 2019 to July, 2020, the Company raised monthly invoices on JMPL

in terms of the said agreement for a sum of Rs. 47.20 lakh each.

h) In terms of the bills/invoices raised by the Company, JMPL has been

making payments to the Company covering the period November, 2019 to July,

2020. All the employees and workers of the Company at its Dharwad plant

continue to work for JMPL in terms of the agreement dated 27.09.2019 and to

cover such costs, JMPL had been making payments in the manner aforesaid. It

is also evident that the business of the Company through its plant at Dharwad

is operational, even during the liquidation process.

Company Appeal (AT) (Insolvency) No. 731 of 2021 10

i) The Respondent has not paid any sum of money to the Appellants from

the account of the Company. All salaries and wages of the employees/workers

at the Dharwad plant of the Company and the security agencies appointed by

the Respondent were being paid by the Respondent from the money received

from JMPL. As per the agreement, the Appellants are required to work at the

Dharwad plant of the Company to ensure that the terms of such agreement are

honoured and there is no difficulty faced by JMPL, in the process of conversion

of coal into met coke.

j) Further case is that although, the Appellants were attending their duties

at the Dharwad plant of the Company regularly, the Respondent delayed the

payment of their salaries and wages almost every month and in particular has

refused to make any payment since the month of June, 2020 for quite some

time. The Appellants, upon expressing concern with regard to such non-

payment, were informed by the Respondent that the Respondent was following

the principle of "No work no pay".

k) The Respondent failed to appreciate that when the entire nation is

suffering by the disastrous financial effect caused by the outbreak of the

pandemic, the Appellants have been regularly attending the Dharwad plant of

the Company to render their services to JMPL. Non-payment of the salaries and

wages by the Respondent is against the principles of equity, fairness and

humanity. The liquidator has, however, been receiving continuous payment

from JMPL under the agreement.

Company Appeal (AT) (Insolvency) No. 731 of 2021 11

l) Prior to the nationwide lockdown declared by the Government of India,

by reason of the outbreak of the Covid-19 pandemic, the Hon'ble Supreme

Court by an order dated 24.02.2020, passed in an appeal preferred by Mr.

Arun Kumar Jagatramka, directed that the liquidation proceeding of the

Company may go on, but sales, if any, was not to be confirmed. It is pleaded

that in terms of the orders passed by this Adjudicating Authority and the

Hon'ble Supreme Court, the Respondent cannot remove any of the employees

or workers or retrench them from employment.

m) However, since payment were not being made by the Respondent in spite

of funds available in the Company, some of the employees at the higher

management level have been compelled to tender their resignations. The

Respondent, by his act and conduct, and by withholding the payments, which

the workers and employees are entitled to receive, was trying to create a

compelling situation for the worker to leave the Company.

n) Further case is that by an email dated 03.08.2020, the

Respondent/Liquidator had informed the Deputy Commissioner of Police,

Dharwad Region, Karnataka, about a possible unrest at the Dharwad plant.

The email was only intended to portray that the Respondent took all possible

steps to revive the Company and had been paying the salaries of employees

and wages of workers even during the pandemic till May, 2020. The

Respondent also created an impression that the financial condition of the

Company had deteriorated further and that it was becoming impossible to pay

the salaries and wages to idle employees and workmen.

Company Appeal (AT) (Insolvency) No. 731 of 2021 12

o) Further case is that the Appellants lodged complaints dated 04.08.2020

with the Deputy Commissioner, Belgaum and with the Deputy Commissioner of

Police, Dharwad Region Karnataka on 06.08.2020, setting out the facts from

their perspective and informing the said authorities that the salaries and wages

for the month of July 2020 have not been paid and the Respondent is also not

interested in paying any further amount on frivolous grounds.

p) The work at the Dharwad plant of the Company in terms of the

agreement is still operational. There are dispatches of met coke that have been

made from the Dharwad plant even in August, 2020. The employees and

workers are regularly attending their duties as per the requirements of the

management of the Company.

q) Further case is that the Appellants have been harassed unnecessarily by

the Respondent by refusing to pay legitimate dues on account of the services

rendered even after receipt of payment and having available fund. The

Respondent is only interested in closing down the Dharwad plant, which is

otherwise operational and cut short the source of generating revenue.

Immediate intervention of this Adjudicating Authority is, therefore, both

expedient and necessary to prevent further illegalities being committed upon

the applicants at the instance of the Respondent, who is only interested in the

closure of the Company and not its revival. The manner in which the

Respondent is discharging the functions as the Liquidator of the Company also

requires to be investigated by an independent and competent agency so as to

prevent any unjust decision being taken at the behest of the Respondent.

Company Appeal (AT) (Insolvency) No. 731 of 2021 13

Thereafter, the Appellants filed I.A. No. 865/KB/2020 in CP (IB) No.

182/KB/2017 with a prayer (supra) and after hearing the parties the

Adjudicating Authority dismissed the said I.A. Hence this Appeal.

3. The Learned Counsel for the Appellants during the course of argument

and in his memo of Appeal along with Written/Additional Written Submissions

submitted that one of the reliefs sought by the Appellants in I.A. No.

865/KB/2020 was 'the respondent/Liquidator of the Company, Gujarat NRE

Coke Ltd., be directed to disburse/make payment of the dues of the workers and

employees of the Company working at Dharwad Plant at Karnataka in a regular

and timely manner'. The Respondent in his Affidavit in Reply has admitted that

he has made payment to 20 Appellants being Appellant Nos. 8, 14, 15, 16, 17,

20, 21, 23, 24, 25, 26, 30, 32, 33, 35, 36, 37, 38, 40 and 42. Thus, till date, 22

Appellants have not been paid their legitimate dues.

4. It is further submitted that Section 53(1)(b)(i) of the IBC which provides

for 'Distribution of assets' in case of Liquidation stipulates payment of

'workmen's dues for the period of twenty-four months preceding the liquidation

commencement date' which admittedly have not been paid by the Respondent

till date.

5. It is further submitted that Section 35(j) of the IBC obligates the

Liquidator, i.e. the Respondent herein, 'to invite and settle claims of creditors

and claimants and distribute proceeds in accordance with the provisions of this

Code'. The Appellants, who are workers of Gujarat NRE Coke Ltd. have been

Company Appeal (AT) (Insolvency) No. 731 of 2021 14

used as pawns by the Respondent in his ego-tussle with the Promotors of

Gujarat NRE Coke Ltd. The refusal by the Respondent for non-payment of the

wages of certain Appellants on the pretext of 'not handing over charge and

refusing to make over the assets/records of the Corporate debtor' is merely

hubris and a ruse to coerce them to toe his line and extend co-operation in his

tussle/ego clash with the Promotors of Gujarat NRE Coke Ltd.

6. It is further submitted that despite having received Rs. 2.56 crores from

01.11.2019 to June, 2020 from Jeju Metals under the Conversion Agreement

with the Corporate Debtor and the last of such payments having been received

on 13.07.2020, the Respondent abruptly terminated the contract with Jeju

Metals on 15.07.2020 and thwarted all efforts by Jeju Metals to run the

Dharwad Plant. The Respondent, in order to justify his decision of shutting

down the Dharwad Plant on 15.07.2021 has taken recourse to a letter by

Lakshmi Vilas Bank dated 03.09.2020 (at page 308-309 of the Reply) which

belies logic and makes apparent his determination to shut down operations of

the Dharwad Plant at all costs. It is an admitted fact that the Respondent has

taken over the entire records of the Corporate Debtor.

7. The Ld. Counsel for the Respondent/Liquidator during the course of

argument and in his Reply Affidavit along with Written/Additional Written

Submissions submitted that ex-workmen and ex-employees of the Dharwad

Plant of the Corporate debtor (in Liquidation) at the behest of the suspended

Promoter and Director of the Corporate Debtor, namely Mr. Arun Kumar

Jagatramka and his family, with mala fide intent. The present Appeal is yet

Company Appeal (AT) (Insolvency) No. 731 of 2021 15

another attempt of Mr. Arun Kuamr Jagatramka to create all types of hurdles

to derail an frustrate the liquidation proceedings.

8. It is further submitted that on enquiries being made by the Liquidator

from the ex-employees/ex-workmen arraigned as Appellant in the present

Appeal, more specifically from one Mr. Mounesh Pater, the Appellant No. 24

and another Mr. Deepak Kalal, the Appellant No. 23. The said Appellants have

denied any connection with the present Appeal and have expressly denied

granting any consent for filing of the present Appeal

9. It is further submitted that the Appellants have raised a new ground in

this Appeal of alleged non-payment of their purported dues on sale of the

assets of the Corporate Debtor in course of the liquidation process. The

Appellants cannot be permitted to take this ground inasmuch as the same was

not the subject matter of IA 865/KB/2020 in which the impugned order was

passed.

10. It is further submitted that before dealing with the merits if the allegation

and contention raised in the Appeal, the background facts and events

necessary for adjudicating of the present appeal as under:

• Upon completion of the timelines in the CIRP, when no resolution plan

was approved, the Adjudicating Authority passed the liquidation order of

the Corporate Debtor on 11.01.2018. Pursuant to initiation of liquidation

process of the Corporate Debtor (in liquidation), Mr. Arun Kumar

Jagatramka, on 14.02.2018 instituted an application being CA (CAA) No.

Company Appeal (AT) (Insolvency) No. 731 of 2021 16

198/KB/2018 before the Adjudicating Authority proposing a Composite

Scheme of Compromise and Arrangement between the Corporate Debtor

and its Shareholders, Foreign Currency Convertible Bond Holders,

Secured Creditors and Unsecured Creditors (hereinafter referred to as

the "Stakeholders") under Section 230 to 232 of the Companies Act,

2013.

• The Adjudicating Authority admitted the aforesaid scheme under Section

230 and 232 of the Companies Act, 2013 for proposing scheme of

compromise and arrangement and directed the Liquidator to hold the

meetings of the stakeholders on 16.07.2018. However, one of the

operational creditors of the Corporate Debtor, namely, Jindal Power and

Steel Limited filed an Appeal challenging the aforesaid order dated

15.05.2018 before this Appellate Tribunal in CA ( AT) (Ins.) No. 221 of

2018 on or around 09.07.2018. Vide judgment dated 24.10.2019, this

Appellate Tribunal directed the Liquidator to proceed in term sof the

principle decided in Y. Shivram Prasad vs. S. Dhanapal & Ors., inter alia

holding that the promoter of the Corporate Debtor was not entitled under

the law to submit a scheme of arrangement.

• Pursuant to the issuance of public announcement by the liquidator for

inviting a Scheme of Companies and Arrangement, a Scheme under

Section 230 was submitted by 109 equity shareholders of the Corporate

Debtor to the Liquidator on 30.11.2019. Accordingly, the Liquidator

instituted an application being CA No. 20/2020 under Section 230 before

Company Appeal (AT) (Insolvency) No. 731 of 2021 17

the Adjudicating Authority on the basis of said Scheme received from the

abovementioned shareholders of the Corporate Debtor.

• The Scheme proposed by 109 employees of the Corporate Debtor was

approved by the Unsecured Creditors and FCCB Holders with requisite

majority. However, the said Scheme was not approved by the Secured

Creditor and Equity Shareholders by the requisite 75% majority.

• Since the financial creditors had not approved the Scheme proposed by

109 equity shareholders of the Corporate Debtor, around 370

employees/workmen of the Corporate Debtor filed an un-numbered

application in CP(IB) No. 182/KB/2017 before the Adjudicating Authority

on 29.05.2020 (hereinafter referred to as the "Reconsideration

Application") for reconsideration of the Scheme and passing of the

aforesaid Scheme by the financial creditors who were made the

respondents therein. The Reconsideration Application and the

application filed by the Liquidator being CA20/2020 in CP (IB) No.

182/KB/2017 in connection with the scheme propounded by 109 equity

shareholders were rejected and dismissed by Adjudicating Authority vide

its order dated 09.06.2020 and 24.06.2020 (at Annexure F & G of the

Reply) respectively.

• The aforesaid orders were also challenged before this Appellate Tribunal

in CA (AT) Ins.) No. 985-986 of 2020 and the same was dismissed on

19.11.2020. A civil appeal challenging the order dated 19.11.2020 was

also filed before the Hon'ble Supreme Court in Civil Appeal Nos. 4062-

Company Appeal (AT) (Insolvency) No. 731 of 2021 18

4063 of 2020 which was also dismissed by the Hon'ble Supreme Court

on 28.01.2021 (at Annexure H & I of the Reply) respectively.

• Further, Mr. Arun Kumar Jagatramka also filed a civil appeal being Civil

Appeal No. 9664 of 2019 before the Hon'ble Supreme Court challenging

the judgment dated 24.09.2019 and the Hon'ble Supreme Court

dismissed the aforesaid civil appeal by holding that the aforesaid

promoter being ineligible under Section 29A of the IBC cannot submit a

Scheme under Section 230 for revival of the Corporate Debtor in

liquidation vide its judgment dated 15.03.2021 (at Annexure- J of the

Reply).

• Immediately after the rejection of the aforesaid Reconsideration

Application and the Scheme Application (being CA 20/2020 in CP (IB)

No. 182/KB/2017) of 109 employees/shareholders by the financial

creditors and equity shareholders and thereafter by the Adjudicating

Authority, complete non-cooperation of the employees and workmen of

the Corporate Debtor under the influence of the Mr. Arun Kumar

Jagatramka commenced Mr. Arun Kumar Jagatramka being the

suspended director and promoter did not want the Liquidation

Proceedings to continue.

• Due to continuing losses and cash flows drying up, the only running

steel business of the Corporate Debtor had to be shut down after the first

week of September, 2020. The operating windmills of the corporate

debtor supplying power to the steel plant was also shut as the corporate

Company Appeal (AT) (Insolvency) No. 731 of 2021 19

debtor could not pay the operations and maintenance charges for

running the same. Also, continuing heavy rains at the windmill locations

resulted in huge losses due to non-generation of expected power as a

result of which the Corporate Debtor was unable to meet the weekly

operating and maintenance charges. The agency providing the O & M

services therefore discontinued the operations of the windmills and

withdrew their services in first week of September, 2020.

• The Khambalia, Gujarat coke unit of the Corporate Debtor consisting of

11 chimneys was non-operational since long even prior to the liquidation

commencement date. The Bhachau, Gujarat coke units of the Corporate

Debtor were mostly non-operational since the liquidation commencement

date. A maximum of only 2 out of 16 chimneys were intermittently

running. A chart depicting the number of chimneys run and production

details month wise from April 2019 to September, 2020. The Dharwad,

Karnataka coke unit consisting of 8 chimneys were almost non-

functional since the liquidation commencement date. A maximum of only

2 out of 8 chimneys were intermittently running. The coke units as

aforesaid of the Corporate Debtor could not be operated due to shortage

of working capital.

• Since the Dharwad Plant of the corporate debtor was not functioning, the

Liquidator entered into a processing agreement with Jeju Metals private

Limited w.e.f. 01.11.2019. Vide the said agreement, it was agreed that

Jeju Metals Private Limited shall pay a consideration @ Rs. 200 per MT

Company Appeal (AT) (Insolvency) No. 731 of 2021 20

of Met Coke produced, subject to a minimum of Rs. 40 Lacs per month,

plus all manufacturing expenses such as electricity, power & fuel, repair

and maintenance, travelling & conveyance except salary, wages and

contribution to security personnel expenses.

• In terms of the aforesaid, the workmen and employees of the corporate

debtor were employed for processing of the met coke for Jeju and their

salaries and wages were also being duly paid by the Liquidator. It is

noteworthy to state here that the processing charges were required to be

paid to the Liquidator within 21 days of the end of each month. However,

the said Jeju made the payment in accordance with the processing

agreement only till February 2020 and thereafter, started making delayed

payments till 13th July 2020, whereafter, the said Jeju has not made

any payment to the Corporate Debtor.

• The Jeju, vide numerous emails requested the Liquidator to reduce the

contract fee, however, it is imperative to mention here that the non-

operational cost of the Dharwad Unit itself comes to around Rs. 41 Lakh

and any reduction in the contract fee would have resulted in losses to the

corporate debtor. The copy of the Liquidation Proceedings Presentation

dated 16.09.2020 which was relied upon by the Appellants before the

Adjudicating Authority (at Annexure- M of the Reply).

• As the Jeju failed to adhere to the terms and conditions of the processing

agreement and also failed to make payment to corporate debtor, the

Liquidator, vide email dated 15.07.2020 issued a four months' notice for

Company Appeal (AT) (Insolvency) No. 731 of 2021 21

termination of the processing agreement. Further, it has also been learnt

that the financial position of Jeju has deteriorated and a recall notice

dated 03.09.2020 has also been issued to them by Lakshmi Vilas Bank.

In light of the aforesaid facts and circumstances, since all the business

and windmill units of the corporate debtor were shut and the operating

cash flows had completely dried, the liquidator on 23.09.2020 issued a

suspension of work notice on a 'no work no pay basis'. After the issuance

of the aforesaid suspension notice, the non-cooperation from workers

employees and Mr. Arun Kumar Jagatramka further intensified at all

locations of the corporate debtor.

• The decision to terminate the agreement with Jeju due to delayed

payments by Jeju was done after numerous negotiations and discussions

carried out between the Liquidator and Key Managerial Persons of the

corporate debtor (in liquidation). In order to ensure that the salaries and

wages of the workers and employees of the corporate debtor are paid, I

further offered Jeju to utilise the services of the workmen and employees

for its processing operations on a contractual basis so that the employees

and workmen are still paid salaries vide my email dated 08.05.2020. In

response to the said emails, Jeju, vide its email dated 21.05.2020,

accepted the delay in making the payments to the corporate debtor.

Furthermore, Jeju further admitted that operations at the Dharwad plant

could not be commenced initially due to market condition and

subsequently due to COVID and further clarified that they could not find

Company Appeal (AT) (Insolvency) No. 731 of 2021 22

any solution for commencing the operations at Dharwad Unit till the

lockdown is completely lifted and the business activities in the country

comes to reasonable normalcy.

• Since the processing agreement was already fixed at the most optimal

consideration, only considering that the salaries and wages of the

employees and workmen of Corporate Debtor (in liquidation) and other

allied costs of the plant could be met, any further reduction in the

consideration was not possible for the Corporate Debtor. Accordingly,

vide email dated 14.05.2020, I again reiterated the practical difficulties in

reducing the consideration amount for utilization of processing unit by

Jeju and again offered Jeju the options already discussed vide email

dated 08.05.2020.

11. It is further submitted that the reliefs sought by the Appellants the

instant Appeal are infructuous in as much as 20 ex-workmen/ex-employees of

Corporate Debtor have already been paid their full and final settlement dues

i.e. Appellants No. 8, 14, 15, 16, 17, 20, 21, 23, 24, 25, 26, 30, 32, 33, 35, 36,

37, 38, 40 and 42, so far remaining 23 Appellants, being ex-employees of

Corporate debtor their full and final settlement dues have not been paid as

their discharge is pending since they have not handed over charge and

refused/obstructed to make over the assets/records of the Corporate Debtor in

their possession in spite of being repeatedly called upon to do so.

12. The Ld. Counsel for the Appellant relying on the Judgment of Hon'ble

Supreme Court in the case of "Tata Consultancy Services Limited vs.

Company Appeal (AT) (Insolvency) No. 731 of 2021 23

Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited

(Civil Appeal No. 3045 of 2020)" wherein the Hon'ble Supreme Court

observed as hereunder:

"..........

26. In Gujarat Urja (supra), the contract in question was terminated by a third party based on an ipso facto clause, i.e., the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in relation to the insolvency of the corporate debtor and it was amenable to the jurisdiction of the NCLT under Section 60(5)(c). This Court observed that "....NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor... The nexus with the insolvency of the corporate debtor must exist"

(para 69). Thus, the residuary jurisdiction of the NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor.

27. It is evident that the appellant had time and again informed the Corporate Debtor that its services were deficient, and it was falling foul of its contractual obligations. There is nothing to indicate that the termination of the Facilities Agreement was motivated by the insolvency of the Corporate Debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10 June 2019 were not a smokescreen to terminate the agreement because of the insolvency of the Corporate Debtor. Thus, we are of the view that the NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of the Corporate Debtor. In the absence

Company Appeal (AT) (Insolvency) No. 731 of 2021 24

of jurisdiction over the dispute, the NCLT could not have imposed an ad-interim stay on the termination notice. The NCLAT has incorrectly upheld the interim order of the NCLT."

13. It is further submitted that non-cooperating appellants, whose full and

final settlement have not been cleared by the Respondent due to their failure to

handover the assets, documents and information of Corporate Debtor cannot

agitate the issue of entitlement under the I&B Code, 2016, as the same

pertains to independent contractual agreement between the Corporate Debtor

and the ex-employees of Corporate Debtor. During the course of hearing by the

counsel for the Appellants, the present appeal was mainly filed in order to

claim the outstanding dues of the Appellants, being ex-workmen/ex-employees

of the Corporate Debtor (in liquidation).

14. It is further submitted that since the ex-workmen/ex-employees of

Corporate Debtor continued to obstruct entry of the Respondent and his team

from accessing the plant and factory premises at Dharwad to take possession

and control over the assets of the Corporate Debtor, the Respondent was

constrained to initiate an application being I.A. No. 673/KB/2020 in C.P. (IB)

No. 182/KB/2017 before the Adjudicating Authority and vide order dated

25.11.2021, the Adjudicating Authority inter alia constituted a team of Special

Officers to visit the plant situated at Dharwad to inter alia ensure that the

physical custody and safety of the assets of the Corporate Debtor are restored

to the Respondent. In view of the above, the instant Appeal is not maintainable

and deserves to be dismissed.

Company Appeal (AT) (Insolvency) No. 731 of 2021 25

15. From the perusal of the Impugned Order, with regard to prayer (a), (b)

and (d) in IA No. 865/KB/2020 filed in CP (IB) No. 182/KB/2017, the findings

recorded by the Adjudicating Authority is as follows:

"6.9. Prayer (a) is a direction sought upon the liquidator to pay the

dues of the workers and employees working at the Dharwad

plant of the Company in a regular and timely manner. We are

satisfied with the statement in para 4.24 (supra) that the

liquidator has made payments wages of all workmen have been

paid in full till 23.09.2020 on the basis of wages sheet for Aug

2020, and that the salaries of all employees at Dharwad and

other units of the Company have been paid in full till August

2020. We also note that owing to limited cash flow, the

liquidator has paid ₹15,000/- on account of salary of employees

drawing up to ₹30,000/- for the month of September, 2020,

while every employee drawing salary up to ₹15,000/- have been

paid in full for the month of September, 2020. The liquidator

cannot be expected to foot the bill from his own pocket in the

absence of adequate cash flows to the corporate debtor.

6.10. We note the arguments of Mr Swatarup Banerjee that had the

agreement with JMPL not been terminated, the workers would

have had some money in their pockets. This is neither here nor

there. The liquidator has taken the decision to terminate the

contract on 15.07.2020 from a commercial perspective, where the

Company Appeal (AT) (Insolvency) No. 731 of 2021 26

payments for April 2020 came to be paid in tranches till July

2020. The liquidator was not sure whether the payments for May,

June and July 2020 would at all come, and therefore came to the

conclusion to terminate the contract so that he could explore other

options. We have seen from the correspondence exchanged

between the liquidator and JMPL, mentioned in para 4.23 (supra)

that the admitted position was that JMPL was not in a position to

commence its operations in the plant, firstly due to 'market

conditions' and later due to the Covid-19 pandemic. In such

circumstances, it is a matter of conjecture whether JMPL would

have come as the knight in shining armour to save the workers.

Considering that no payments have come forth from JMPL after

the termination of the contract, we are not too sure that this could

have happened.

6.11. Therefore, in the absence of inflows into the coffers of the

Company, prayer (a) cannot be granted at this stage, and we

order accordingly.

Prayer (b):

6.12. In so far as prayer (b) is concerned, this is for a direction to

restrain the liquidator from taking any coercive decision for closing

down the operations of the Company's Dharwad plant.

Company Appeal (AT) (Insolvency) No. 731 of 2021 27

6.13. We have, in the course of oral arguments from both sides, had

occasion to go through the correspondences, charts, cash flow

statements, and statements of expenditure brought on record. The

liquidator has made payment of wages in full till 23.09.2020 to all

workers, and salaries to all employees in full till August 2020.

Even for September 2020, the liquidator has paid salary in full for

those employees drawing salary up to ₹15,000/-, and ₹15,000/-

for those employees drawing salary up to ₹30,000/-. This

statement is uncontroverted. We find therefrom that the liquidator

has taken every possible step to keep the Dharwad plant

operational. We note that the outstanding expenses of the

Company as on 31st August 2020 were ₹8.32 crore besides other

liabilities, 64 and that the same would continue to is mount due to

monthly fixed costs of the Company. We also note that that April

to Dec 2019, the revenue of the Dharwad unit was ₹18.50 crore,

whereas the expenditure was ₹32.55 crore,65 thereby making the

unit unviable. The liquidator cannot be expected to keep it afloat

when the balance sheet of the company is in the red. The

documents placed on record do not reveal any other source of

revenue to meet the expenses of the Company.

6.14. At some point of time, hard decisions are called for in the life of a

company, and these have to be taken. Unviable units will have to

be closed down. The actions will have to be measured up against

Company Appeal (AT) (Insolvency) No. 731 of 2021 28

the objectives of the Code, one of which is to free up resources of

unviable companies by permitting an easy exit. It cannot be

misconstrued to keep unviable units afloat by some sleight of

hand under the guise of keeping it as a "going concern," thereby

defeating a key objective of the Code.

6.15. The upshot of the discussion is that prayer (b) cannot be granted.

It is for the Liquidator to take a call on whether to close down the

operations of the Dharwad plant of the Company, as indeed for

other units of the Corporate Debtor. In the order dated

11.01.2018,66 this Adjudicating Authority had specifically

ordered the liquidator to try and dispose of the corporate debtor

as a going concern within a maximum period of three months. For

various reasons, this has not been possible for the liquidator.

6.16. We, accordingly, now direct the liquidator to proceed with the

sale of assets of the Company without further ado as per section

33 of the Code, now that the stay on confirmation of assets has

been lifted in the light of the final decision of the Hon'ble Supreme

Court in Arun Kumar Jagatramka v Jindal Steel & Power Ltd.

Prayer (d):

6.17. Before we part with the matter, we record that the prayer (d),

which is for a competent and independent agency to be appointed

to investigate the manner in which the liquidator has been

Company Appeal (AT) (Insolvency) No. 731 of 2021 29

conducting his affairs as such liquidator, was not seriously

argued by the learned counsel for the applicants. It was also not

given up.

6.18. In this regard, we hold that in the absence of any allegation of

fraud or bias in the decisions of the liquidator, we cannot order a

roving inquiry just on the basis of perceived loss of employment of

the workers on account of a business decision taken by the

liquidator to terminate the arrangement with JMPL. To hold

otherwise will set a wrong precedent, and insolvency

professionals shall not be able to take independent decisions,

leading to a failure of the system. Such an approach should,

therefore, be shunned. Actions taken in good faith by a public

servant always enjoy protection under the law, and the IBC is no

different, providing for the same under section 233 of the Code.

6.19. Resultantly, IA No.865/KB/2020 shall be dismissed.

We take note of the conduct of the Appellants who have not come with

clean hands in filing this Appeal. Out of 42 Appellants, 20 have been paid in

full and final settlement and so far as the remaining Appellants are concerned,

they have not been handed over charge and have obstructed in taking of the

possession of Dharwad unit. The reasons recorded by the Adjudicating

Authority for dismissing the IA No. 865/KB/2020 are within the framework of

law and require no interference. The impugned order dated 03.05.2021 passed

Company Appeal (AT) (Insolvency) No. 731 of 2021 30

by the Adjudicating Authority (National Company Law Tribunal, Kolkata

Bench, Kolkata) in I.A. No. 865/KB/2020 in CP (IB) No. 182/KB/2017 is

hereby affirmed. There is no merit in the Appeal. The Appeal is hereby

dismissed. No order as to costs.

16. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Adjudicating Authority

(National Company Law Tribunal, Kolkata Bench, Kolkata), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 08th September, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 731 of 2021