Thekedaar Kramchaari Committee ... vs Pardeep Kumar Sethi & Ors

[Arising out of Order dated 21.08.2023 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench (Court-II) in IA. No.1067/ND/2023 in Company Petition No. (IB)-1088(ND)/2020]

In the matter of:

Amit Kumar Pandey & Ors. ....Appellants Vs.

Pardeep Kumar Sethi, Resolution Professional ...Respondents (JMT Auto Ltd.) and Ors. For Appellant: Mr. Abhijit Sinha, Mr. Utkarsh Singh, Mr. Aditya Tripathi, Advocates. For Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Prateen Kumar, Ms. Raveena Rai, Ms. Smriti Nair, Advocates Mr. Anuj Tiwari, Mr. Swankit Nanda, Ms. Aroshi Pal, Advocates for RP.

JUDGMENT

(5 th December, 2023)

Ashok Bhushan, J.

This Appeal has been filed against the order dated 21.08.2023 passed

by the Adjudicating Authority (National Company Law Tribunal), New Delhi

Bench (Court-II) allowing IA. No.1067/ND/2023 filed by the Resolution

Professional under Section 30(6) of the IBC praying for approval of the

Resolution Plan dated 11.11.2022 submitted by 'Ramkrishna Forgings

Limited'. The Adjudicating Authority by the impugned order has approved the

Resolution Plan, aggrieved by which order, this Appeal has been filed. 2

2. Initially the Appeal was filed by 'Thekedaar Kramchari Committee', an

unregistered union and IA No.5182 of 2023 has been filed for amending the

memo of parties by substituting the Appellant/Union with five Appellants as

mentioned in Annexure-2 of the IA. In the ends of justice, we allow IA No.5182

of 2023 and substitute the Appellant Nos.1 to 5 as mentioned in Annexure-2

of the IA.

3. The Appellants' case is that they are workers engaged by sub-contractor

and in the Resolution Plan, the claims submitted on behalf of sub-contracted

workers have been accepted only to the extent of 8% whereas workmen of the

Corporate Debtor have been proposed payment of 100% of their claim.

4. We have heard Shri Abhijit Sinha, Learned Counsel for the Appellants

and Shri Krishnendu Datta, Learned Senior Counsel for the Resolution

Professional.

5. Shri Abhijit Sinha, Learned Counsel for the Appellants submits that the

Appellants who were workers employed through sub-contractor have been

working in the units of the Corporate Debtor and they were entitled for

payment of their full wages including provident fund and gratuity etc. whereas

the Resolution Plan only proposes 8% of such dues whereas claims of the

workmen have been accepted 100% of their claims. It is submitted that there

is no difference between workmen who are employed directly by the Corporate

and workers who are engaged through sub-contractor, both having been

performing same duties are entitled for same emoluments. It was due to

Company Appeal (AT) (Insolvency) No. 1364 of 2023 3

inadvertence that claims were submitted in Form-B instead of Form D or E

which was inconsequential. If Section 3(36) of the IBC read with Section 2(s)

of the Industrial Dispute Act, 1947, the regulation does not make any

difference between workers and sub-contracted workers. Appellants are also

stakeholders and a harmonious interpretation of the statute needs to be given

to extend benefit to the sub-contracted workers also. Statutory dues of the

Appellants cannot be forsaken in the Resolution Plan.

6. Shri Krishnendu Datta, Learned Senior Counsel appearing for the

Respondents submits that the Appellants have no right to challenge the

approval of the Resolution Plan. Appellants were not even stakeholders in the

CIRP of the Corporate Debtor. The claims of workmen of the Corporate Debtor

were filed and admitted by Resolution Professional whereas claims were filed

by the sub-contractor themselves as operational debt. Learned Counsel for

the Respondents has referred to copy of the claims submitted by sub-

contractors which has been brought on record at pages 110-319 which

indicate that the claims were filed by sub-contractor on the basis of invoices

which was raised to the Corporate Debtor. He submits that the claims were

submitted in Form-B i.e. by Operational Creditors except workmen and

employees. Sub-contractors have raised different bills and invoices to the

Corporate Debtor with regard to which the claims were submitted and the

Resolution Professional has rightly admitted the claim as operational debt and

the treatment of such operational debt has been made in accordance with law

in the Resolution Plan. The claims filed by the sub-contractor cannot be

treated to be claim filed by the workmen and dealt in the category of

Company Appeal (AT) (Insolvency) No. 1364 of 2023 4

workmen's claims. Under Section 53 of the IBC, claim of workmen is on higher

pedestal as compared to the claim of the operational creditor. No error has

been committed by the Adjudicating Authority in approving the Resolution

Plan submitted by Resolution Applicant on the basis of collated and admitted

claims of Operational Creditor. Total claim of the Operational Creditors was

admitted which was under the category "other than workmen, employees and

government dues". The Appellant cannot claim parity with workmen's claim

as dealt in the Resolution Plan. The claim received in the CIRP has to be

treated in accordance with IBC and CIRP Regulations, 2016.

7. We have considered the submissions of the Counsel for the parties and

perused the record.

8. None of the Appellants in this Appeal have filed any claim in the CIRP

of the Corporate Debtor. Appellants' claim to be workers of the sub-contractor

and according to the Appellant sub-contractor has filed the claim on their

behalf in the CIRP of the Corporate Debtor as operational debt. The Appellant

in the Appeal has brought on record copy of the claims submitted by the sub-

contractor. We may notice only one claim submitted in Form-B by one Mr.

Sukhwinder Singh who claimed to be proprietor. Claim submitted in Form B

dated 11.03.2022 is as follows:-

"FORM B

PROOF OF CLAIM BY OPERATIONAL CREDITORS EXCEPT WORKMEN AND EMPLOYEES

(Under Regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016)

Company Appeal (AT) (Insolvency) No. 1364 of 2023 5

Date:11.03.2022

To

The Interim Resolution Professional Sri Pradeep Kumar Sethi, RBSA Restructuring Advisors LLP, 1121, Building No.11, Solitaire Corporate Park, Andheri Kuria Road, Andheri East, Mumbai Maharashtra- 400 093 Email id: imtauto.irp@rbsa.in

From SUKHWINDER SINGH Adityapur, Jamshedpur-831013

SUBJECT: SUBMISSION OF PROOF OF CLAIM

Sir,

I/We, SUKHWINDER SINGH, hereby submit this proof of claim in respect of the corporate insolvency resolution process in the case of JMT AUTO Limited. The details for the same are set out below:-

PARTICULARS

1. Name of Operational Creditor Sukhwinder Sigh

2. Identification Number of Operational PAN No. AWJPS5300E Creditor AADHAR No. 54102441 7395 (If an incorporated body provide GST No. : NO identification number and proof of Vender No. : 230191 incorporation. If a partnership or individual provide identification records* of all the partners or the individual

3. Address and email address of Operational Adityapur, JAMSHEDPUR-

Creditor for correspondence 831013 gursohi01@gmail.com 4. Total Amount of claim 3,64,026.79

(Including any interest as at the Insolvency Commencement Date) PARTICULARS

5. DETAILS OF DOCUMENTS BY Annexure-I REFERENCE TO WHICH THE DEBT CAN BE SUBSTANTIATED

6. DETAILS OF ANY DISPUTE AS WELL AS THE RECORD OF PENDENCY OR ORDER OF SUIT OR ARBITRATION PROCEEDINGS

7. DETAILS OF HOW AND Annexure-I WHEN DEBT INCURRED

Company Appeal (AT) (Insolvency) No. 1364 of 2023 6

8. DETAILS OF ANY MUTUAL CREDIT, MUTUAL DEBTS, OR OTHER MUTUAL DEALINGS BETWEEN THE CORPORATE DEBTOR AND THE CREDITOR WHICH MAY BE SET-OFF AGAINST THE CLAIM

9. DETAILS OF:

a. Any security held, the value security and its date, or b. Any retention of title arrangement in respect of goods or properties to which the claim refers

10. DETAILS OF THE BANK ACCOUNT TO Punjab National Bank WHICH THE AMOUNT OF THE CLAIM OR A/c. 06701011000495 ANY PART THEREOF CAN BE IFSC Code PUNB0067010 TRANSFERRED PURSUANT TO A RESOLUTION PLAN

11. LIST OF DOCUMENTS ATTACHED TO PAN CARD, AADHAR THIS PROOF OF CLAIM IN ORDER TO CARD, PROVE THE EXISTENCE AND NON- CANCIL CHEQUE, PAYMENT OF CLAIM DUE TO THE ANNEXURE-I OPERATIONAL CREDITOR Signature of operational creditor or person authorised to act on his behalf [Please enclose the authority if this is being submitted on behalf of an Operational Creditor]

Name in BLOCK LETTERS SUKHWINDER SINGH Position with or in relation to creditor Proprietor Address of person signing *PAN number, passport, AADHAAR Card or the identity card issued by the Election Commission of India"

9. The above Form clearly indicate that the claim has been filed by the

Operational Creditor, by a vendor. The claim was submitted as operational

creditor. The Resolution Professional has admitted the claim of various

Vendors as operational creditors and the said claims were dealt in the

Resolution Plan as Operational Creditors. Appellant who never submitted any

claim before the Resolution Professional claiming to be workmen cannot be

allowed to contend at this stage that they are workmen and they should be

paid at par with the workmen of the Corporate Debtor for amount which was

admitted in the CIRP by the Resolution Professional.

Company Appeal (AT) (Insolvency) No. 1364 of 2023 7

10. Learned Counsel for the Appellant has contended that there is no

difference in the work of workers who are engaged by sub-contractor and

workmen who are engaged directly by the Corporate Debtor and both are

workmen within the definition of workmen as defined in Section 2(s) of the

Industrial Dispute Act. Section 2(s) of the Industrial Dispute Act is as follows:-

"2. Definitions.-

xxx xxx xxx

(s) "workman" means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person-

(i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or

(ii) who is employed in the police service or as an officer or other employee of a prison, or

(iii) who is employed mainly in a managerial or administrative capacity, or

(iv) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the

Company Appeal (AT) (Insolvency) No. 1364 of 2023 8

powers vested in him, functions mainly of a managerial nature."

11. Learned Counsel for the Appellant has referred to Section 3(36) of the

IBC which provides as follows:-

"3. Definitions.- ...............(36) "workman" shall have the same meaning as assigned to it in clause (s) of section 2 of the Industrial Disputes Act, 1947"

12. There can be no dispute with the submission with regard to statutory

definition of workmen as given in Industrial Dispute Act and adopted by

Section 3(36) of the IBC but the question is as to whether when the claim has

not been filed in the CIRP as workmen by the Appellant and the claim which

can be referable by them is the claim filed by sub-contractor as operational

debt, can it be treated at par with the workmen dues. The treatment of such

operational debt cannot be faulted on the anvil of Section 53 of the IBC.

Section 53 itself provides different treatment in distribution of assets where

workmen dues are dealt in Section 53(1)(b) and operational debt at much

lower ladder. The Resolution Plan has also similarly dealt with workmen dues

differently from operational debt and the admitted workmen dues and

admitted operational debt cannot be faulted in the Resolution Plan.

13. In the Resolution Plan where paragraph 7.33 notices distribution of

claims provided in the approved Resolution Plan is as follows:-

"7.33. That the distribution of claims provided in the approved Resolution Plan is provided hereinunder:-

Company Appeal (AT) (Insolvency) No. 1364 of 2023 9

Sr. Category of Amount Amount Amount Amount No. Creditors Claimed Admitted Provided Provided under the to the Resolution Amount Plan Claimed (%)

1. Financial 1,68,39,69,450 168,36,81,352 1,11,24,40,394 66% Creditors

2. Operational 43,21,78,653 18,72,42,052 8,22,90,131 19% Creditors (Government Dues)

3. Operational 9,41,16,803 9,27,71,650 1,41,17,535 15% Creditors (Employees)

4. Operational 1,02,39,732 1,02,24,742 1,02,39,732 100% Creditors (Workmen)

5. Operational 26,10,54,063 23,38,13,932 2,12,74,408 8% Creditors (other than Workmen, Employees and Government Dues)

6. Other Debt 96,37,800 -

and Dues TOTAL 2,48,15,58,701 2,20,77,33,728 125,00,00,000 50%

14. The claim at best on behalf of the Appellants through sub-contractor

was a claim of operational debt filed by operational creditor i.e. vendors,

hence, the same has been treated as Serial No.5 in paragraph 7.33. A claim

which was filed by operational creditor cannot be treated at par with claim of

workmen. When Resolution Plan differentiate between payment to the

workmen as well as to the Operational Creditors, such distinction is in

accordance with law and cannot be faulted.

15. The Hon'ble Supreme Court in "Committee of Creditors of Essar

Steel India Limited Through Authorised Signatory vs. Satish Kumar

Gupta & Ors., (2020) 8 SCC 531" held equitable treatment is to be accorded

to each creditor depending upon the class to which it belongs: secured or

Company Appeal (AT) (Insolvency) No. 1364 of 2023 10

unsecured, financial or operational. In paragraphs 88 and 90, following has

been laid down:-

"88. By reading paragraph 77 (of Swiss Ribbons) dehors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Paragraph 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in paragraph 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, paragraph 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in paragraph 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors' rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the

Company Appeal (AT) (Insolvency) No. 1364 of 2023 11

provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors.

90. Under Regulation 39(4), the compliance certificate of the resolution professional as to the CIRP being successful is contained in Form H to the Regulations. This statutory form, in Paras 6 and 7, states as under:

"6. The Resolution Plan includes a statement under Regulation 38(1-A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and Regulations made thereunder.

7. The amounts provided for the stakeholders under the Resolution Plan are as under:

(Amount in Rs lakh) Sl. Category of stakeholder [ If there Amount Amount Amount Amount No. are sub-categories in a category, claimed admitted provided provided to the please add rows for each under the amount category.] Plan claimed (%) 1. Dissenting Secured Financial Creditors 2. Other Secured Financial Creditors

3. Dissenting Unsecured Financial Creditors 4. Other Unsecured Financial Creditors 5. Operational Creditors

Company Appeal (AT) (Insolvency) No. 1364 of 2023 12

Government

Workmen

Employees

...

6. Other Debts and Dues

Total

Quite clearly, secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured financial creditors are to be paid. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in Sl. No. 5 of Para 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court's judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code -- to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational."

16. Shri Abhijit Sinha, Learned Counsel for the Appellant has also placed

reliance on the judgment of the Hon'ble Supreme Court in "Basti Sugar Mills

Ltd. vs. Ram Ujagar and Ors.- (1964) 2 SCR 838" where the Hon'ble

Supreme Court in paragraph 10 laid down following:-

Company Appeal (AT) (Insolvency) No. 1364 of 2023 13

"10. On the ordinary grammatical sense of the words "employed by a factory" they include, in our opinion, every person who is employed to do the work of the factory. The use of the word "by" has nothing to do with the question as to who makes the appointment. The reason why "by" was used instead of "in" appears to be to ensure that if a person has been employed to do the work of the industry, whether the work is done inside the factory or outside the factory he will get the benefit of the Standing Orders."

17. In the present Appeal, the claim which was filed through sub-contractor

cannot be treated as workmen of the Corporate Debtor. The Resolution Plan

has dealt with claim as admitted by Resolution Professional and reflected in

the Information Memorandum. The claim filed by the Operational Creditor in

Form B has been dealt with in accordance with the IBC and CIRP Regulation

and the claim which was filed by the Operational Creditor cannot be

transposed to be claim of workmen for the purpose of this Appeal.

18. We, thus, are of the view that the issue raised by the Counsel for the

Appellant that workers employed by sub-contractor are also workers of the

Corporate Debtor need no answer in this Appeal since the question is as to

treatment of the claim which was submitted in the CIRP of the Corporate

Debtor and admitted by the Resolution Professional.

19. The submission which has been advanced by Counsel for the Appellant

that due to the workers of sub-contractor being not aware of the CIRP could

not file their claim cannot be considered at the stage when all claims have

Company Appeal (AT) (Insolvency) No. 1364 of 2023 14

been collated and admitted and dealt with in the Resolution Plan. Challenge

in this Appeal is to the order of the Adjudicating Authority approving the

Resolution Plan. We are satisfied that there is no infirmity in the Resolution

Plan giving different treatment to the workmen dues and those claimed by the

Operational Creditor. At the instance of the Appellant, we do not find any error

in the order impugned warranting interference in exercise of our appellate

jurisdiction. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Insolvency) No. 1364 of 2023