NCLT cannot Decide on Legality of Closure of Factory under Industrial Dispute Act: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT )  has held that the National Company Law Tribunal ( NCLT ) adjudicating authority is not the right forum to decide whether closure of the factory under the Industrial Disputes Act, 1947 was in accordance with law.

Rakesh J Shah & Ors, the Appellants in their capacity as Authorised Representative of 271 workmen submitted their claims in Form F vide e-mail dated 07.02.2019. Liquidator vide e-mail dated 25.02.2019 asked the Appellants to submit the proof of employment in the company in the period of two years preceding the liquidation commencement date in order to admit their claims. The liquidator vide e-mail dated 02.03.2019 communicated the rejection of the claims.

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Aggrieved by the rejection of the claims by the liquidator, Appellant filed before the Adjudicating Authority, wherein passed the impugned order rejecting the claims. Appellants aggrieved by the said order has come up in this Appeal.

The appellants submitted that even though the corporate debtor has ceased to do business from June, 2010, the closure of factory was not in compliance with the provisions of the Industrial Dispute Act, 1947. The workmen shall be deemed to be continuing and entitled for all benefits including wages till the date of commencement of liquidation.

That Liquidator has wrongly restricted the look back period to two years preceding the liquidation commencement date. Workmen are to be treated as employees of the corporate debtor and no salary slip was required to be proved by the Appellants.

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Per contra, the respondents submitted that the factory ceased to work from June, 2010 and according to own case of the Appellant, they have not worked in the factory from April 2012. Liquidation Commencement Date being 31.12.2019, there is no material submitted before the liquidator to establish that the workmen on whose behalf the claims were filed were in the employment on the date of commencement of the liquidation.

That liquidation Commencement Date being 31.12.2019, there is no material submitted before the liquidator to establish that the workmen on whose behalf the claims were filed were in the employment on the date of commencement of the liquidation.

The tribunal agreed with the findings of the Adjudicating Authority wherein it was observed that the workers/employees have slept over their rights for years together and have woken up all of a sudden out of their slumber only when the Corporate Debtor went into CIRP and eventually into liquidation. 'Vigilantibus non dormientibus jura subveniunt' is a well settled proposition of law which means that the law comes to the aid of those who are vigilant and not the indolent, who sleep over their rights.

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The tribunal noted that the NCLT while exercising its jurisdiction on the liquidation process of the corporate debtor is not entitled to enter into issue as to whether the closure of the factory from June 2010 was in violation of the Industrial Dispute Act, 1947. The said issue ought to have been raised by the Appellants before the Industrial Court or Labour Court.

The CIRP of the Corporate Debtor commenced vide order dated 01.01.2018 passed by the Adjudicating Authority on an application filed under Section 7 by the Allahabad Bank against the Corporate Debtor- 'Biotor Industries Ltd.'. On an application filed by the Resolution Professional, an order dated 31.12.2018 was passed by the Adjudicating Authority directing for liquidation of the corporate debtor. Liquidator made publication inviting claims from the stakeholders.

The tribunal in the above case observed that the closure/lockout notice which was issued on 31.07.2017 much prior to initiation of the CIRP and the closure and lockout notice was nothing to do with the CIRP process. Challenge to the closure and lockout notice cannot be raised before the Adjudicating Authority who is not competent to adjudicate the said issue which arises out of the provision of the Uttar Pradesh Industrial Disputes Act, 1947.

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The coram comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) concluded that the issue of closure of the factory from June, 2010 cannot be questioned and the issue which ought to have been raised by the Appellants before the Industrial Court or Labour Court. Before the liquidator, no material having brought by the Appellants to prove their employment and working till 31.12.2018, the Liquidator did not commit any error in rejecting the claims. Adjudicating Authority after considering all submissions of the parties has rightly dismissed.

To Read the full text of the Order CLICK HERE

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