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Judgment
This Interlocutory Application i.e., IA (IBC)/133/GB/2024 has been filed by M/s National Laminate Staff Employees Union (“Applicant”) under Section 60(5) of the Insolvency and Bankruptcy, Code, 2016(“IBC”) seeking condonation of delay of 1042 days in intimating and filing its claim. In CP No. 9/GB/2019, this Tribunal vide order dated 26.08.2019 admitted the said application and initiated Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor [National Plywood Industries Limited]. The Applicant through the present Application prays for the following reliefs : -
a. Condoning the delay of 1042 days in filing of the Applicant claim to the Respondent;
b. Directing the Respondent to accept the claim filed on behalf of the Applicant Union and consider the same in accordance with law; and
c. For such further and other reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the case.
The relevant submissions of the Applicant made vide this Application is extracted hereunder:
The Applicant submitted that it represents former employees of the Corporate Debtor, National Plywood Industries Ltd., who are Operational Creditors by virtue of a subsisting and binding Labour Court Award dated 21.01.2022 in I.D. No. 4/2021 passed by the Labour Court, Hosur.
The said Award adjudicated an industrial dispute referred by the Government of Tamil Nadu, arising out of an illegal lockout imposed by the Corporate Debtor on 26.02.2018, and unequivocally held that the lockout was illegal, entitling the workers to full wages from the date of lockout.
The Award has attained finality, not having been stayed, reversed, or set aside by any competent authority. The Hon’ble Madras High Court vide order dated 17.10.2024, has categorically upheld the Labour Court’s jurisdiction to proceed with the industrial dispute despite the pendency of CIRP and directed the Resolution Professional (RP) to consider and admit the claim after verification.
The Applicant states that no effective publication of the Public Announcement (Form-A) under Regulation 6 of the CIRP Regulations was made in Tamil Nadu, the principal place of operations of the Corporate Debtor. The publication was made only in Guwahati and Kolkata editions, with no publication in Tamil at the relevant time. The first knowledge of the CIRP proceedings was only received upon the publication of Form-G in “The Hindu Tamil” on 26.02.2024.
Upon such awareness, the Applicant promptly submitted its claim on 27.03.2024. The same was rejected on 01.04.2024 by the RP citing delay.
The Applicant respectfully submits that the delay of 1042 days (from the claim deadline till its submission) is bonafide and unintentional, occasioned solely due to defective public notification and ongoing judicial clarification regarding jurisdiction of the Labour Court.
It is further submitted that the Resolution Professional has no authority under the IBC to reject the claim outright. As per judicial precedents and Explanation to Section 29 of IBC, the RP’s function is to verify and collate claims, not adjudicate or dismiss them.
Moreover, the non-inclusion of legally adjudicated dues payable to workmen renders the Resolution Plan non-compliant with Section 30(2)(e) and Section 53 of the IBC, and therefore, liable to be rejected. The Hon’ble Supreme Court in State Tax Officer v. Rainbow Papers Ltd. [(2023) 9 SCC 545] has affirmed that a Resolution Plan must provide for payment of statutory and workmen dues and cannot bypass them.
The Resolution Plan approved by CoC on 11.06.2024, is invalid in law if it does not take into account admitted workmen dues, which enjoy priority status under Section 53(1)(b) of the IBC.
The Applicant respectfully submits that equitable justice and statutory mandate demand that delay be condoned, and the claims of the employees be considered on merits.
The submissions made by the Respondent are the following:
Respondent while opposing the application seeking condonation of delay and admission of a belated claim by the Applicant states that the application is barred by statutory timelines and inconsistent with the binding directions of this Tribunal and Hon’ble NCLAT.
Respondent further submits that this Tribunal vide Order dated 08.04.2022 specifically directed that no fresh claims shall be entertained. This order was affirmed by the Hon’ble NCLAT on 08.02.2024, directing that the CIRP be completed within 90 days.
The Public Announcement under Regulation 6 of the CIRP Regulations was duly made on 27.08.2019 by the erstwhile RP not only in Guwahati and Kolkata but also in “Dinamani” (Tamil) and “New Indian Express” editions in Tamil Nadu. The announcement was also published on the IBBI website, Corporate Debtor’s website, and the MCA Portal, thereby constituting deemed constructive notice.
The last date for submitting claims was 09.09.2019, and the 90-day period expired on 24.11.2019. The Applicant’s claim was submitted only on 29.03.2024, reflecting a delay of 1586 days, which is inordinate and unjustifiable.
The Applicant’s assertion of lack of knowledge is untrue. The Labour Court Order dated 08.09.2021, where the Applicant was present, records that the RP had informed the Court about the CIRP and Section 14 moratorium. Hence, the Applicant had constructive and actual knowledge of the proceedings.
The CIRP has substantially progressed, and the Resolution Plan was approved by the CoC on 11.06.2024. The plan makes adequate provision of Rs. 29.28 Lakhs for employees, Rs. 13.39 Lakhs for ESI, and Rs. 36.18 Lakhs for PF, safeguarding workmen's interest.
Acceptance of such delayed claims at this stage would derail the entire CIRP, contrary to judicial dicta in:
a. Deputy Commissioner Div-VII v. Kiran Shah (NCLAT, 16.09.2021)
b. Ebix Singapore v. CoC of Educomp (SC, 13.09.2021)
c. Commissioner of Central Taxes v. C.S. Ashish Singh (NCLAT, 10.11.2021) These judgments emphasize strict adherence to CIRP timelines and finality of resolution plans.
It is trite law that once a Resolution Plan is approved, no fresh claims can be entertained. The Successful Resolution Applicant cannot be burdened with undecided claims post-facto, jeopardizing certainty and economic feasibility.
The Applicant’s attempt to derive priority from Rainbow Papers judgment is misconceived, as that judgment pertained to statutory dues, not belatedly filed operational claims post-approval of a resolution plan.
Heard the Counsel for the Applicant as well as the Respondent in person and perused the material available on record.
In the instant application, it is evident that there is a conflict between the strict timelines stipulated under the IBC, and the rights of operational creditors whose pre-existing claims arise from industrial disputes. It is not in dispute that the Applicant’s claim originates from an award passed by the Labour Court, Hosur, which was subsequently upheld by the Hon’ble Madras High Court. The said award declared the lockout imposed by the Corporate Debtor as illegal and recognized the entitlement of the Applicant’s members to receive wages from the date of the lockout. The said award has attained finality and is binding on the parties.
While the Applicant contends that its claim ought to be considered on merits and the delay condoned due to lack of adequate notice of the CIRP, the Resolution Professional has placed on record substantial evidence that the Public Announcement under Regulation 6 of the CIRP Regulations was published on 27.08.2019 in two widely circulated newspapers in Tamil Nadu—“Dinamani” (Tamil) and “New Indian Express” (English), and was also uploaded on the websites of IBBI, MCA, and the Corporate Debtor, thereby constituting deemed notice.
It is also pertinent to note that in the Labour Court proceedings dated 08.09.2021, the Applicant was made aware of the CIRP and the moratorium under Section 14 of the Code, as recorded in the said order. The Applicant, despite such knowledge, failed to submit any claim within the time prescribed under IBC and instead sought to file the claim only on 27.03.2024, resulting in an inordinate delay of over 1586 days from the last date for submission of claims.
The explanation offered by the Applicant for such delay does not inspire confidence and falls short of establishing “sufficient cause” for condonation under the strict regime of the IBC. At this juncture, it would be appropriate to rely on the Hon’ble Supreme Court’s ruling in Basawaraj & Anr. vs. Special Land Acquisition Officer (AIR 2014 SC 746, 2013). The relevant para of the said judgment is reproduced below:
“15.The law on the issue can be summarised to the effect that where a case has been presented in the court beyond limitation, the applicant has to explain the court as to what was the “sufficient cause” which means an adequate and enough reason which prevented him to approach the court within limitation. In case a party is found to be negligent, or for want of bonafide on his part in the facts and circumstances of the case, or found to have not acted diligently or remained inactive, there cannot be a justified ground to condone the delay. No court could be justified in condoning such an inordinate delay by imposing any condition whatsoever. The application is to be decided only within the parameters laid down by this court in regard to the condonation of delay. In case there was no sufficient cause to prevent a litigant to approach the court on time condoning the delay without any justification, putting any condition whatsoever, amounts to passing an order in violation of the statutory provisions and it tantamounts to showing utter disregard to the legislature.”
Furthermore, this Tribunal is bound by its own order dated 08.04.2022, upheld by the Hon’ble NCLAT on 08.02.2024, specifically restraining the Resolution Professional from entertaining any fresh claim applications. In the face of such a binding direction, this Tribunal cannot permit deviation to consider a belated claim, particularly when the Resolution Plan has already been approved by the Committee of Creditors and is pending final approval.
It is also relevant that the Successful Resolution Applicant has made provisions in the Resolution Plan for the payment of employee-related dues, including amounts for wages, PF, and ESI. Thus, no substantial prejudice will be caused to the Applicant by rejection of the present application.
While this Tribunal acknowledges the Labour Court’s findings on the lockout and wage entitlement, such findings cannot override the IBC’s mandatory claim-filing procedure. The Supreme Court and NCLAT have upheld timelines and finality of resolution plans as integral to the Code. The Applicant’s reliance on State Tax Officer v. Rainbow Papers Ltd. is misplaced, as that case dealt with statutory dues as secured debt and does not justify condonation of delay for operational creditors aware of the CIRP.
In view of the above detailed findings, this Tribunal is of the considered opinion that the Applicant has failed to establish a valid ground for condonation of delay. The application is devoid of merit and liable to be rejected.
Accordingly, I.A.(IBC)133/GB/2024 filed by M/s. National Laminate Staff Employees Union seeking condonation of delay in filing its claim is hereby dismissed.
The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
Certified Copy of this order may be issued, if applied for, upon compliance of all requisite formalities.
File be consigned to records.