Suresh Narayan Singh vs Tayo Rolls Limited

Per: Coram

This Court convened through hybrid mode.

The I.A.s along with the Intervention Petition are interrelated and are taken up for consideration analogously.

The underlying Company Petition in C.P. (IB) No. 701/KB/2017 was filed by Mr. Suresh Narayan Singh, the Operational Creditor against Tayo Rolls Limited, the Corporate Debtor, to initiate Corporate Insolvency Resolution Process (“CIRP”), under section 9 of the Insolvency and Bankruptcy Code 2016, which was admitted vide order dated 05 April 2019.

Initially, Ms. Vinita Agarwal had been appointed as the Interim Resolution Professional. Thereafter, Committee of Creditors (“CoC”) passed a resolution in the 5^th CoC meeting held on 27 July 2019 with 82.24% voting share to replace the IRP and appoint Mr. Anish Agarwal as the Resolution Professional. The same was approved by this Adjudicating Authority vide order dated 30 October 2019.

The I.A. has been filed by Suresh Narayan Singh, authorised representative of 284 workers of the Tayo Rolls Limited, seeking the following prayers:

The I.A. has been filed by Suresh Narayan Singh, authorised representative of 284 workers of the Tayo Rolls Limited, seeking the following prayers:

The I.A. has been filed by Suresh Narayan Singh, authorised representative of 284 workers of the Tayo Rolls Limited, seeking the following prayers:

^{2222.Page 125 to the Reply in I.A. (IBC) 33/KB/2020}We are considering this I.A. as numbered in the e-filing portal, the hardcopy of the same has been

numbered as I.A. 69/KB/2020

Submissions of the learned Counsel appearing on behalf of the workmen in I.A. (IB) No. 33/KB/2020 I.A. (IB) No. 69/KB/2020 and I.A. (IB) No. 167/KB/2020:

The Hon’ble Supreme Court in the matter of Arcelor Mittal vs. Satish Kumar Gupta^{33.(2019) 2 SCC 1} has acknowledged certain mandatory steps that are pre-requisite for CIRP and that the CIRP begins at section 23 of the Code. The said steps are covered under section 17, 18(1), 20, 21, 22, 25, 28 and 29 of the Code and have not been initiated or concluded by the Resolution Professional. As such, the matter has not reached the stage of CIRP under section 23 of the Code.

The present RP upon his appointment has reshuffled the claims without disclosing any reasons and admitted a claim of Rs. 366 Crore of JBVNL, thereby increasing its voting share to almost 90%. By doing so, the RP got a resolution for publication of Expression of Interest (EOI) passed without even making any information memorandum which is a sine qua non to section 29 of the Code. The RP has not prepared a statement of assets and liabilities as stipulated under section 18(1).

The Corporate Debtor, in its Audited Balance Sheet for the FY 2016-17 under para 38, page 109 under the heading Exceptional Item has disclosed that it had undertaken negotiations for onetime settlement of vendor liabilities and as a consequence of such settlement it has written back Rs.351.48 lakhs in the Audited Balance Sheet. As such, the list of creditors shown in the progress reports of the RPs appear to be doubtful including the TRL Krosaki Refractories Ltd.

The dues of JBVNL have been reflected in the Audited Balance Sheet for the FY 2015-16 of the CD for Rs.218 crore which is disputed and the same has been shown at Page 15, para 15 under the heading 'Contingent Liabilities and Major Obligations'.

The aforesaid dues as contingent liability which is contingent on the outcome of the Courts' Order and as such not an 'admitted debt’ as contemplated under Section 3(11) and (12) of the IBC, 2016. However, the previous RP treated the same as a debt crystallized and assigned voting of right of 53% to the said State Electricity Board erroneously.

Against a purported claim of Rs.440.53 crore by the JBVNL a claim of Rs.366.30 crore has been admitted by the new RP without any reference to Rs.34.14 crore being the only admitted liability as opposed to Rs.218 crore, which is classified as contingent liability by the previous RP on the basis of some legal opinion. The present RP has failed to disclose any such basis for consideration for Rs.366.30 crore as admitted liability of the JBVNL.

By definition and intent of the legislation delayed payment surcharge of Rs.208.00 crore can't be an admitted debt to be considered as part of the claim.

Further, pursuant to para 5.5 as amended by Jharkhand State Gazette Notification^{44.Annexure B to I.A.} No-214 Dated 16/04/2007 of (Electricity Supply Code) Regulations, 2005 notified as per the power conferred by Clause (x)of sub-section (2) of Section 181 read with Section 50 of the Electricity Act 2003, a new investor who may take over the CD is not obliged to make any payments to the JBVNL. JBVNL has only one choice to recover the same from the erstwhile TAYO management and/or the Tata Steel Ltd. This proposition of law is also endorsed by the Hon'ble High Court and the Hon’ble Supreme Court.

In light of the aforesaid scenario, the Workmen propose to take over the CD and pray for an in-principle approval of this Hon'ble Bench for the same.

The CD has 350 acres of land at Jamshedpur and several properties located in the townships viz. registered office at Jamshedpur, a guest house at Kolkata etc. The Applicants propose to sell/transfer/ assign 150 acres of surplus land which have not been used for the last 40 years, which will fetch enough resource for revival of the CD.

The workmen propose to pay all the legitimate dues of the creditors including the dues of TRL Refractories of Rs.40 odd lakh and also propose to pay around 25 to 50% of the dues of workmen and employees initially which may be around another Rs.2 crore.

With the investment of an amount of around Rs.200 crore, all the remaining employees who are not superannuated and/or have become invalid to continue in the employment may be engaged profitably.

That the Workmen have assigned the task of preparation of project report for revival of the CD to a set of Chartered Accountants with a set of competent professionals with further assignment to talk to Bankers or investor and/or private financiers to finance the remaining amount of term loan and the working capital requirement of the CD for starting the operation or for handling the operation in future as the case may be.

The Adjudicating Authority in its Order dated 05/04/2019 has accepted the claim of the Petitioners for Rs.2,19,83,760/- on account of wages and Rs.21,98,37,600/- as compensation aggregating to Rs.24,18,21,360/- and as such the same was an admitted claim. However, the previous RP had accepted only Rs. 20.72 Crore and allotted a vote share of 32.45% without specifying any reason whatsoever. The previous RP also failed to add our PF claim on the Corporate Debtor which is with the trust constituted by the CD.

The Corporate Debtor has declared in the Audited Balance Sheet for the FY 2016–17 under the head Exceptional Items at para 38 under sub-heading "Write back of liabilities" under clause (ii), wherein it is stated that

The new RP has revised the claim of Workmen & Employees of CD at Rs.28 crore. To fix our claim the RP purportedly sought legal opinion from two "legal luminaries" without any knowledge or authorisation of the COC. Further, no explanation was given for rejection of basis of our claim thread base explained to him. He was explained that in view of default of the CD under sub-section 6 of Section 25(O) of the Industrial Disputes Act, 1947 the CD is liable to pay the entire amount of Rs.190 crore and the PF amount of around Rs.15.74 crore with interest on the same. Now, if this is the claim of Workmen & Employees legally accrued under law i.e., Industrial disputes Act, 1947 then the same amount can be claimed under IB, 20l6, too. There can't be two different claims under the two laws nor there any such stipulation in the IBC, 2016. By misinterpreting Section 53 purportedly the RP has calculated the claim only from October, 2016 to 05/04/2019 which is erroneous in as much as Section 53 of IBC, 2016 only determines the priority of payments to be made in the event of liquidation however, any remaining dues can be paid under 53(1)(f) of IBC,2016. It is also apparent that in the event of liquidation of the CD, the claim of Workmen and the Employees of the CD accrued under Industrial Disputes Act, 1947 cannot get extinguished inasmuch as there no such contemplation in IBC.

The Workmen also provided the new RP an Order of the Hon'ble High Court, Ranchi passed in WP 3166 of 2018 filed by the Workmen in which the single Bench of the said Hon'ble High Court agreed with the proposition of law that Industrial Disputes Act. 1947 would supersede Section 238 of the IBC, 2016 and referred the matter to Larger Bench given the serious public interest involved in it. The RP failed to explain how he could ignore a judicial Order on the same.

The have further referred an Order of Hon'ble Supreme Court in Meenakshi Mills case (1992) 3 SCC 336 in which the Hon'ble Apex Court has categorically stated that Chapter VB of the I D Act, 1947 inserted by amendment Act of 32 of 1976 has been inserted to give effect to the Directive Principles of State. It is trite that IBC, 2016 has not been enacted to give effect to the Directive Principles of State and hence here is hardly any doubt that Industrial Disputes Act, 1947 would supersede the IBC, 2016 in case of a conflict. Further, there is no apparent conflict between the two enactments inasmuch as both operate in different spheres. However, the RP failed to pay any heed to this and also failed to explain on what ground his "legal experts" had opined that IBC would supersede on all purported inconsistent sections of I D Act, 1947?

the RP further failed to explain that even if he took the liability commencing from October, 2016 and ending on 05/04/2019 how he could exclude the value of compensation of Rs.21.98 crore admitted by the Adjudicating Authority, NCLT in NO its Order dated 05/04/2019 without any demur from CD and the amount which has now been disclosed at Rs.15.74 crore

The Hon'ble Bench cannot pass an Order for Liquidation merely on elapse of 270 days of time without the commencement of the Insolvency Resolution Process for reasons not under controi of the COC where it is apparent that the COC has not been allowed to exercise its discretion or commercial judgment or by reason of majority of any Creditor.

The Deed of Conveyance ^{55.Annexure C to I.A. (IBC) 167/KB/2020} dated 18.03.1969 being a government grant under Government Grants Act, 1895 categorically mentions that the said Deed of Conveyance for 350 acres of land was made in favour of TATA Steel Ltd. for setting up of (i) Alloy Tool and Special Steel Plant (i) Roll Foundry Project.

All the above projects are owned by the Corporate Debtor and as such it is clear that the said land was granted for the Corporate Debtor i.e Tayo Rolls Ltd to set up its projects and also for further expansion of the same in future.

The Hon'ble Supreme Court in its order in (2015) 15 SCC 55 also acknowledges the same on the admitted position of the TATA STEEL.Para 7 and 43 of the said Order read as follows:

The three units of the Corporate Debtor i.e., Rolls, Foundry and Pig Iron Plant are covered in almost 100 acres of the said 350 acres. The colony occupies another 50 acres out of which Tata Steel occupies 29 acres albeit without authority or misusing its status of being majority shareholder of the Corporate Debtor. If the road, warehousing etc are included the Corporate Debtor occupies more than 150 acres of the said land out of the said 350 acres.

Tata Steel Ltd. has set up another plant in the name of style of Tata Growth Shop as part of Tata Steel Ltd. albeit without any such authority in another almost 50 acres of land. The remaining 150 acres has never been used which has been proposed to be cancelled by the AIADA vide a letter dated 01/09/2000 which matter finally went to Supreme Court and decided in favour of Tata Steel Ltd. i.e the Petitioner/ Appellant in (2015) 15 SCC 55.

Condition No. 4 of Deed of Conveyance dated 18/03/1969 contains various "covenants" between the parties. Clause (xiv) stipulates that the land shall be used by the Appellant for the specified purpose within a period of one year from the date of the lease failing which the lease may be terminated and the Appellant evicted from the land and without notice. The said clause reads as follows:

It is apparent that had that land belonged to Tata Steel Ltd, the same would have been cancelled for its failure to set up any business within one year as stipulated in the conditions therein referred hereinabove. That the same has also been acknowledged by the Hon'ble Supreme Court in its order^{66.Annexure D to I.A. (IBC) 167/KB/2020} in (2015) 15 SCC 55.

The RP has declared only 50 acres of land in favour of Corporate Debtor, illegally allowing 300 acres of land to Tata Steel Ltd., completely ignoring those documents ostensibly to favour Tata Steel Ltd., to misappropriate CD's 300 acres of land to the gross prejudice of the Corporate Debtor, the Workmen, the JBVNL and other creditors and also the State of Jharkhand and AIADA with completely motivated reasons. In view of the above, the Expression of Interest is liable to be declared null and void in the interest of justice and equity.

The Corporate Debtor was held liable to pay the revised bills of JBVNL (erstwhile Bihar Electricity State Board) along with Delayed Payment Surcharge vide order^{77.Annexure C to the Reply Affidavit in I.A. (IBC) 33/KB/2020} dated 02.05.2013 passed by the Hon’ble Jharkhand High Court in CWJC 852 of 2000 R.

The Certificate Officer, vide order^{88.Annexure D to the Reply Affidavit in I.A. (IBC) 33/KB/2020} dated 12.12.2015 in Certificate Case No. 38/14-15 filed under the Bihar and Orissa Public Demand Recovery Act 1914, had ordered JBVNL to serve a fresh bill upon the Corporate Debtor herein for its outstanding dues and further ordered the amount of Rs. 48,06,74,070/- to be kept in abeyance, which was over and above the demanded payable sum. Accordingly, the revised bill^{99.Annexure E to the Reply Affidavit in I.A. (IBC) 33/KB/2020} was issued by JBVNL on 24.12.2015 for an amount of Rs. 2,18,03,67,289/- and the amount of Rs. 48,06,74,070/- continued to be kept in abeyance.

On 22.04.2019, JBVNL filed its claim in Form B and claimed a sum of Rs. 4,40,53,35,190/- out of which the erstwhile RP initially admitted a sum of Rs. 2,18,03,67,289/-. Subsequently in the 2^nd CoC Meeting, the admitted claim of JBVNL was reduced to Rs. 34,13,54,771/- and the claim of the workers was admitted to the tune of Rs. 20,72,34,906/-.

Thereafter, upon replacement of the RP, the present RP i.e the respondent herein, in the 7^th CoC expressed the intention to re-verify the claims of the CoC. Accordingly, the RP in the 9^th CoC Meeting held on 19.12.2019 revised the claims of the CoC members. The claim of JBVNL was revised to Rs. 3,66,30,17,046/- and the claim of the workers was revised to Rs. 28,88,92,223.65.

The issue of revised claims and voting shares of the CoC was discussed in the 10^th CoC Meeting and the complete details qua the grounds for such revision and the calculation thus arrived at has been provided in the said Minutes of the 10^th CoC Meeting.

It is noteworthy that in the 10^th CoC Meeting, there was no representation on behalf of the workers despite service of notice to the same.

The workers of the Corporate Debtor had filed collective claim of Rs. 190,04,38,183.54/-. Such claim was on account of various heads including outstanding salary, leave encashment, leave travel concession. medical year, bonus pay and gratuity. However, the calculation of categories of such claims was done by the workers until the schedule date of retirement of each worker. Thus, the workers had filed a claim even in respect of the future period for which they were yet to render any service. The erstwhile Resolution Professional, Ms. Vineet Agarwal, had admitted claim of the workers only up to Rs. 20,72,34,906/-. Upon appointment of the present Resolution Professional, the workers resubmitted their claims before the Resolution Professional which was recalculated and revised. Accordingly, the Resolution Professional increased the claims of the workers upon due verification, admitting a total claim of Rs. 28,88,92,223.65/-. This admitted amount includes the entire claim of the workers until the date of commencement of the CIRP of the Corporate Debtor (i.e., 5th April, 2019).

None of the heads/sub- categories under which the workers have raised their claim and/or the amounts claimed thereunder have been disputed by the Resolution Professional. The claim has been fully accepted until the CIRP commencement date as aforesaid, and only the claim in respect of the period of post commencement of the CIRP has been rejected. Therefore, there is no illegality whatsoever in respect of the workers' claim which has been admitted correctly to the permissible extent in accordance with law.

Insofar as JBVNL's increased claim is concerned, it is evident that JBVNL made requests to the present RP upon his appointment for re-verification of these claims and also provided various document and materials to the Resolution Professional including the aforesaid orders of the High Court at Jharkhand, the order of the Certificate Officer and the revised bills raised by JBVNL upon the Corporate Debtor pursuant thereto.

It is on the basis of this information that the Resolution Professional admitted the clam of the JBVNL to tune of Rs. 366,30,17,046/- (Rupees Three Hundred and Sixty Six Crores Thirty Lakhs Seventeen Thousand and Forty Six Only) which includes Rs. 218,03,67,289/- (Rupees Two Hundred and Eighteen Crores Three Lakhs Sixty Seven Thousand Two Hundred and Eighty Nine Only) on account of the aforesaid fresh bill dated 24th December, 2015 along with delayed payment surcharge @ 0.4% per week on and from the date of fresh bill (ie24.12.2015) until the date of commencement of CIRP (i.e. 5th February, 2019). The delayed payment surcharge has been calculated in terms of the Tariff Order dated 28th February, 2019 passed by the Jharkhand State Electricity Regulatory Commission, a copy of the relevant page whereof (i.e. page 188) is annexed hereto and marked as Annexure Q. The Resolution professional craves leave to refer and rely upon the entire tariff order at the time of hearing, if necessary. This is the correct calculation of the claim of JBVNL unlike the admission of a mere sum of Rs. 34 Crores which was erroneously done by the previous Resolution Professional.

The Resolution Professional submitted that all necessary steps as per law has been followed in CIRP and the same does not suffer from any violation or infraction. Also, the admission of claims and constitution of CoC has been done correctly and legally. He denied that the mandatory actions prerequisite for the CIRP has not been initiated and/or concluded. He also denied that he did not prepare the Statement of Assets and Liabilities of the Corporate Debtor. He further denied that the proceedings in the matter have not reached the stage of Section 23 i.e., CIRP. He also submitted that all regulations and mandated timelines as mandated by the Code have been followed.

By the lease deed dated 18.03.1969, the Government of Bihar has leased out in favour of Tata Steel Ltd. about 350 Acres of land for industrial purposes, for a period of 99 years. The Corporate Debtor is a subsidiary of Tata Steel Ltd an vide the deed of sub-lease^{1010.Annexure A to the reply to I.A. (IBC) 167/KB/2020} dated 07.10.1969, a sub-lease for 50 Acres was granted to the Corporate Debtor by Tata Steel Ltd. In this manner, Tata Steel Ltd. became the lessee of the Government of Bihar for the entire 350 Acres of land and the Corporate Debtor became a sub-lessee in respect of the 50 Acres out of the aforesaid 350 Acres.

Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor commenced on 5th April, 2019. The 50 Acres of land of the Corporate Debtor was not experiencing any business activity as the business of the Corporate Debtor had become non-operational as far back as September 2016. The remaining 300 Acres of land continues to be under occupation of Tata Steel Ltd. and appears to be used for various industrial activities.

The said 50 Acres of land of the Corporate Debtor has been referred to and disclosed in the Expression of Interest as well as the Information Memorandum prepared by the Resolution Professional in respect of the Corporate Debtor's CIRP.

Based upon such information, JBVNL submitted a Resolution Plan for taking over the Corporate Debtor. In this plan it has been inter alia proposed that the State of Jharkhand (i.e. the State which was carved out as a separate state from the State of Bihar in the year 2000 and which presently owns the said 350 acres of land) would execute a direct lease in favour of the Corporate Debtor in respect of the said 50 Acres of land. This Resolution Plan was passed by the Committee of Creditors and is pending approval by this Adjudicating Authority in I.A. No. 357 of 2020.

In view of the aforesaid, it is evident that the rights of the Corporate Debtor are confined to the said 50 Acres of land. The Corporate Debtor does not have any right, title or interest in respect of the remaining 300 acres of land which is being used and enjoyed by Tata Steel.

Heard the parties on various dates at length and perused the record.

Following issues arise for consideration:

The foremost contention of the workmen in the present applications is that the claim of JBVNL as admitted by the present RP is not sound in law. According to the workmen, the said claim falls under the category of ‘contingent liability’ and ought not to have been admitted by the RP.

It is seen that the Corporate Debtor, in its audited balance-sheet for the F.Y. 2015-16, has listed the dues of JBVNL as "Contingent Liabilities and Major Obligations" with inter alia the following observation:

It is clear that the Hon’ble High Court of Jharkhand vide order dated 02.04.2013 in WPC 852 of 2000 had clearly held that the tariff schedule scheduled by the Bihar State Electricity Board dated 24^th September 1999 was applicable to the petitioner i.e the Corporate Debtor herein and that the Petitioner therein was liable to pay delayed payment surcharge on the rectified bill issued by the Board i.e JVBNL.

The review petition filed against the aforesaid order was dismissed by the Hon’ble High Court of Jharkhand on 17.07.2013. Further, the second writ filed by the Corporate Debtor being WPC 3801 of 2013 was also dismissed by the Hon’ble High Court of Jharkhand on 22.05.2015 on the grounds that JBVNL had already initiated proceedings being Certificate Case No. 38/14-15^{1212.Annexure D to the Reply in I.A. (IBC) 33/KB/2020, Pages} against the Corporate Debtor under Bihar & Orissa Public Demand Recovery Act, 1914.

Furthermore, the directions given by the Certificate Officer in Certificate Case No. 38/14-15 are also extracted hereinafter:

It is seen that subsequent to the orders in WPC 852 of 2000 and WPC 3801 of 2013, the Corporate Debtor had filed two Letter Patent Appeals being LPA No. 217 of 2013 and LPA 405 of 2015. LPA 405 of 2015 has been dismissed vide order dated 07.09.2022^{1313.Annexure P to Reply in I.A. 69/KB/2020}.

Upon passing of the Certificate Order by the Certificate Officer in Certificate Case No. 38/14-15, the liability of the Corporate Debtor towards JBVNL to the extent indicated therein, became established and no longer remained a ‘contingent liability’ as claimed by the workmen. Further, upon the issuance of fresh bill dated 24.12.2015 by JBVNL, the same became crystallised. In pursuance of the said order passed by the Certificate Officer, JBVNL issued the revised bill^{1414.Annexure E to the Reply in I.A. (IBC) 33/KB/2020, Page no 79.} on 24.12.2015 for an amount of Rs. 2,18,03,07,289/-. As directed by the Certificate Officer in the preceding order, the amount to be kept in abeyance i.e Rs. 48,0674,070/- was mentioned in the revised bill.

Further, during the course of arguments, the learned Counsel on behalf of the workmen claimed that the Resolution Professional has admitted Rs.366.30 Crore of Jharkhand Bidyut Vitran Nigam Limited (“JBVNL”) against the claim of Rs.440.53 Crore which arose during 2000 to 2013 and is barred by limitation. The learned Counsel referred to the order passed by the Hon’ble High Court of Jharkhand in CWJC No. 852 of 2000 on 02 May 2013 which was filed by Tayo Rolls Limited. The Learned Counsel submitted that once the order was passed on 2013, the limitation stated which as per section 56(2) of the Electricity Act, 2003 is only two years. The order of CIRP was passed on 05 April 2019 ie. after 6 years from the date of the order of the Hon’ble High Court of Jharkhand.

In this regard, it becomes pertinent to refer to section 56 of the Electricity Act, 2003 (“the Act”) which is as follows:

On perusal of the aforesaid provision, it is clear that section 56(2) only operates in cases where the consumer has neglected to pay the charge of the electricity consumed by it and does not apply to other cases such that of deficiency in service and dispute in the bills.

In Prem Cottex vs. Uttar haryana bijli vitran nigam ltd.&ors. ^{1515.Civil Appeal No.7235 Of 2009. Decided on 05.01.2021} the Hon’ble Supreme Court has held as follows:

Further in K.C. Ninan vs. Kerala State Electricity Board and Others^{1616.2023 SCC OnLine SC 663}, the Hon’ble Supreme Court has held as follows:

It is clear from the aforesaid decisions of the Apex Court that the right to recover arrears/dues on part of JBVNL will not be curtailed by virtue of section 56(2) of the Act, which merely relates to the remedy of disconnection of the electricity supply. Further, section 56(2) of the Act will only operate in scenarios where the bills/dues have been disputes. In the instant matter, it is seen that the electricity bills in case of the Corporate Debtor have been a matter of dispute since 2000 and although the Hon’ble Jharkhand High Court on 02.05.2013 has passed a decision on the subject matter, the litigations carried on until the passing of the order by the Certificate Officer in Certificate Case No. 38/14-15. Subsequent to the said certificate order, a revised bill was issued on 24.12.2015 and it is only then that the demand and the corresponding right of recovery arose.

Since the delay/failure on part of the Corporate Debtor was not a result of neglect on its part but disputes in the amount of the said bill, the provision of section 56(2) shall not hinder the right of recovery of the dues of JBVNL.

Lastly, it is clear that the Corporate Debtor has acknowledged the Certificate Order dated 12.12.2015 in its Annual Statements for the F.Y. 2016-17^{1717.Annexure C to the I.A. 69/KB/2020, Page 51} and the LPAs pointed out therein have been dismissed afterwards, the same would amount to valid acknowledgment in terms of section 18 of the Limitation Act, 1963 giving rise to a fresh limitation period which would then culminate on 28.03.2020. Since the claim was filed on 22.04.2019, the same was filed within limitation period.

According to the workmen, pursuant to para 5.5 of (Electricity Supply Code) Regulations, 2005 as amended by Jharkhand State Gazette Notification^{1818.Annexure B to I.A.} No-214 Dated 16/04/2007, a Resolution Applicant who assumes control of the Corporate Debtor is not responsible for fulfilling the obligations of the outgoing management.

Para 5.5 of the Regulations is reproduced hereinafter:

There is no quarrel on this issue as 5.5 is not in conflict with the “ Clean slate” syndrome of the insolvency regime where the claims lodged by the electricituy supply utility would be subject to payment under the laid down mechanism . Further the regulation lays down the mandate with respect to securing reconnection of electricity connection on an application made by such new occupant like the SRA who has no relation with the previous management and is well provided for under section 29A which provides that SRA cannot be a related party of the Corporate debtor.

It is also pertinent to refer to the decision of the Apex Court in K.C. Kinan (supra) in the matter which are as follows:

While the decision of the Apex Court pertains to sale of a property on an “as is where is” basis, the same principle can be applied to the case of a resolution plan. When a resolution plan is submitted by a prospective resolution applicant (PRA), it is understood that such PRA has notice of all the dues and liabilities of the Corporate Debtor, including that of electricity dues, if any and has agreed to pay the same in terms of the resolution plan. As such, the claim of the workmen that the dues of JBVNL can only be recovered from the erstwhile management of the Corporate Debtor is without basis.

The next contention of the workmen is that the voting share allotted to JBVNL by the RP is without sound reasoning. In this regard, it is seen that in the Minutes^{1919.Annexure G to the Reply in I.A. (IBC) 33/KB/2020.} of the 1st CoC Meeting, an amount of Rs. 2,18,03,07,289/- was admitted by the erstwhile RP out of the total claim of JBVNL for Rs. 4,40,53,35,190/-. However, in the 2^nd CoC Meeting^{2020.Annexure H to the Reply in I.A. (IBC) 33/KB/2020}, the claim of JBVNL was reduced to Rs. 34,13,54,771/-.

Thereafter subsequent to the replacement of the RP, JBVNL vide letter^{2121.Annexure J to the Reply in I.A. (IBC) 33/KB/2020} dated 05.11.2019 requested the present RP to re-verify its claim. Accordingly, the present RP, in the 7^th CoC Meeting mentioned²² that he would be re-verifying all claims. In order to do the same, the CoC passed resolution approving the appointment of Mr. Vineet Agarwal as process advisor and Magnus Legal Services LLP to provide legal assistance by 100% votes. This implies that the decisions to re-verify the claims and the appointment of the aforesaid personnel were both assented to by the workmen herein.

As per the Minutes of the 9^th CoC Meeting^{2323.Annexure L to the Reply in I.A. (IBC) 33/KB/2020}, it is seen that since the re-verification of claims was a technical issue the Resolution Professional further appointed other professionals to assist him in the matter. The relevant portion of the Minutes is reproduced hereinafter:

The process followed by the RP and the aforesaid personnel in re-verification of all the claims including that of the workmen is clearly outlined in the Minutes of the 9^th CoC Meeting. Furthermore, the reason for re-evaluation of JBVNL’s claim is also mentioned clearly in the said Minutes. The relevant portions of the Minutes in respect thereof are extracted hereinafter:

As such, it is clear that the increase in admitted claim of JBVNL by the RP was correct, transparent and as per the provisions of the Code. The contention of the workmen regarding the voting share of JBVNL being incorrect, arbitrary and clandestine therefore does not stand.

The workmen had submitted a claim of Rs. 190 Crore in addition to the provident fund (PF) dues to the tune of Rs. 15.74 Crore. As on date, the total amount of admitted claim by the present RP is Rs. 28 Crore (Approx) and the PF dues have not been included in calculation of the said admitted claim.

According to the workmen, the RP has committed an error in failing to take into account the provident fund dues of the workmen while computing the admitted claim and in process reducing the voting percentage of the workmen.

In this regard, it is to be noted that any amount due from the Corporate Debtor in terms of Provident fund contribution is in fact, due to the Provident Fund Trust and not directly to the workmen.

Even though the PF dues have not been included in the admitted claims of the workmen, the Resolution Plan proposes to make 100% payment in respect of the admitted claim of the Provident Fund Trust which is mentioned to be Rs. 0.14 Crore or 14 Lakh. The change in the quantum of such unpaid contribution will not impact the voting percentage of the workmen in the CoC. The allegation regarding the constitution of the CoC to this extent is unsustainable.

The workmen have further claimed that the quantum of claims admitted by the present RP is incorrect and that the Corporate Debtor is liable to pay the entire amount due to the workmen till their superannuation pursuant to section 25(O)(6) of Industrial Disputes Act, 1947.

The Adjudicating Authority while admitting the Corporate Debtor into CIRP accepted the claim of the workmen for Rs. 2,19,83,760/- as default of wages and Rs. 21,98,37,600/- as compensation, aggregating to a sum of Rs. 24,18,21,360/-. The workmen had filed a claim for Rs. 190 Crore with the erstwhile RP who had initially admitted the claim for a sum of Rs. 24,18,21,360/- and rejected the rest of the claim. Subsequently, the present RP, after re-verifying the claims of the workmen, increased the admitted claim to Rs. 28 Crore (Approx.)

As admitted by the Corporate Debtor in its audited balance sheets for the F.Y. 2016-17²⁴, the Corporate Debtor had filed a closure application under section 25-O of Industrial Disputes Act, 1947 which was refused by the state authorities on 27.10.2016.

The Corporate Debtor, being aggrieved by said order had filed before the Hon’ble High Court, Jharkhand a writ petition being WP(L) No. 6690 of 2016. During the

²⁴Annexure C to I.A.(IBC) 69/KB/2020, Page 142 pendency of the same, CIRP was initiated against the Corporate Debtor by this Adjudicating Authority vide order dated 05.04.2019 when the moratorium also commenced.

According to the submissions of the workmen, the said writ petition being WP (L) No. 6690 of 2016 was subsequently dismissed by Hon’ble High Court vide order dated 19.08.2019 following which no other application was filed before the Labour, Employment and Training Department, Jharkhand state. The workmen contend that considering the same, its default under section 25(O) has become absolute after one year and the workmen still being the employees of the Corporate Debtor are entitled to an amount till their superannuation.

In order to adjudicate upon this issue, it becomes pertinent to refer to section 25(O) of the Industrial Disputes Act, 1947 which is reproduced as follows:

It is further relevant to refer to the order dated 19.08.2019 passed by the Hon’ble High Court, the relevant portion of which is reproduced hereinafter:

It is clear from the aforesaid provision and the order dated 19.08.2019 that once issued, the order of the government refusing the closure of the undertaking becomes binding on all the parties and remains in force for one year from the date of such order.

In the instant matter, since the state government’s order dated 27.10.2016 lost its force due to efflux of time, a follow-up for closure was required to be made by the Corporate Debtor, which as per records, has not been made. Further, there is no record regarding the retrenchment of the workmen afterwards. As such, from legal point of view, the workmen continue to be employed by the Corporate Debtor till date and ought to be paid their salaries and other benefits accordingly.

Considering the same, the salary along with the ancillary benefits due to them will need to divided into two parts i.e salary dues for pre-CIRP period and salary dues pertaining to the CIRP period. For pre-CIRP period (October 2016 to 05.04.2019), the claim was made to the RP in Form D, as required. However, salaries payable to workmen for the CIRP period, if at all, will be covered under CIRP costs. As such, the calculation of salary dues by the present RP in respect of the workmen is as per law.

It is to be noted that the salary which would accrue to the workmen for the CIRP period are uncrystallised future/contingent liabilities as on the CIRP commencement date and a claim regarding the same cannot be admitted beforehand by the RP i.e prior to constitution of CoC. The same therefore, shall have no bearing on the voting shares of CoC members. As such, the constitution of CoC on the basis of the pending dues till the time the CIRP started was done as per law by the RP.

Further, regarding the inclusion of salaries due for the CIRP period, it becomes relevant to refer to the decision of the Hon’ble Supreme Court in Sunil Kumar Jain and Ors. v. Sundaresh Bhatt and Ors.^{2525.(2022) ibclaw.in 23 SC} wherein the Apex Court has held that:

It has been admitted by both parties on several occasions that the Corporate Debtor became inoperative since October 2016 and has remained so throughout the CIRP period. As such, the possibility of all the workmen working during the CIRP period does not arise and only the salary dues of working workmen, if any, would be included in the CIRP Costs. It is seen in Item No. 9 of the Minutes of 9^th CoC Meeting^{2626.Page 302 of the I.A.69/KB/2020}, that unpaid wages for the CIRP period to the tune of Rs. 3,41, 85,408/-have been included in CIRP Costs.

It also becomes pertinent to refer to the recent decision of Hon’ble NCLAT in Era Labourer Union of Sidcul, Pant Nagar, through its secretary vs. Apex Builsys Ltd.^{2727.(2024) ibclaw.in 599 NCLAT}, wherein the Appellate Authority has held as follows:

Keeping in line with the aforementioned decision, we are of the opinion that the claims admitted by the present RP in respect of the workmen are correct and as per law.

It is claimed by the workmen that since as per the Meenakshi Mills case^{2828.(1992) 3 SCC 336}, Chapter VB of the Industrial Dispute Act, 1947 was inserted to give effect to directive principles of state, the statute of Industrial Dispute Act, 1947 will supersede IBC 2016. In Meenakshi Mills case (supra), it was held that any restriction so imposed which has the effect of promoting or effectuating a directive principle can be presumed to be reasonable restriction in public interest.

In the instant, it is seen that the Corporate Debtor’s application for closure of the company was refused by the state government vide order dated 27.10.2016. However, the said order had lost effect after one year as given in the statute itself. The same has been confirmed by the Hon’ble High Court, Jharkhand. The steps taken by the RP in admitting part of the workmen’s claims is as per IBC and at the same time not inconsistent with the provisions of the Industrial Dispute Act, 1947. There is no conflict between the two statutes in the instant matter.

In regard to ‘conflict’ between two ‘special statutes’, we find it relevant to refer to the decision of the National Company Law Apellate Tribunal (NCLAT) in Mr. P. Eswaramoorthy Liquidator of M/s. Senthil Papers and Boards Private Limited vs. The Deputy Commissioner ofIncome Tax (Benami Prohibition)^2929. wherein the following was held:

Further, the Apex Court in K Kishan vs. M/S Vijay Nirman Company Pvt. Ltd^{3030.CIVIL APPEAL NO. 21824 OF 2017} has held that:

Both the statutes operate in different spheres and the overlap between the same has not resulted in any conflict between the two, the question of one overriding the other does not arise. The RP via his actions has in no way interfered with any remedy that may be available to the workmen under the Industrial Disputes Act, 1947, for which they may approach the appropriate Authority.

The workmen in I.A. 167/KB/2020 have claimed that the entire stretch of 350 acres of land which formed the subject matter of the government grant under Government Grants Act, 1895 via Deed of Conveyance ^{3131.Annexure C to I.A. (IBC) 167/KB/2020} dated 18.03.1969 belongs to the Corporate Debtor herein and that the RP has erroneously declared only 50 acres of land in favour of Corporate Debtor, thereby mis-appropriating 300 acres of land to the gross prejudice of the Corporate Debtor and the workmen.

In this regard, the first document to be relied on is the aforesaid deed of conveyance dated 18.03.1969 which makes it clear that the government grant was given to Tata Steel Ltd.(then known as TATA Iron and Steel Company Limited) for setting up of (i) Alloy Tool and Special Steel Plant (i) Roll Foundry Project. As such the principal leasehold agreement was executed in favour of Tata Steel Ltd. and not the Corporate Debtor herein.

Next is the sub-lease agreement^{3232.Annexure B to IVN. P. 2/KB/2021} dated 07.10.1969 which was executed between the Corporate Debtor (then known as Tata Yodogawa Ltd.) herein and Tata Steel Ltd. whereby the Corporate Debtor was given exclusive possession of 50 Acre out of the aforesaid 350 Acres land for industrial purposes. The said sub-lease agreement makes it further clear that the sub-lease of the Corporate Debtor was limited to 50 Acres only.

It is seen that the workmen have relied on the decision of the Hon'ble Supreme Court in its order in (2015) 15 SCC 55, specifically paragraphs 7 and 43. Upon reading of the same, it becomes clear that the Hon’ble Apex Court while allowing the appeal, has upheld Tata Steel Limited’s lease-hold right to the 350 acre of land. Paragraph 44 therein also make it clear that the grant was given to TATA Steel Ltd. and as such the leasehold rights with respect to the entirety of 350 Acres belongs to TATA Steel Ltd. the relevant portion of Paragraph 44 is reproduced hereinafter for reference:

From the aforesaid documents, it is abundantly clear that only 50 Acre of land over which the Corporate Debtor enjoys leasehold rights shall form part of its assets and the claim of the workmen regarding the leasehold - rights of the remaining 300 acres of land belonging to the Corporate Debtor is without any legal footing.

The workmen have claimed that the erstwhile RP as well as the present RP have failed to comply with several provisions of the Code including sections including sections 17, 18(1), 20, 22, 25, 28 and 29. According to the workmen, the mandatory actions under the aforesaid sections form the pre-requisites to the start of CIRP under section 23 and due to the non-compliance of the same, the CIRP under section 23 has not been initiated at all. The workmen in this regard have placed reliance on the Hon’ble Supreme Court’s decision in Arcelor Mittal vs. Satish Kumar Gupta^{3333.(2019) 2 SCC 1}.

As per the workmen’s claims, the Resolution Professional failed to seize control of the Corporate Debtor's assets and properties, leaving Tata Steel Ltd. in control of the entire 350 acres of land, the buildings, plant and machinery, residential colonies, the registered office, and all other movable and immovable assets. This is in violation of Sections 17 (1) and (2), 18 (1) (a) (iii), (d) and (f), 20 (1), 25 (2) (a) (c) (e) (g), and 29 of the Code read with relevant regulations.

It has been contended that the Resolution Professional has also failed to prepare an information memorandum under section 18 of the Code and further to commence the Insolvency Resolution Process violating the mandate of 18 (I) (a), (b), (c), 20 (2) (c) of the Code.

At this juncture it is useful to refer to section 23 of the Code which is reproduced hereinafter:

Further, the relevant portion of Arcelor Mittal (supra) has been reproduced hereinafter:

In Arcelor Mittal (supra), the Apex Court has stated that the Resolution Professional, upon to his/her appointment in the first CoC Meeting under section 22, conducts the CIRP then on, as per section 23 of the Code. Till that point in time, the IRP conducts its preliminary duties under sections 13 to 22. Be that as it may, in order to make the CIRP effective the steps mentioned under sections 13 to 22 become necessary to be carried out.

Coming to the specific claims of the workmen regarding Tata Steel Ltd.’s control of the entire 350 acres of land, it is clear at this point that TATA Steel Limited, being the principal lessee was entitled to the possession and usage of the 350 acres of land barring the 50 acres over which the Corporate Debtor has exclusive possession and leasehold rights. As such, the RP, in allowing so, has not contravened the provisions of Sections 17 (1) and (2), 18 (1) (a) (iii), (d) and (f), 20 (1), 25 (2) (a) (c) (e) (g) as alleged by the workmen.

Lastly, regarding the preparation of the information memorandum, it is seen that the Resolution Professional, in the 7^th CoC Meeting ^{3434.Page 130 of the Reply in I.A. (IBC) 69/KB/2020} held on 11.11.2019 had mentioned to the CoC members that since upon his appointment, the present RP had not received any additional information regarding the same, the RP was going to continue with the IM prepared by the previous RP. It is mentioned therein that the CoC members had received the IM of the Corporate Debtor. The said 7^th CoC meeting was also attended by Mr. A.K. Shrivastava as a representative on behalf of the workmen.

In light of the said minutes of the 7th CoC Meeting, it is clear that IM had been prepared by the RP. As such, the allegations regarding non-compliances of the provisions of the Code are unsustainable.

In view of the aforesaid findings and facts and circumstances of the case, we are of the considered opinion that the CoC has been correctly constituted and the process of CIRP has also been duly conducted as per law. In result we conclude that the prayers sought by the Applicants in the present applications cannot be granted and accordingly, I.A. 33/KB/2020, I.A.69/KB/2020 and I.A. 167/KB/2020 are hereby rejected.

The Registry is directed to email copies of the order forthwith to the learned Counsel on record and the Liquidator for information.

Certified copies of this order may be issued, if applied for, upon compliance of all requisite formalities.

Files be consigned to the record.