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NCLAT observed the conduct of the Appellants who have not come with clean hands, Appeal is dismissed

The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising Justice Anant Bijay Singh, Judicial Member and Ms. Shreesha Merla, Technical Member was hearing an Appeal preferred by the Appellants was 42 in numbers being aggrieved and dissatisfied with the order passed by the Adjudicating Authority, whereby the AA dismissed the I.A. filed by the workers seeking relief. The NCLAT New Delhi Bench observed the conduct of the Appellants who have not come with clean hands in filing this Appeal. The Appeal was dismissed.


The company filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016, 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 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 the sale of assets of the Company was to be initiated in accordance with Section 33 of the Code.

Appellants’ Submission:

Appellants claimed that while they tried their 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.

A further case was 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 funds. The Respondent is only interested in closing down the Dharwad plant, which is otherwise operational and cutting 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 from being taken at the behest of the Respondent.

It was 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. It was also 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’.

Respondent’s Submission:

Counsel for the Respondent/Liquidator submitted that ex-workmen and ex-employees of the Dharwad Plant of the Corporate debtor at the behest of the suspended Promoter and Director of the Corporate Debtor, and his family, with mala fide intent. The present Appeal was yet another attempt of the Corporate Debtor to create all types of hurdles to derail and frustrate the liquidation proceedings.

It was further submitted that the reliefs sought by the Appellants the instant Appeal were 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.

It was further submitted that non-cooperating appellants, whose full and final settlement has not been cleared by the Respondent due to their failure to hand over the assets, documents and information of the Corporate Debtor cannot agitate the issue of entitlement under the I&B Code, 2016, as the same pertains to the independent contractual agreement between the Corporate Debtor and the ex-employees of Corporate Debtor. During the course of the 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). In view of the above, the instant Appeal was not maintainable and deserves to be dismissed.

Court’s Analysis:

The Appellate Authority noted 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 the possession of Dharwad unit. The reasons recorded by the Adjudicating Authority for dismissing the IA were within the framework of law and required no interference. The impugned order dated 03.05.2021 passed by the Adjudicating Authority was affirmed. There was no merit in the Appeal. The Appeal was dismissed.

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