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2025 (5) TMI 318 - AT - IBCMaintainability of application u/s 60(5) of the IBC - applications filed by the ex-employees seeking payment of outstanding dues from the new entity that acquired the erstwhile company under the resolution process - HELD THAT - There are substance in the objection raised by the respondent. The entity under which the applicants are claiming their employment and their dues against erstwhile entity has been resolved with the approval of the NCLT by order dated 02.02.2021. The grievance if any shall arise out of the said order and appropriate remedy available to the applicant was to file application before the NCLT in the CA 1163/2020 in C.P. 3638/MB/2018. Section 60(5) which has been referred to by the applicant in the application could have been availed before the NCLT Mumbai where the erstwhile entity in which the applicants were working has been resolved. The above applications filed by the applicant need not be entertained by the Appellate Tribunal. Application are disposed of with liberty to the applicant to raise grievances if any - Both the applications stand disposed of.
1. ISSUES PRESENTED and CONSIDERED
- Whether the applications filed by the ex-employees seeking payment of outstanding dues from the new entity that acquired the erstwhile company under the resolution process are maintainable before the Appellate Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC)? - Whether the new entity, having acquired the erstwhile company through a resolution process approved by the National Company Law Tribunal (NCLT), is liable to pay the outstanding employment dues claimed by the applicants? - Whether the applicants' grievance regarding non-payment of dues post the cut-off date can be entertained in these applications before the Appellate Tribunal or whether the appropriate forum is the NCLT where the resolution was approved? - Whether the applications filed after a significant lapse of time from the resolution order should be entertained or dismissed on grounds of delay and maintainability? 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of Applications under Section 60(5) of the IBC before the Appellate Tribunal Relevant Legal Framework and Precedents: Section 60(5) of the IBC empowers the Appellate Tribunal to hear appeals against orders passed by the Adjudicating Authority (NCLT). However, the jurisdiction of the Appellate Tribunal is circumscribed to appeals arising from orders of the NCLT under the IBC framework. The applicants invoked Section 60(5) for seeking payment of dues post the resolution of the company. Court's Interpretation and Reasoning: The Court observed that the resolution of the erstwhile company was approved by the NCLT Mumbai by order dated 02.02.2021. The applicants' claims arise out of that resolution order, and thus the appropriate forum for raising grievances related to the resolution order is the NCLT itself, not the Appellate Tribunal. The Court held that Section 60(5) remedy should have been availed before the NCLT Mumbai where the resolution was sanctioned. Application of Law to Facts: Since the applicants filed the applications directly before the Appellate Tribunal, bypassing the NCLT, the Court found the applications not maintainable under Section 60(5) before the Appellate Tribunal. The Court emphasized that the applicants' claims are derivative of the resolution order and should be pursued in the forum that approved the resolution. Treatment of Competing Arguments: The applicants argued that their claims are based on confirmed ledger statements and the order of the NCLT, and hence maintainable under Section 60(5). The respondents contended that the applications are not maintainable before the Appellate Tribunal and that the applicants should have approached the NCLT. The Court sided with the respondents, holding that the proper remedy lies before the NCLT. Conclusion: The applications are not maintainable before the Appellate Tribunal under Section 60(5) of the IBC and should be filed before the NCLT Mumbai. Issue 2: Liability of the New Entity to Pay Outstanding Employment Dues Relevant Legal Framework and Precedents: The resolution plan approved by the NCLT sanctioned the acquisition of the erstwhile company by the new entity upon payment of a substantial consideration. Generally, under the IBC regime, the new entity takes over the assets and liabilities as per the resolution plan approved by the NCLT. Court's Interpretation and Reasoning: The Court noted that the new entity, Respondent No. 1, was declared the successful purchaser after paying Rs. 164 crore and the erstwhile company ceased to exist. The respondents asserted that all dues payable to the applicants were settled as per the resolution plan and no further dues are outstanding. Key Evidence and Findings: The respondents filed replies stating that the applicants' entitlements have been satisfied and no amounts remain payable. The applicants, however, claimed outstanding dues based on ledger statements and final settlement statements. Application of Law to Facts: The Court refrained from adjudicating on the merits of the payment dispute, observing that the grievance relates to the resolution order and the payment of dues under it. The Court opined that such disputes should be raised before the NCLT, which sanctioned the resolution plan and can examine the payment obligations of the new entity. Treatment of Competing Arguments: The applicants contended that the new entity is liable to pay the balance dues, whereas the respondents denied any outstanding liability. The Court did not express any opinion on the merits but left the matter open for consideration by the NCLT. Conclusion: The question of liability of the new entity to pay outstanding dues is to be determined by the NCLT in appropriate proceedings; the Appellate Tribunal will not entertain such claims in these applications. Issue 3: Forum and Timeliness for Raising Grievances Regarding Employment Dues Relevant Legal Framework and Precedents: The NCLT order dated 02.02.2021 approved the resolution plan and transferred the company to the new entity. The applicants' claims relate to dues after the cut-off date determined in the resolution process. Court's Interpretation and Reasoning: The Court observed that the applicants filed the present applications several years after the resolution was approved. The Court emphasized that the appropriate remedy for grievances arising from the resolution order is to file applications before the NCLT Mumbai in the relevant company petition and associated applications. Application of Law to Facts: The Court noted that the applicants' failure to approach the NCLT within a reasonable time after the resolution order undermines the maintainability of their claims before the Appellate Tribunal. The Court granted liberty to the applicants to raise their grievances before the NCLT in the relevant proceedings. Treatment of Competing Arguments: Respondents argued that the delay and the forum chosen by applicants are improper. Applicants argued that their claims are valid and supported by ledger statements. The Court found the respondents' objections on maintainability and forum choice to have substance. Conclusion: The applicants' grievances regarding employment dues post resolution must be raised before the NCLT Mumbai within the appropriate proceedings; delay and forum choice are material factors in determining maintainability. 3. SIGNIFICANT HOLDINGS "The grievance, if any, shall arise out of the said order and appropriate remedy available to the applicant was to file application before the NCLT in the CA 1163/2020 in C.P. 3638/MB/2018. Section 60(5) which has been referred to by the applicant in the application could have been availed before the NCLT Mumbai, where the erstwhile entity in which the applicants were working has been resolved." "We thus are of the view that objections raised by the counsel for the respondents have substance. The above applications filed by the applicant need not be entertained by the Appellate Tribunal. Application are disposed of with liberty to the applicant to raise grievances, if any, in CA 1163/2020 in C.P. 3638/MB/2018." Core Principles Established:
Final Determinations:
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