TMI Blog2022 (9) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... ka - restraint by an order of injunction from terminating, or taking any decision to terminate, the agreement between the company and Jeju Metals Private Limited - appointment of competent and independent agency to investigate the manner in which the respondent/Liquidator has been conducting his affairs as such Liquidator, and a report be called for from such agency. HELD THAT:- The conduct of the Appellants are noted, 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 of the possession of Dharwad unit. The reasons recorded by the Adjudicating Authority for dismissing the application are within the framework of law and require no interference. The impugned order dated 03.05.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) is hereby affirmed. There is no merit in the Appeal. Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 731 of 2021 - - - Dated:- 8-9-2022 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 10 of the Insolvency and Bankruptcy Code, 2016 (for short IBC ), 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 sale of assets of the Company was to be initiated in accordance with Section 33 of the Code. d) Further case is that the Appellants claim that while they tried heir 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. e) Jeju Metals Private Limited ( JMPL ), a company dealing in coal and coke and one of the customers of the Company, expressed a desire to get its coal processed at the Coke plant of the Gujarat NRE at Dharwad. It as mutually agreed between the Company and JMPL that JMPL's coal would be processed into metallurgical coke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant of the Company and the security agencies appointed by the Respondent were being paid by the Respondent from the money received from JMPL. As per the agreement, the Appellants are required to work at the Dharwad plant of the Company to ensure that the terms of such agreement are honoured and there is no difficulty faced by JMPL, in the process of conversion of coal into met coke. j) Further case is that although, the Appellants were attending their duties at the Dharwad plant of the Company regularly, the Respondent delayed the payment of their salaries and wages almost every month and in particular has refused to make any payment since the month of June, 2020 for quite some time. The Appellants, upon expressing concern with regard to such non-payment, were informed by the Respondent that the Respondent was following the principle of No work no pay . k) The Respondent failed to appreciate that when the entire nation is suffering by the disastrous financial effect caused by the outbreak of the pandemic, the Appellants have been regularly attending the Dharwad plant of the Company to render their services to JMPL. Non-payment of the salaries and wages by the Respondent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 2020. The employees and workers are regularly attending their duties as per the requirements of the management of the Company. q) Further case is 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 fund. The Respondent is only interested in closing down the Dharwad plant, which is otherwise operational and cut 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 being taken at the behest of the Respondent. Thereafter, the Appellants filed I.A. No. 865/KB/2020 in CP (IB) No. 182/KB/2017 with a prayer (supra) and after hearing the parties the Adjudicating Authority dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (at page 308-309 of the Reply) which belies logic and makes apparent his determination to shut down operations of the Dharwad Plant at all costs. It is an admitted fact that the Respondent has taken over the entire records of the Corporate Debtor. 7. The Ld. Counsel for the Respondent/Liquidator during the course of argument and in his Reply Affidavit along with Written/Additional Written Submissions submitted that ex-workmen and ex-employees of the Dharwad Plant of the Corporate debtor (in Liquidation) at the behest of the suspended Promoter and Director of the Corporate Debtor, namely Mr. Arun Kumar Jagatramka and his family, with mala fide intent. The present Appeal is yet another attempt of Mr. Arun Kuamr Jagatramka to create all types of hurdles to derail an frustrate the liquidation proceedings. 8. It is further submitted that on enquiries being made by the Liquidator from the ex-employees/ex-workmen arraigned as Appellant in the present Appeal, more specifically from one Mr. Mounesh Pater, the Appellant No. 24 and another Mr. Deepak Kalal, the Appellant No. 23. The said Appellants have denied any connection with the present Appeal and have expressly denied granting an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the Liquidator instituted an application being CA No. 20/2020 under Section 230 before the Adjudicating Authority on the basis of said Scheme received from the abovementioned shareholders of the Corporate Debtor. The Scheme proposed by 109 employees of the Corporate Debtor was approved by the Unsecured Creditors and FCCB Holders with requisite majority. However, the said Scheme was not approved by the Secured Creditor and Equity Shareholders by the requisite 75% majority. Since the financial creditors had not approved the Scheme proposed by 109 equity shareholders of the Corporate Debtor, around 370 employees/workmen of the Corporate Debtor filed an un-numbered application in CP(IB) No. 182/KB/2017 before the Adjudicating Authority on 29.05.2020 (hereinafter referred to as the Reconsideration Application ) for reconsideration of the Scheme and passing of the aforesaid Scheme by the financial creditors who were made the respondents therein. The Reconsideration Application and the application filed by the Liquidator being CA20/2020 in CP (IB) No. 182/KB/2017 in connection with the scheme propounded by 109 equity shareholders were rejected and dismissed by Adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chimneys was non-operational since long even prior to the liquidation commencement date. The Bhachau, Gujarat coke units of the Corporate Debtor were mostly non-operational since the liquidation commencement date. A maximum of only 2 out of 16 chimneys were intermittently running. A chart depicting the number of chimneys run and production details month wise from April 2019 to September, 2020. The Dharwad, Karnataka coke unit consisting of 8 chimneys were almost non-functional since the liquidation commencement date. A maximum of only 2 out of 8 chimneys were intermittently running. The coke units as aforesaid of the Corporate Debtor could not be operated due to shortage of working capital. Since the Dharwad Plant of the corporate debtor was not functioning, the Liquidator entered into a processing agreement with Jeju Metals private Limited w.e.f. 01.11.2019. Vide the said agreement, it was agreed that Jeju Metals Private Limited shall pay a consideration @ Rs. 200 per MT of Met Coke produced, subject to a minimum of Rs. 40 Lacs per month, plus all manufacturing expenses such as electricity, power fuel, repair and maintenance, travelling conveyance except salary, wages and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther offered Jeju to utilise the services of the workmen and employees for its processing operations on a contractual basis so that the employees and workmen are still paid salaries vide my email dated 08.05.2020. In response to the said emails, Jeju, vide its email dated 21.05.2020, accepted the delay in making the payments to the corporate debtor. Furthermore, Jeju further admitted that operations at the Dharwad plant could not be commenced initially due to market condition and subsequently due to COVID and further clarified that they could not find any solution for commencing the operations at Dharwad Unit till the lockdown is completely lifted and the business activities in the country comes to reasonable normalcy. Since the processing agreement was already fixed at the most optimal consideration, only considering that the salaries and wages of the employees and workmen of Corporate Debtor (in liquidation) and other allied costs of the plant could be met, any further reduction in the consideration was not possible for the Corporate Debtor. Accordingly, vide email dated 14.05.2020, I again reiterated the practical difficulties in reducing the consideration amount for utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement because of the insolvency of the Corporate Debtor. Thus, we are of the view that the NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of the Corporate Debtor. In the absence of jurisdiction over the dispute, the NCLT could not have imposed an ad-interim stay on the termination notice. The NCLAT has incorrectly upheld the interim order of the NCLT. 13. It is further submitted that non-cooperating appellants, whose full and final settlement have not been cleared by the Respondent due to their failure to handover the assets, documents and information of Corporate Debtor cannot agitate the issue of entitlement under the I B Code, 2016, as the same pertains to independent contractual agreement between the Corporate Debtor and the ex-employees of Corporate Debtor. During the course of 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). 14. It is further submitted that since the ex-workmen/ex-employees of Corporate Debtor continued to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lore other options. We have seen from the correspondence exchanged between the liquidator and JMPL, mentioned in para 4.23 (supra) that the admitted position was that JMPL was not in a position to commence its operations in the plant, firstly due to market conditions and later due to the Covid-19 pandemic. In such circumstances, it is a matter of conjecture whether JMPL would have come as the knight in shining armour to save the workers. Considering that no payments have come forth from JMPL after the termination of the contract, we are not too sure that this could have happened. 6.11. Therefore, in the absence of inflows into the coffers of the Company, prayer (a) cannot be granted at this stage, and we order accordingly. Prayer (b): 6.12. In so far as prayer (b) is concerned, this is for a direction to restrain the liquidator from taking any coercive decision for closing down the operations of the Company s Dharwad plant. 6.13. We have, in the course of oral arguments from both sides, had occasion to go through the correspondences, charts, cash flow statements, and statements of expenditure brought on record. The liquidator has made payment of wages in ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Prayer (d): 6.17. Before we part with the matter, we record that the prayer (d), which is for a competent and independent agency to be appointed to investigate the manner in which the liquidator has been conducting his affairs as such liquidator, was not seriously argued by the learned counsel for the applicants. It was also not given up. 6.18. In this regard, we hold that in the absence of any allegation of fraud or bias in the decisions of the liquidator, we cannot order a roving inquiry just on the basis of perceived loss of employment of the workers on account of a business decision taken by the liquidator to terminate the arrangement with JMPL. To hold otherwise will set a wrong precedent, and insolvency professionals shall not be able to take independent decisions, leading to a failure of the system. Such an approach should, therefore, be shunned. Actions taken in good faith by a public servant always enjoy protection under the law, and the IBC is no different, providing for the same under section 233 of the Code. 6.19. Resultantly, IA No.865/KB/2020 shall be dismissed. We take note of the conduct of the Appellants who have not come with cle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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