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TMI Blog2025 (5) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved by the said order rejecting Section 9 application, this appeal has been filed. 2. Brief facts of the case necessary to be noticed for deciding this appeal are: (i) Appellants were appointed with different designations by the Company - M/s Desein Private Limited between the period 1979 to 2018. (ii) After June, 2018, the Company failed to pay the monthly salary, allowances and other dues of the Appellants. (iii) Appellants jointly sent a demand notice under Section 8 of the I&B Code on 11.03.2022 claiming amount in default of Rs.2,89,73,950/- due with respect to the Appellants. The demand notice was replied by the Company vide letter dated 23.03.2022 stating that there is no provision for joint application/notice under Section 8. It was stated that individual Operational Creditors have to issue their claim notice under Section 8. By notification dated 24.03.2020, the minimum threshold has been enhanced to Rs.1 Crore. It was stated that notice is for the purpose of recovering of dues which is not the object of IBC. There is pre-existing dispute between the Company and the alleged Operational Creditors. With regard to individual Applicants detail reply was given ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This Tribunal in Sadashiv Nomaya Nayak has erroneously interpreted the intention of the legislature. With regard to Financial Creditors in a joint petition claims of each Financial Creditors can be added to complete the minimum threshold of Rs.1 Crore. The same principle has to be applied for workmen/ employees. The mere fact that the judgment of this Tribunal in Sadashiv Nomaya Nayak was not interfered by the Hon'ble Supreme Court in appeal under Section 62 by its order dated 15.05.2023 cannot be read to mean that the issue has attained finality and is binding. Learned counsel for the Appellants has referred to judgment of Hon'ble Supreme Court in "Experion Developers (P) Ltd. Vs. Himanshu Dewan, 2023 SCC OnLine SC 1029" to submit that the Hon'ble Supreme Court has held that if the Appeal is dismissed in limine without any reason, the same is not binding. The Doctrine of Stare Decisis does not apply in this case. 5. Shri Krishnendu Datta, learned senior counsel appearing for the Respondent refuting the submissions of the Appellants submits that scheme of I&B Code for filing Section 7 application and Section 9 application are entirely different. Section 7 application can j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the 2[payment] of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation.-For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding 2[payment] of the operational debt in respect of which the default has occurred. 9. Application for initiation of corporate insolvency resolution process by operational creditor. -(1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section." 8. In contrast we may also notice the provision of Section 7 which deals with initiation of corporate insolvency resolution process by Financial Creditors. Section 7 Sub-section (1) begins with words, "A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r initiating the corporate insolvency resolution process against a corporate debtor under section 9 of the Code in Form 5, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor." 10. Whereas similarly in Rule 4 which deals with Financial Creditor, expression used is "A financial creditor, either by itself or jointly, shall make an application.". Application under Rule 6 is to be filed in Form 5. Form 5 which is part of the Rules has been relied by learned counsel for the Appellants. The Note on which reliance has been placed is part of the instructions in Part V of Form 5. Note to Part V of Form 5 is as follows: "Note: Where workmen/employees are operational creditors, the application may be made either in an individual capacity or in a joint capacity by one of them who is duly authorised for the purpose." 11. The above Note p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt rendered in the case of JK Jute Mill Mazdoor Morcha Vs. Juggilal Kamlapat Jute Mills Company Ltd. through its Director, (2019) 11 SCC 332. He has argued that the Application under Section 9 is to be filed in terms of Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 which prescribes Form 5 for the purpose of filing the application. He has referred to the note appended to Form 5 which read thus: "Note.-Where workmen/employees are operational creditors, the application may be made either in an individual capacity or in a joint capacity by one of them who is duly authorized for the purpose."" 14. This Tribunal after considering the judgment of JK Jute Mill and also another judgment of this Tribunal in "Mr. Suresh Narayan Singh Vs. Tayo Rolls Limited, Company Appeal (AT) (Ins.) No.112 of 2018" laid down following in Paras 9 and 10: "9. In support of his submissions, he has relied upon a decision of this Tribunal in the case of Mr. Suresh Narayan Singh Vs. Tayo Rolls Limited, Company Appeal (AT) Ins. No. 112 of 2018, to contend that issue involved in the present case has been answered in manner that "only if in an individual claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed by learned counsel for the Appellants at Para 4 of the judgment. We have already noticed Note of Form 5 and has taken a view that said Note of Form 5 is for limited purpose of filing appropriate application in individual or joint capacity by one person but said Note cannot be read in any manner to empower different/ other Operational Creditors to join in one application for completing the threshold for filing Section 9 application. 17. Section 4 of the I&B Code provides that matter relating to insolvency of corporate debtors where the minimum amount of the default is one lakh rupees which now has been specified as Rs. 1 Crore by Notification dated 24.03.2020 by the Central Government. The purpose of keeping a threshold of default for initiating Corporate Insolvency Resolution Process against a Corporate Debtor has its own statutory object. The debts of lesser amount cannot be basis for initiating any CIRP against the Corporate Debtor. 18. Coming to the case of workmen/ employees as submitted by learned counsel for the Appellants which according to the Appellants has to be read as exception with regard to other Operational Creditors. Debt or default of each employee may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kmen. 7. If the application is maintainable by one of the workmen, in that capacity, it should have been treated to be an application of 'Operational Creditor' and others could have been asked to file their respective claim before the 'Resolution Professional'. Even in a demand notice under Section 8(1), the details of operational debt of each 'Operational Creditor' can be shown by the authorized person. Only if in an individual claim of 'Operational Creditor' the amount of debt is less than one lakh rupees, it can be rejected being not maintainable." 19. In the present case, copy of demand notice dated 11.03.2022 has been brought on record as 'Annexure-O' to the appeal, which gives details of dues of all Appellants individually. Perusal of said details indicate that dues of Appellant No.1 - Mr. Kavindra Kumar is Rs.35,26,000/- and similarly the dues of all other Appellants' are less than amount of Rs.1 Crore individually. Thus, none of the Appellants' fulfill the threshold of Rs.1 Crore for initiating CIRP. 20. Learned counsel for the Appellants submits that the judgment of Sadashiv Nomaya Nayak has been affirmed by the Hon'ble Supreme Court sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its members. In Para 16 of the Hon'ble Supreme Court laid down following: "16. Even otherwise, we are of the view that instead of one consolidated petition by a trade union representing a number of workmen, filing Individual petitions would be burdensome as each workman would thereafter have to pay Insolvency resolution process costs, costs of the interim resolution professional, costs of appointing valuers, etc. under the provisions of the Code read with Regulations 31 and 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Looked at from any angle, there is no doubt that a registered trade union which is formed for the purpose of regulating the relations between workmen and their employer can maintain a petition as an operational creditor on behalf of its members. We must never forget that procedure is the handmaid of justice, and is meant to serve justice. This Court, in Kailash v. Nanhku³, put it thus: (SCC p. 495, paras 28-29) "28. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of "person" under Section 3(23) of the Code. Equally, the NCLAT is not correct in stating that a trade union would not be an operational creditor as no services are rendered by the trade union to the corporate debtor. What is clear is that the trade union represents its members who are workers, to whom dues may be owed by the employer, which are certainly debts owed for services rendered by each individual workman, who are collectively represented by the trade union. Equally, to state that for each workman there will be a separate cause of action, a separate claim, and a separate date of default would ignore the fact that a joint petition could be filed under Rule 6 read with Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, with authority from several workmen to one of them to file such petition on behalf of all. For all these reasons, we allow the appeal and set aside the judgment of the NCLAT. The matter is now remanded to the NCLAT who will decide the appeal on merits expeditiously as this matter has been pending for quite some time. The appeal is allowed accordingly." 24. The Hon'ble Supreme Court also held that Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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