Allowed

In the matter of United News of India & Ors. (IB)-764(ND)2022

NCLT19 May 2023

Case brief

AI extract

What is this about?

The tribunal held that a registered trade union qualifies as a 'person' eligible to file an insolvency petition under Section 9 of the IBC, 2016, representing employees. Finding the operational debt established, the court admitted the application, initiated the CIRP, and declared a moratorium, appointing an Interim Resolution Professional.

What did the court decide?

Application admitted under Section 9(5); CIRP initiated; Moratorium declared under Section 14; Ms. Pooja Bahry appointed as Interim Resolution Professional; Applicant directed to deposit Rs. 5 Lakhs.

In the matter of United News of India & Ors… — Insolvency and Bankruptcy | NCLT (2023)

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NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH (COURT-II)

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(IB)-764(ND)2022

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IN THE MATTER OF:

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United News of India Worker’s Union On behalf of Employees of United News of India 9, Rafi Marg, New Delhi - 110001 Through its President, Rajesh K. Puri

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… Applicant/Operational Creditor

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VERSUS

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1. United News of India 9, Rafi Marg, New Delhi - 110001 … Respondent No. 1 2. Sagar Mukhopadhyay Chairman of Board of Directors, United News of India, 9, Rafi Marg, New Delhi - 110001 … Respondent No. 2 3. Binod Kumar Mandal Director, United News of India 9, Rafi Marg, New Delhi - 110001 … Respondent No. 3 4. Gautam Singh Director, United News of India 9, Rafi Marg, New Delhi - 110001 … Respondent No. 4

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Section: 9 of the IBC, 2016

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Order Delivered on: 19.05.2023

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CORAM:

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SH. ASHOK KUMAR BHARDWAJ, HON’BLE MEMBER (J)

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SH. L. N. GUPTA, HON’BLE MEMBER (T)

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PRESENT:

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For the Applicant : Adv. Ritwik Parikh

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(IB)-764/(ND)/2022

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United News of India Workers' Union Vs. United News of India & Ors.

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Page 1 of 17

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ORDER

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PER: SH. L. N. GUPTA, MEMBER (T)

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United News of India Worker’s Union (for brevity, the ‘Applicant/ Operational Creditor ’) has filed the present petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity, the ‘IBC, 2016’ ) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity ‘the Rules’) with a prayer to initiate the Corporate Insolvency Resolution Process against United News of India (for brevity, the ‘Respondent’ ).

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The Respondent no.1 namely, United News of India is a Company incorporated on 19.12.1959 with CIN U92200DL1959NPL003169 under the provisions of the Companies Act, 1956 having its Registered Office at 9, Rafi Marg, New Delhi - 110001, which is within the territorial jurisdiction of this Bench. The Authorized Share Capital of the Respondent is Rs.25,00,000/and Paid-up Share Capital is Rs.10,18,900/- as per Master Data.

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It is submitted by the Applicant that Respondent no.1 namely, United News of India, is a leading media agency, established in the year 1959 as a Non-Profit Organization under Section 25 of the Companies Act, 1956. The Respondent No. 1 due to poor management and the complete apathy of the Shareholders has become debt-ridden and is unable to pay the workers’ dues. The Applicant has further submitted

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(IB)-764/(ND)/2022

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United News of India Workers' Union Vs. United News of India & Ors.

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that Respondent No.1 has defaulted in payment of the salaries, gratuity, etc., and other benefits to its permanent employees from 2017, which is in violation of the basic dignity of the employees, who have given their sweat and blood to Respondent No.1 and have worked diligently. It is also a clear violation of the rights guaranteed under Articles 14, 19, and 21 of the Indian Constitution. The Company has accrued a debt of more than Rs.1,03,04,31,488/-. The particulars of the Operational Debt claimed including the total amount of default and the date of default are mentioned in Part IV of the application, which reads thus:

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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As per Part IV of the Application reproduced above, the Applicant has claimed the total outstanding debt of Rs.1,03,04,31,488/- and relied on 16.04.2022 as the date of default.

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It is further submitted by the Applicant that a Demand Notice dated 28.04.2022 under Section 8 of IBC 2016 was served at the Registered Office of Respondent No.1, to which Respondent No.1 sent the reply dated 12.05.2022 as averred in the Affidavit filed under Section 9(3)(b) of IBC, 2016.

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On issuance of the notice, neither any of the respondents appeared nor filed their reply to the present application. Accordingly, they were proceeded ex-parte vide order dated 26.04.2023 of this Adjudicating Authority. However, since the reply of Respondent No. 1 to

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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the Demand Notice, as annexed by the Applicant with the Application, is on record, we would refer to the same which is reproduced below:

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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On perusal of the aforesaid reply to the Demand Notice, it is observed that Respondent No.1 had disputed the claim of the Applicant stating that the Applicant, a Workers Union, is neither an employee nor any amount is due and payable to it. Further, it has not rendered any services to the Respondent No.1 and accordingly, it cannot be said to be an Operational Creditor.

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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Indubitably, as evident from the application, the Applicant herein is a Trade Union. Therefore, before adjudicating the present application on merits, we would first like to examine the issue as emerges for our consideration i.e., “ Whether a Trade Union representing employees is eligible to file an application under IBC, 2016.”.

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In this context, we refer to the term “ Person ” (i.e., the eligible entities, who are entitled to file an application) as defined under Section 3(23) of IBC 2016), which reads thus:

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“3. Definitions. –

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(23) “person” includes –

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(a) an individual;

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(b) a Hindu Undivided Family;

(c) a company;

(d) a trust;

(e) a partnership;

(f) a limited liability partnership; and

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(g) any other entity established under a statute, and includes a person resident outside India.”

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At this stage, we also refer to the Judgement of the Hon’ble Supreme

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Court dated 30.04.2019 passed in the matter of “JK Jute Mill Mazdoor

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Morcha vs. Juggilal Kamlapat Jute Mills Company Limited through

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its Director & Ors.” in Civil Appeal No. 20978 of 2017, wherein the following is held:

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“6. On a reading of the aforesaid statutory provisions, what becomes clear is that a trade union is certainly an entity

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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established under a statute – namely, the Trade Unions Act, and would therefore fall within the definition of “person” under Sections 3(23) of the Code. This being so, it is clear that an “operational debt”, meaning a claim in respect of employment, could certainly be made by a person duly authorised to make such claim on behalf of a workman. Rule 6, Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 also recognises the fact that claims may be made not only in an individual capacity, but also conjointly. Further, a registered trade union recognised by Section 8 of the Trade Unions Act, makes it clear that it can sue and be sued as a body corporate under Section 13 of that Act. Equally, the general fund of the trade union, which inter alia is from collections from workmen who are its members, can certainly be spent on the conduct of disputes involving a member or members thereof or for the prosecution of a legal proceeding to which the trade union is a party, and which is undertaken for the purpose of protecting the rights arising out of the relation of its members with their employer, which would include wages and other sums due from the employer to workmen.”

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(Emphasis added)

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On a conjoint reading of the Judgement of the Hon’ble Apex Court (supra) with the definition of “person”, we observe that a Trade Union is covered under clause (g) of Section 3(23) IBC 2016, which, at the cost of repetition, reads as below:

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“3. Definitions. –

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- (g) any other entity established under a statute , and includes a person resident outside India.”

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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Page 9 of 17

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Thus, we find that a “Trade Union” being covered under “any other entity established under a statute” is a “person” eligible to file an application under IBC 2016. Further, on the question of whether a Trade Union can file an Application on behalf of its workmen, under Section 9 of IBC 2016, claiming an operational debt we refer to the JK Jute Mill Mazdoor Morcha Judgement of the Apex Court (supra), which further reads as follows -

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“…………This being so, it is clear that an “operational debt”, meaning a claim in respect of employment, could certainly be made by a person duly authorised to make such claim on behalf of a workman. Rule 6, Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 also recognises the fact that claims may be made not only in an individual capacity, but also conjointly . Further, a registered trade union recognised by Section 8 of the Trade Unions Act, makes it clear that it can sue and be sued as a body corporate under Section 13 of that Act…”

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Hence, in a sequel to the above, we conclude that -

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(a) a “Trade Union” being covered under Section 3(23) (g) i.e., “any other entity established under a statute” is a “person” eligible to file an application under IBC 2016, and

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(b) a Trade Union can claim an operational debt by filing an Application under Section 9 of IBC, 2016.

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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Therefore now, we would like to examine the present application on its merits. On a perusal of the application, we observe that the Applicant has filed the application on behalf of the workers of Respondent No.1 to whom the R-1 owes an amount of Rs.1,03,04,31,488/-. In support of its contention, the Applicant has annexed the audited Balance Sheet of R-1 for the financial year 20192020 and 2020-2021 to demonstrate the R-1’s acknowledgment of liability in relation to employment dues. The same is reproduced below:

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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The Applicant has further annexed a copy of the reply letter dated

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16.04.2022 written by R-1 to the Deputy Chief Labour Commissioner, wherein too, the liability involved, has been acknowledged. The said letter is reproduced below, for the sake of immediate reference:

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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After going through the application and the aforementioned documents placed therewith, we observe that though the Respondent No.1 in its reply to the demand notice has disputed the debt of the Applicant, however, it has failed to file any document demonstrating that any dispute was raised before the issuance of the demand notice. Since

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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the Respondents have been proceeded ex-parte therefore, it is presumed that they have nothing to say or add in the matter.

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In the given facts and circumstances, the Operational Creditor has succeeded in establishing the default on the part of the Corporate Debtor in payments of the employment dues, which are covered under the definition of operational debt. The present petition filed under Section 9 is complete and fulfills all the requirements of the law. Therefore, the Application is admitted in terms of Section 9(5) of the IBC. Accordingly, the CIRP is initiated and a moratorium is declared in terms of Section 14 of the Code. As a necessary consequence of the moratorium in terms of Section 14(1) (a), (b), (c) & (d), the following prohibitions are imposed with immediate effect:

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“(a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

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(b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

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(c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

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(d) The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the corporate debtor.”

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(IB)-764/(ND)/2022 United News of India Workers' Union Vs. United News of India & Ors.

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Since there is no IRP proposed by the Operational Creditor, therefore, this Bench appoints Ms. Pooja Bahry (Mob. No. 9811071716) having IBBI Registration No. IBBI/IPA-003/IP-N00007/2016-17/10063 and Email ID: [email protected] from the panel of IPs recommended by IBBI to this Adjudicating Authority subject to the condition that there is no disciplinary proceeding pending against the said IRP. The Adjudicating Authority further orders that:

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“Ms. Pooja Bahry, IRP (Email ID: [email protected]) having registration no. IBBI/IPA-003/IP-N00007/2016-17/10063 is directed to take charge of the CIRP of the Respondent with immediate effect. Further, the IRP is directed to take steps under Sections 15, 17, 18, 20, and 21 of the IBC, 2016.”

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The Operational Creditor is directed to deposit Rs.5,00,000/(Five Lakhs) only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by the Interim Resolution Professional and shall be paid back to the Operational Creditor.

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A copy of this Order shall immediately be communicated to the Operational Creditor, the Respondents and the IRP mentioned above, by the Court Officer/Registry of this Tribunal. In addition, a copy of the Order shall also be forwarded by the Court Officer/Registry to IBBI for their records.

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Sd/Sd/- (L. N. GUPTA) (ASHOK KUMAR BHARDWAJ) MEMBER (T) MEMBER (J)

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United News of India Workers' Union Vs. United News of India & Ors.

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(IB)-764/(ND)/2022

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In the matter of United News of India & Ors. (IB)-764(ND)2022

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In the matter of United News of India & Ors. (IB)-764(ND)2022

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