Section 16-G(1)(c) of the Tea Act, 1953 refers to the proceedings under Section 9 Insolvency and Bankruptcy Code shall not be limited to winding up and/or appointment of receiver only. The winding up/liquidation of the company shall be the last resort and only on an eventuality when the corporate insolvency resolution process fails. As observed by the Hon’ble Apex Court in Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, the primary focus of the legislation while enacting Insolvency and Bankruptcy Code, 2016 is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate debt by liquidation and such corporate insolvency resolution process is to be completed in a time bound manner. Therefore, the entire corporate insolvency resolution process as such cannot be equated with winding up proceedings. Duncans Industries Ltd. v. A.J. Agrochem, (2019) 9 SCC 725.
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In B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633 it was held as follows: “It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Insolvency and Bankruptcy Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.” Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd., (2019) 9 SCC 158.
The Adjudicating Authority, when examining an application under Section 9 of the Insolvency and Bankruptcy Code, will have to determine:
- Whether there is an operational debt, as defined, exceeding Rs. 1 lakh? (Section 4 of the IBC).
- Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And
- Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?
If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9 of the IBC, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. Transmission Corporation of Andhra Pradesh Limited v. Equipment Conductors and Cables Ltd., (2019) 12 SCC 697.
Operational Creditors cannot use the Insolvency Code either prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. The alarming result of an operational debt contained in an arbitral award for a small amount of say, two lakhs of rupees, cannot possibly jeopardize an otherwise solvent company worth several crores of rupees. Such a company would be well within its rights to state that it is challenging the arbitral award passed against it, and the mere factum of challenge would be sufficient to state that it disputes the award. Such a case would clearly come within para 38 of Mobilox Innovations (P) Ltd. V. Kirusa Software (P) Ltd., (2018) 1 SCC 353 being a case of a pre-existing ongoing dispute between the parties. The Code cannot be used in terrorem to extract this sum of money of Rupees Two Lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. K. Kishan v. Vijay Nirman Company Private Ltd., (2018) 17 SCC 662.
A trade union is certainly an entity established under a statute – namely, the Trade Unions Act and would therefore fall within the definition of “person” under Section 3(23) of the Insolvency and Bankruptcy Code. That being so, it is clear that an “operational debt”, meaning a claim in respect of employment, could certainly be made by a person duly authorized to make such claim on behalf of a worman. Rule 6, Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 also recognizes the fact that claims may be made not only in an individual capacity, but also conjointly. Further, a registered trade union recognized by Section 8 of the Trade Unions Act, makes it clear that it can sue and be sued by 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. J.K. Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills Co. Ltd., 2019 (4) AWC 3160.