national company law appellate tribunal

National Company Law Appellate Tribunal, New Delhi: In a case of alleged illegal retrenchment/termination of the workmen by the Resolution Professional, a 3-member bench comprising of Ashok Bhushan, J., Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member), granted a two-week extension to the respondents file a reply affidavit.

Brief Facts

In the instant matter, the Appellant, United Machines Karamchari Sangh, challenged the unreasoned and cryptic order dated 06-10-2023 issued by the Adjudicating Authority. The appeal contested the lay-off notice dated 01-02-2020 issued by the respondent 1-Resolution Professional alleging its illegality under the Industrial Disputes Act, 1947.

Due to the alleged illegal retrenchment/termination and the Adjudicating Authority’s failure to address these issues, the appellant preferred the present appeal seeking the setting aside of the lay-off notice and the consideration of lawful dues of the workmen. The appeal is brought before the NCLAT to rectify the perceived errors and protect the rights of the affected employees.

Grounds of Appeal

  1. 1. Conflict between IBC and Industrial Disputes Act

The Adjudicating Authority’s reasoning, based on Section 238 of the IBC, is challenged as it allegedly overrides provisions of the Industrial Disputes Act. The appellant contended that social welfare legislations protecting Provident Fund, Gratuity, and against illegal retrenchment are not in conflict with the IBC.

  1. 2. Resolution Professional’s Powers

The appellant argued that the Resolution Professional lacks the power to retrench employees under the IBC, unlike the liquidator. The lay-off notice is deemed illegal, as the Resolution Professional allegedly acted beyond authority, relying on an oral opinion subsequently set aside by the NCLAT.

  1. 3. Violation of Statutory Provisions

The lay-off notice is alleged to violate Sections 25 and 33 of the IBC, as well as Sections 25C and 25M of the Industrial Disputes Act and Section 2(n) of UP Industrial Disputes Act, 1947. The appellant contended that the lay-off notice was considered as the termination notice without proper compliance with statutory procedures.

  1. 4. Failure to Consider Contentions

The Adjudicating Authority is accused of overlooking the appellant’s contentions regarding the provisions and procedures established by the ID Act for the termination of workmen, as well as relevant legal precedents.

  1. 5. Abuse of Section 238 of IBC

The Adjudicating Authority is criticized for allegedly allowing Resolution Professionals to disregard statutory provisions by relying on Section 238 of the IBC, leading to what the appellant terms as “judicial legislation.”

NCLAT’s Direction

The NCLAT issued notice and granted the respondent two weeks to file a reply affidavit and sets a subsequent date for the next hearing on 01-12-2023. The NCLAT also allowed the appellant two weeks from the filing of the reply affidavit to submit a rejoinder, if any.

[Unitech Machines Karamchari Sangh v. Vivek Raheja, 2023 SCC OnLine NCLAT 2201, order dated 07-11-2023]

Advocates who appeared in this case :

Mr. Swarnendu Chatterjee, Ms. Deepakshi Garg, Mr. Yashwardhan Singh, Ms. Megha Saha, Counsel for the Appellant

Mr. Abhishek Anand, Ms. Lubhanshi Rai, Counsel for the Respondent

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