T. Sivasankar Vs Managing Director (Madras High Court)
Conclusion: Assessee challenge against order passed by Liquidator through writ petition was not to be entertained as the order was appealable under the Insolvency and Bankruptcy Code, 2016. Assessee by bypassing the statutory mechanism, had misused the process of law as IBC, 2016 was a codified and time-bound legislation enacted to ensure the expeditious resolution or liquidation of corporate debtors, with specific timelines prescribed at each stage.
Held: Assesssee filed the writ petition challenging the communication issued by the second respondent wherein it was informed that National Company Law Tribunal, Chennai, had ordered the liquidation of M/s. Associated Cylinders & Accessories Private Limited. The company had treated assessee as falling within the definition of “workers” under Section 53(1)(b)(i) and, with the consent of the secured creditor, had disbursed the first tranche of payment to all employees. They were also informed that assessee had resigned from the company in the year 2014. It was further clarified that both the first and second tranches of distribution had been made strictly in accordance with the provisions of the IBC, 2016, and as such, the request for further distribution from the liquidation account could not be acceded to. Aggrieved, assessee sought a direction to settle their dues in accordance with the orders passed by National Company Law Tribunal. The first respondent, which was under liquidation, entered appearance through the second respondent—the Official Liquidator—who filed a counter affidavit. In the event of rejection of verification of claims, the aggrieved creditor was entitled, under Section 42 of the Code, to prefer an appeal before the Adjudicating Authority within a period of 14 days. Alternatively, assessee also had a remedy under Section 60(5) of the Code to approach the National Company Law Tribunal if they were aggrieved by the non-admissibility of their claims. It was therefore contended that the invocation of writ jurisdiction under Article 226 of the Constitution was not tenable in the absence of any extraordinary or exceptional circumstances. The principal questions that arose for consideration in this writ petition were whether the relief sought by assessee—predicated on the order of admission passed by the National Company Law Tribunal in C.P./607/(IB)/CB/2017—was legally tenable, and whether the present writ petition was maintainable in the face of an alternative and efficacious statutory remedy available under the Insolvency and Bankruptcy Code, 2016. It was held that the Resolution Professional or the Liquidator was vested with the authority to independently verify, and if necessary, reject claims, notwithstanding the admission of the Corporate Insolvency Resolution Process by the NCLT. The order of admission passed by NCLT under Section 9 of the Insolvency and Bankruptcy Code, 2016 was based solely on the prima facie satisfaction regarding the existence of a debt and default at the threshold stage. Such an order did not preclude the Resolution Professional or the Liquidator from subsequently rejecting an individual worker’s claim if it was found to be unsupported by adequate documentary evidence or otherwise inadmissible under the law. Assessee by bypassing the statutory mechanism, had misused the process of law and unnecessarily consumed valuable judicial time. It must be borne in mind that the IBC, 2016 was a codified and time-bound legislation enacted to ensure the expeditious resolution or liquidation of corporate debtors, with specific timelines prescribed at each stage. The conduct of assessee, in prosecuting this writ petition contrary to the statutory scheme, frustrates the very object and purpose of the Code.
