Summary
After insolvency proceedings commenced and a moratorium was declared, the High Court continued steps to auction the corporate debtor’s land for workmen’s dues. The Supreme Court set aside those interim orders because disposal of the debtor’s assets had to proceed under the Insolvency and Bankruptcy Code. Workers could submit their claims through the insolvency process, and the auction participant and other parties retained lawful remedies without adjudication of their objections.
Issues
- Whether auction proceedings to satisfy workmen’s dues could continue after commencement of insolvency and declaration of moratorium.
- What remedies remained available to workers and the auction participant.
Provisions considered
- Sections 14, 231 and 238, Insolvency and Bankruptcy Code, 2016The moratorium and insolvency framework prevented parallel auction of the corporate debtor’s assets; disposal was to be governed by the Code. (¶¶ 6, 7, 8, 9)
- Regulation 9, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016The workers’ union could submit claims for arrears, salaries and other dues to the competent authority through the prescribed claim process. (¶ 10)
Held
- The High Court could not proceed with auction orders after the NCLT’s moratorium. Alienation during insolvency would jeopardise the interests of all stakeholders. (¶ 9)
- Sale or liquidation of the debtor’s assets was governed by the Code, with workers free to submit proof-backed claims, individually or collectively through an authorised representative. (¶¶ 9, 10)
- Parties retained remedies available according to law regarding objections to the halted auction; neither those objections nor the resolution professional’s competing pleas were decided. (¶ 11)
Result
Appeals allowed. The High Court’s interim orders of 14 August and 5 September 2019 were set aside. Asset disposal was to proceed under the Code; the workers’ union could lodge its dues claim and parties could pursue available lawful remedies.