J K Jute Mill Mazdoor Morcha vs Juggilal Kamlapat Jute Mills Company Ltd. through Its Director

5 of the 2016 Rules, with authority from several workmen to one of them to file such petition on behalf of all – Judgment of the NCLAT set aside – Matter remanded to the NCLAT to be decided on merits, expeditiously –Trade Unions Act, 1926 – ss.2(g), (h), 8, 13, 15(c) and (d) – Sick Industrial Companies (Special Provisions) Act, 1985 – Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 – r.6 r/w Form 5 – Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 – Regulations 31 and 33.

Interpretation of Statutes – “noscitur a sociis” – Held: In Section 3(23) of the Code, a “person” would include any other entity established under a statute under Clause (g) – Clause (g) has to be read noscitur a sociis with the previous clauses of s.3(23) – Insolvency and Bankruptcy Code, 2016 – s.3(23)(g). Words & Phrases –”established under a statute” – Discussed.

Allowing the appeal, the Court

HELD: 1.1 A trade union is certainly an entity established under a statute – namely, the Trade Unions Act, 1926 and would therefore fall within the definition of “person” under Sections 3(23) of the Insolvency and Bankruptcy Code, 2016. 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. [Para 6] [1056-F-H; 1057-A-B]

1.2 In Section 3(23), a “person” includes a company in clause (c), and would include any other entity established under a statute under clause (g). It is clear that clause (g) has to be read noscitur a sociis with the previous clauses of Section 3(23). This being the case, entities such as companies, trusts, partnerships, and limited liability partnerships are all entities governed by the Companies Act, the Indian Trusts Act, and the Partnership Act, which are not “established” under those Acts in the sense understood in Canara Bank and the judgments followed by it. The context, therefore, in which the phrase “established under a statute” occurs, makes it clear that a trade union, like a company, trust, partnership, or limited liability partnership, when registered under the Trade Union Act, would be “established” under that Act in the sense of being governed by that Act. For this reason, the judgment in Canara Bank would not apply to Section 3(23) of the Code. Even otherwise, instead of one consolidated petition by a trade union representing a number of workmen, filing individual petitions would be burdensome as each workman would thereafter have to pay insolvency resolution process costs, costs of the interim resolution professional, costs of appointing valuers, etc. under the provisions of the Code read with Regulations 31 and 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. A registered trade union which is formed for the purpose of regulating the relations between workmen and their employer can maintain a petition as an operational creditor on behalf of its members. Procedure is the handmaid of justice, and is meant to serve justice. [Paras 9, 10] [1058-D-H; 1059-A-B]

1.3 The NCLAT, by the impugned judgment, is not correct in refusing to go into whether the trade union would come within the definition of “person” under Section 3(23) of the Code. Equally, the NCLAT is not correct in stating that a trade union would not be an operational creditor as no services are rendered by the trade union to the corporate debtor. The trade union JUTE MILLS CO. LTD. THR. ITS DIR.

represents its members who are workers, to whom dues may be owed by the employer, which are certainly debts owed for services rendered by each individual workman, who are collectively represented by the trade union. Equally, to state that for each workman there will be a separate cause of action, a separate claim, and a separate date of default would ignore the fact that a joint petition could be filed under Rule 6 read with Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, with authority from several workmen to one of them to file such petition on behalf of all. The judgment of the NCLAT is set aside. The matter is now remanded to the NCLAT who will decide the appeal on merits expeditiously as this matter has been pending for quite some time. [Para 11] [1060-D-G]

Commissioner of Income Tax (TDS), Kanpur and Anr. v. Canara Bank (2018) 9 SCC 322 – held inapplicable. Kailash v. Nanhku and Ors. (2005) 4 SCC 480 – relied on.

Sanjay Sadanand Varrier v. Power Horse India Pvt. Ltd. (2017) 5 Mah LJ 876 ; Sarah Mathew v. Institute of Cardio Vascular Diseases and Ors. (2014) 2 SCC

62 – referred to.