SC: A Trade Union could be an operational creditor under I&B Code, 2016

The Hon’ble Supreme Court, today, i.e. on 30thApril 2019, in the matter of JK Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills Company Ltd. Through Its Director & Ors. pronounced that a trade union could be said to be an operational creditor under the Insolvency and Bankruptcy Code, 2016.

The Hon’ble Supreme Court observed that:

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 Sections 3(23) of the Insolvency and Bankruptcy Code, 2016. (Para 6)

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. (Para 6)

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. (Para 9)

A trade union could be said to be an operational creditor under the Insolvency and Bankruptcy Code, 2016 as the trade union represents its members who are workers to whom dues may be owed by the employer, which are certainly debts owned for services rendered by each individual workman, who are collectively represented by the trade union. (This inference has been drawn on the basis of Para 11)

A collective application of workmen under the rubric of a registered trade union is maintainable as 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. (This inference has been drawn on the basis of Para 11)

Copy of judgement: Judgement_30-Apr-2019

-Tushar Kaushik

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