SC weighs in on interplay of labour laws and IBC

By Abhishek Dutta and Vineet Shrivastava, Aureus Law Partners

India as a welfare state has enacted various labour laws in order to ensure the protection and promotion of the social and economic status of workers and the elimination of their exploitation.

Under the Indian constitution, trade union, labour and industrial disputes are included in the concurrent list, where both the central and state governments are competent to enact legislation, with certain matters reserved for the central government. In addition to these, the preamble of the constitution has secured social, economic and political justice, equality of status and opportunity. There have been some recent court decisions under the Insolvency and Bankruptcy Code, 2016, (code) that deal with the interpretation of labour legislation.

labour laws
Abhishek Dutta
Founder and managing partner
Aureus Law Partners

Recently, the Supreme Court, in the case of JK Jute Mill Mazdoor Morcha v Juggilal Kamalpat Jute Mills Company Ltd, upheld the insolvency application filed under section 9 of the code by a registered trade union considering it to be an operational creditor for the purposes of the code.

The National Company Law Tribunal (NCLT), while adjudicating the application filed by the trade union on behalf of nearly 3000 workers of the debtor, had held that the trade union was not covered as an operational creditor and had dismissed the insolvency application. In the appellate proceedings, the NCLAT had also dismissed the trade union’s application by stating that each worker could file an individual application before the NCLT.

The Supreme Court, after studying various provisions of the Trade Unions Act, 1926 (act), observed that a trade union being an entity established under the provisions of the act would fall under the definition of a person under section 3(23) of the code.

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Abhishek Dutta is the founder and managing partner of Aureus Law Partners and Vineet Shrivastava is a partner at the firm.

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