NEW DELHI: The ultimate court docket on Tuesday grew to become down the plea of workmen to present precedence to their dues in case of liquidation of an bancrupt corporate. It upheld Section 53 of the Insolvency and Bankruptcy Codewhich limits the dues to 24 months most effective previous the date of order of liquidation after which rank their dues similarly with the secured collectors.
A bench of Justices MR Shah and Sanjiv Khanna mentioned the unpaid dues of the workmen are adequately and considerably safe below the Code and in relation to the waterfall mechanism prescribed by way of Section 53 of the Code and the availability is legitimate and constitutional.
“In fact, the secured creditors are taking significant hair-cut and workmen are being compensated on an equitable basis in a just and proper manner as per Section 53 of the Code. The Code balances the rights of the secured creditors, who are financial institutions in which the general public has invested money, and also ensures that the economic activity and revival of a viable company is not hindered because it has suffered or fallen into a financial crisis, The Code focuses on bringing additional gains to both the economy and the exchequer through efficiency enhancement and consequent greater value capture,” it mentioned.
The court docket mentioned in financial issues, a much wider latitude was once given to the lawmaker and a few sacrifices need to be all the time made for the higher excellent, and except such sacrifices are prima facie obvious.
“The workmen also have a stake and benefit from the revival of the company, and therefore unless it is found that the sacrifices envisaged for the workmen, which certainly form a separate class, are onerous and burdensome so as to be manifestly unjust and arbitrary, We will not set aside the legislation, solely on the ground that some or marginal sacrifice has to be made by the workers,” it mentioned.
The best court docket held that waterfall mechanism prescribed within the Code as regards to the workmen’s dues is a well-considered and thought-out determination. “The waterfall mechanism and the hierarchy prescribed to the workmen’s dues should be seen in the overall objective of the Code, which is to explore whether the corporate debtor can be revived so that jobs are not lost,” it mentioned.
A bench of Justices MR Shah and Sanjiv Khanna mentioned the unpaid dues of the workmen are adequately and considerably safe below the Code and in relation to the waterfall mechanism prescribed by way of Section 53 of the Code and the availability is legitimate and constitutional.
“In fact, the secured creditors are taking significant hair-cut and workmen are being compensated on an equitable basis in a just and proper manner as per Section 53 of the Code. The Code balances the rights of the secured creditors, who are financial institutions in which the general public has invested money, and also ensures that the economic activity and revival of a viable company is not hindered because it has suffered or fallen into a financial crisis, The Code focuses on bringing additional gains to both the economy and the exchequer through efficiency enhancement and consequent greater value capture,” it mentioned.
The court docket mentioned in financial issues, a much wider latitude was once given to the lawmaker and a few sacrifices need to be all the time made for the higher excellent, and except such sacrifices are prima facie obvious.
“The workmen also have a stake and benefit from the revival of the company, and therefore unless it is found that the sacrifices envisaged for the workmen, which certainly form a separate class, are onerous and burdensome so as to be manifestly unjust and arbitrary, We will not set aside the legislation, solely on the ground that some or marginal sacrifice has to be made by the workers,” it mentioned.
The best court docket held that waterfall mechanism prescribed within the Code as regards to the workmen’s dues is a well-considered and thought-out determination. “The waterfall mechanism and the hierarchy prescribed to the workmen’s dues should be seen in the overall objective of the Code, which is to explore whether the corporate debtor can be revived so that jobs are not lost,” it mentioned.