One Workman Cannot Represent Others In IBC Proceedings Without Authorisation: NCLT Kochi

The National Company Law Tribunal (NCLT), Kochi has held that an application filed in the names of multiple workmen cannot be maintained on behalf of those who did not authorise the sole signatory to represent them.

“….in the absence of any specific authorisation, authority, or power of attorney in favour of the signatory, the other applicants would not be bound by any action taken by the signatory. Since they may rely on the acts done by the signatory, which would not be binding upon them, it would not be appropriate for this Adjudicating Authority to permit the signatory to continue with this IA on behalf of the other applicants.” the tribunal ruled

It however, clarified that the application could be entertained at the instance of the sole signatory.

A coram of Judicial Member Vinay Goel and Technical Member Ravichandran Ramasamy was considering an application filed by 24 workmen of Vysali Pharmaceuticals Private Limited, seeking payment of unpaid wages and statutory dues, including provident fund, pension and gratuity, and protection of their employment during liquidation.

The Corporate Debtor was admitted into the Corporate Insolvency Resolution Process in October 2023 and ordered into liquidation in December 2024. While the Liquidator initially attempted to sell the company as a going concern, he later opted to sell its assets on a stand-alone basis following amendments to the IBBI (Liquidation Process) Regulations.

The workmen claimed they had continued to work during liquidation but had not received their full wages. They alleged that of ₹71.25 lakh due towards wages during the liquidation period, only ₹40.99 lakh had been paid, leaving a balance of ₹30.25 lakh.

The Liquidator objected to the application's maintainability on the ground that it had been signed by only one of the 24 applicants without authorisation. He, however, admitted the workmen's claims, stated that wages for services rendered during liquidation would be treated as liquidation costs, and submitted that statutory dues would be dealt with in accordance with the Insolvency and Bankruptcy Code.

The Tribunal noted that while the application had been filed in the names of 24 workmen, only one had signed it and there was no authorisation empowering him to represent the others.

However, the Bench held that the application was maintainable insofar as the signatory applicant was concerned.

“ Keeping in view the nature of the reliefs claimed, the objectives of the IBC, 2016 and the status of the applicants as workmen, we feel it is just and fair to entertain this IA at least insofar as the signatory applicant is concerned.” it added

The Tribunal further observed that the Liquidator had adequately addressed the workmen's concerns and assured that the sale proceeds would be distributed in accordance with the IBC and the applicable Rules and Regulations.

On merits, the Bench held that although the liquidation order terminated the employment of the workmen, the Liquidator remained bound to pay wages for services rendered during the liquidation period by treating them as liquidation costs.

It further held that once the corporate debtor was to be sold through auction instead of as a going concern, its operations could not continue. It said that the terminated employees had no locus to dictate the manner of liquidation to the liquidator.

Accordingly, the Tribunal disposed of the application.

For Applicants: Advocate M.A Shaji

For Respondents: Advocate Vinod P.V