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JK Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills Company Ltd.

Civil Appeal · 2019 INSC 595Decided 30 Apr 2019
Civil Appeal No. 20978 of 2017
Justice Rohinton Fali Nariman · Justice Vineet Saran

Background

A jute mill, after being repeatedly closed and reopened, shut down permanently in 2014. A registered trade union representing roughly 3,000 of its workers issued a demand notice under the Insolvency and Bankruptcy Code, 2016 seeking to recover outstanding dues owed to the workers, treating itself as an "operational creditor." Both the National Company Law Tribunal and the National Company Law Appellate Tribunal (NCLAT) rejected the union's petition, holding that a trade union could not be an operational creditor and that each worker would have to file an individual claim, prompting the union's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that a registered trade union, being an entity "established under a statute" (the Trade Unions Act, 1926), qualifies as a "person" under Section 3(23) of the Code and can therefore be an operational creditor on behalf of its member-workmen, since the Trade Unions Act expressly empowers a union to sue and be sued and to spend its funds defending members' employment-related rights. The Court rejected the respondent's reliance on an income-tax precedent about the meaning of "established under a statute," distinguishing it as inapplicable to the Code's own definitional scheme, and held that requiring thousands of workers to file separate individual claims, each bearing its own insolvency-process costs, would be unduly burdensome when a single joint petition is legally permissible. The Court allowed the appeal, set aside the NCLAT's judgment, and remanded the matter to the NCLAT to decide the union's petition on its merits expeditiously.

Lesson Learnt

A registered trade union can file and pursue an insolvency claim as an "operational creditor" on behalf of its member-workers collectively, so individual workers owed wages or dues by an insolvent employer do not each have to bear the cost and burden of filing separate claims.

Official source (sci.gov.in)View Judgment (PDF)

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