The Supreme Court on October 16, 2025 heard an appeal by the Secretary representing the workmen of Unitech Machines who sought to temporarily stay on impugned orders by NCLT and NCLAT orders that upheld a lay-off circular for the workmen.The appeal contested the authority of the Resolution Professional to implement the retrenchment and the non-payment of statutory dues, including provident fund, gratuity, and wages, while also challenging the override of social welfare protections under the IDA (Industrial Disputes Act), 1947, by Section 238 of the IBC ( Insolvency & Bankruptcy Code), 2016.
The dispute arose after the petitioner who represented 92 workmen challenged a lay-off circular dated 1 February 2020 issued by the Resolution Professional, following the commencement of the Corporate Insolvency Resolution Process (CIRP) on March 1, 2019. While the wages were paid through March 2020, the RP issued the lay-off citing funding constraints and an oral suggestion recorded during the NCLT hearing on January 29, 2020. The appellant therefore approached the tribunal seeking to quash the lay-off, asserting that it amounted to a de-facto retrenchment that bypassed the protections of Sections 25C, 25F, and 25M of the Industrial Disputes Act, 1947. He contended that the Resolution Professional (RP) lacked statutory authority to effect retrenchment under Section 33(7) of the IBC, and that the approved resolution plan failed to account for statutory dues, including provident fund, gratuity, and wages beyond March 2020, in violation of Section 30(2)(b) IBC. and Article 21. The NCLT treated the RP’s actions as part of his statutory duties under Sections 20 and 25 of the IBC, aimed at preserving the corporate debtor’s assets and managing the company during the CIRP, and, including Section 238 IBC in this context, found no illegality in discontinuing services where the company had effectively ceased operations as an ongoing concern.The NCLAT followed a similar approach, holding that the NCLT lacked jurisdiction to entertain a challenge to the lay-off. It further recognized that wages could be included as CIRP costs only to the extent that the corporate debtor continued to operate as a going concern and workers actually performed services during the CIRP. Accordingly, NCLAT upheld the impugned order and dismissed the appeal as the appellant who did not work post-lay-off could not claim dues beyond that date, except as provided under the approved resolution plan. The appellant argued that the NCLAT’s findings were wholly violative , noting that the RP was approved only during the pendency of the present appeal, as reflected in the order dated 03.12.2024, and that the appeal, filed as early as 2023, was repeatedly adjourned on grounds not attributable to the appellant. Therefore the appellant contested that the NCLAT’s attribution of delay to the appellant and its subsequent adverse findings were manifestly unsustainable.The appellant also stressed that social-welfare protections under the IDA 1947 and related statutes cannot be overridden by Section 238 of the IBC, a principle affirmed in Sunil Kumar Jain v. Sundaresh Bhat (2022) 7 SCC 540,and Tourism Finance Corporation v. Rainbow Papers Ltd 2019 SCC OnLine NCLAT 910 which held that statutory protections under the EPF Act and the Payment of Gratuity Act continue to apply and are enforceable against the Corporate Debtor. Therefore, the dues of the Appellant’s members, including CIRP-period wages and statutory dues, are required to be fully satisfied.Therefore, the appellant aggrieved sought temporary stay on both Tribunal orders before the Court, while also requesting directions for the payment of all legitimate and statutory dues to the workmen.
The Court examined the appeal and issued notice to respondents to be returnable in four weeks.
Appearances:
For Appellant(s): Mr. Swarnendu Chatterjee, AOR Ms. Harshita Rawat, Adv. Mr. Ali Abbas Masoodi, Adv
