Tayo Rolls insolvency: confusion over IRP selection

Tata Steel subsidiary, Tayo Rolls, has been mired in controversy for a long time now. It has been facing losses since 2008. Much before it was under IBC proceedings, the company had filed before the BIFR under provisions of the (now repealed) SICA. The company has also been involved in litigation for non-payment of workmen’s wages and has in the past, sought closure of one of its units under the provisions of the Industrial Disputes Act..Its application for closure of business units was rejected and is now pending before the Jharkhand High Court based on a writ challenging the above order by the company. Meanwhile, the workmen have also approached the High Court for recovery of wages..More recently, Tayo Rolls sought to trigger insolvency against itself under Section 10 of the IBC, as an applicant whose proceeding before BIFR stood abated. This application was however rejected by the NCLT since it was not filed within the 180-day time period allowed for abatement applications. All this while, the workers of Tayo Rolls sought to implead themselves under the Section 10 proceedings. This was only allowed after a Supreme Court order..On the same day as the Section 10 filing, for not being allowed to implead by the NCLT, 284 workers of Tayo Rolls sought to trigger insolvency under Section 9, for unpaid wages. This application was also rejected by the NCLT since it was filed by an elected representative of the workmen, and a strict reading of the IBC suggests that a Section 9 filing cannot be done jointly or in a representative capacity..Appeals were filed in NCLAT against both orders of the NCLT. Recently, the NCLAT overturned the NCLT decision in the case of Section 9 filing made by the workmen. It said that given each workman’s dues were individually greater than 1 lakh, the application could be admitted. It accordingly, remitted the case back to NCLT for admission..Soon after, a decision in the Section 10 appeal was also made. Here, the NCLAT observed that a corporate debtor may very well make an application even after 180 days have elapsed, but in such a case, they will not be able to avail the benefit of non-payment of filing fees. Provided that the Section 9 was already remitted to the NCLT, the NCLAT chose not to remit this one. The NCLT will now only admit the Section 9 filing made by workmen..However, in its order, the NCLAT has mentioned that the IRP as suggested by the corporate debtor will be elected by the NCLT. Given that the case has not been admitted into CIRP as yet, it’s unclear whether NCLAT’s direction to NCLT for the appointment of IRP is binding or not. There is an inherent conflict for the selection of IRP, as the workmen would want an IRP representative of their interests, whereas the Tayo Rolls would want an IRP which is representative of its own interests. Further, this ruling by the NCLAT also overlooks conflict that may arise between the proceedings pending before High Court (relating to Industrial Disputes Act) for the closure of units and IBC proceedings..Image taken from here..(Read the judgment)