Case: ANAND RAO KORADA RESOLUTION PROFESSIONAL Vs. M/S VARSHA FABRICS (P) LTD

3. Pursuant to the issuance of Notice, all the Respondents were served by the Appellant, and proof of service was filed on 04.11.2019. Respondent No. 13 – Hirakud Workers Union was however not represented by Counsel. The Civil Appeals were taken up for hearing on 13.11.2019 before this Court4. The factual matrix in which the present Civil Appeals have been filed is as under :–4.1 M/s Varsha Fabrics Pvt. Ltd. (Respondent No. 1), India Finance Ltd. (Respondent No. 2), Mudrika Commercial Pvt. Ltd. (Respondent No. 3), Hirakud Industrial Works Ltd. (Respondent No. 4), and Industrial Development Corporation of Orissa Ltd. (Respondent No. 5) entered into a Share Purchase Agreement ( SPA) dated 10.07.2006. As per the SPA, Respondent No. 5 divested its 100% shareholding in Respondent No. 4 in favour of Respondent Nos. 1 to 3. Respondent No. 4 shut down its factory on 08.05.20074.2 Subsequently, Respondent Nos. 1 to 3 sold their stake in Respondent No. 4 to Indo Wagon Engineering Ltd. Respondent No. 13 – the Hirakud Workers Union filed W.P. (Civil) No. 12479/2009 before the Odisha High Court praying inter alia for cancellation of the SPA dated 10.07.2006, and payment of the arrears and current salaries of the workmen4.3 Respondent No. 13 filed another Writ Petition bearing W.P. (Civil) No. 7939/2011 on 28.03.2011 for payment of their dues before the Odisha High Court4.4 The High Court vide Order dated 14.03.2012 directed the Deputy Labour Commissioner, Sambalpur Division (Respondent No. 10 herein) to recover the workmens dues by sale of the assets of Respondent No. 4 – Company through a public auction4.5 These proceedings culminated in the Order dated 03.08.2015 passed by this Court, wherein it was directed that the issue of quantifying the compensation payable to the workmen should be determined by the Labour Court. It was further directed that if Respondent Nos. 1 to 3 fail to make the payment of compensation to the workmen, the assets of Respondent No. 4 would be sold through public auction, and the proceeds would be used for disbursement of the arrears of the workmen4.6 The Labour Court, Sambalpur vide Order dated 11.11.2016 quantified the amount payable to the workmen as Rs. 45,66,67,133/-4.7 The High Court vide Order dated 12.01.2017 directed the Deputy Labour Commissioner, Sambalpur Division to sell a parcel of Respondent No. 4s land admeasuring 157.27 acres to the Hirakud Dam Project. Upon receipt of the sale proceeds of Rs. 10,04,12,105/- from the Government of Orissa, this amount was disbursed towards the arrears of the workmens dues4.8 During the pendency of proceedings before the High Court in W.P. (Civil) No. 7939/2011, M/s Nandakini Contractors Pvt. Ltd – a Financial Creditor filed a Petition under Section 7 of the IBC, 2016 bearing CP (IB) No. 01/CTB/2019, before the National Company Law Tribunal, Cuttack Bench ( NCLT) for initiation of the Corporate Insolvency Resolution Process ( CIRP) against the Corporate Debtor – Respondent No. 4, since it had committed a default in paying the financial debt of Rs. 24,11,975/-4.11 During the pendency of the moratorium, W.P.(Civil) 7939/2011 was posted for hearing on 14.08.2019 before the High Court. The Additional Government Advocate submitted that the valuation of the land in Mouza – Tara Nagar owned by Respondent No. 4 was Rs. 6,05,000/- per acre. The High Court directed the Additional Government Advocate to file an affidavit with respect to the valuation conducted4.12 The High Court by a further Order dated 05.09.2019, recorded the submission of the Appellant – Resolution Professional that there were other companies which had expressed an interest to participate in the public auction. The matter was posted for further hearing on 17.09.20194.13 The Appellant – Resolution Professional filed the present Civil Appeals to challenge the Interim Orders dated 14.08.2019 and 05.09.2019 passed by the Odisha High Court in W.P. (Civil) No. 7939/2011 on the ground that since the CIRP against Respondent No. 4 had commenced, the proceedings before the High Court in W.P. (Civil) No. 7939/2011 ought to be stayed.

Reasoning:
9. In view of the provisions of the IBC, the High Court ought not to have proceeded with the auction of the property of the Corporate Debtor – Respondent No. 4 herein, once the proceedings under the IBC had commenced, and an Order declaring moratorium was passed by the NCLT. The High Court passed the impugned Interim Orders dated 14.08.2019 and 05.09.2019 after the CIRP had commenced in this caseThe moratorium having been declared by the NCLT on 04.06.2019, the High Court was not justified in passing the Orders dated 14.08.2019 and 05.09.2019 for carrying out auction of the assets of the Respondent No. 4–Company i.e. the Corporate Debtor before the NCLT. The subject matter of the auction proceedings before the High Court is a vast chunk of land admeasuring about 330 acres, including Railway lines and buildingsIf the assets of the Respondent No. 4 – Company are alienated during the pendency of the proceedings under the IBC, it will seriously jeopardise the interest of all the stakeholders.