Labour Courts Cannot Hear Employee Reinstatement Claims After Resolution Plan Approval: Bombay High Court

The Bombay High Court has held that once a resolution plan is approved by the National Company Law Tribunal (NCLT), labour courts and industrial tribunals cannot continue or entertain employee claims, including claims seeking reinstatement without back wages.

Justice Arun R. Pedneker made the observation while allowing a batch of writ petitions filed by Ahmednagar Forgings Ltd, now Metalyst Forgings Ltd., challenging orders passed by the Labour Court and Industrial Tribunal at Aurangabad.

The High Court held that the tribunals could not have continued adjudication after the resolution plan was approved on May 14, 2024. It noted that the legal bar arises not merely from the completion of the corporate insolvency resolution process but from the approval of the plan under Section 31 of the Insolvency and Bankruptcy Code.

Relying on the Supreme Court's ruling in Electrosteel Steel Limited (now ESL Steel Limited) vs Ispat Carrier Private Limited, the court said that all claims not forming part of an approved resolution plan stand extinguished.

“Even the claim for reinstatement without back-wages cannot be considered by the Labour Court / Industrial Tribunal,” the court observed.

The disputes arose from the termination of several employees on different dates, some before and some after the initiation of insolvency proceedings. The employees had approached the Labour Court and Industrial Tribunal seeking reinstatement and other service benefits.

Insolvency proceedings against the company were admitted by the NCLT on December 15, 2017. The approved resolution plan expressly provided that all employee and workmen claims not included in the plan would stand permanently extinguished.

The court noted that an approved resolution plan is binding on all stakeholders, including employees, and held that no proceedings can continue after approval of the resolution plan.

It accordingly set aside the orders passed by the Labour Court and the Industrial Tribunal and all pending proceedings in these forums