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Interplay of Labour Laws And Bankruptcy Code in India

Author: Shreya Jetly

Designation: Law Student

Contact: 955*******



The IBC Act obtains to strengthen the present framework by the way of making a single law for Bankruptcy and for insolvency in India. The act contains 11 schedules and 225 sections.

The rights of employers, employees, workmen, in a workplace all come under labour laws and it’s also called employment law which consists of all legal rights, etc of employees and all others working in a workplace. Labour laws are stated in various legislations like “Worker’s Compensation Act, 1923, The Trade Unions Act, 1926, Payment of Wages Act 1936, Industrial Employment (Standing Orders) Act, 1946, Indian Industrial Disputes Act, 1947 Minimum Wages Act, 1948, Factories Act, 1948, Maternity Benefits Act, 1961, Payment of Bonus Act, 1965, MRTU and PULP Act, 1971, The Payments of Gratuity Act, 1972, Labour Law Compliance Rules, Employees Provident Fund, Employees’ State Insurance, Collective Bargaining, Unorganised Workers' Social Security Act, 2009, Sexual Harassment of Women at Workplace Act, 2013”.

The Insolvency and Bankruptcy Code, 2016, (code) that deal with the interpretation of labour legislation under recent court’s judgement.

JK Jute Mill Mazdoor Morcha Vs. Juggilal Kamlapat Jute Mills Case Analyses

In JK Jute Mill Mazdoor Morcha Vs. Juggilal Kamlapat Jute Mills case, a Demand Notice by the trade union was issued on behalf of approximately 3000 workers under Section 8 of IBC, stating their demands of the unpaid salaries to the respondent against whom proceedings were pending under the Sick Industrial Companies Act, 1985.

On hearing both the parties the NCLT & NCLAT held that

the trade union will not be covered under the head of “operational creditor” and that each worker can file an individual application before the NCLT. The issue raised in the case was that “whether a trade union could be called as an operational creditor for the IBC?”

The Hon’ble Supreme Court thought that the definition of “Trade Union” as defined Under section 2(h) of the Trade Union Act, 1926 as “any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more Trade Unions” and it also they also looked at the definition of a person which is defined under the Section 3(23) of IBC as "person includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a trust; (e) a partnership; (f) a limited liability partnership; and (g) any other entity established under a statute, and includes a person resident outside India” on observing both the definitions the court decided that a trade union will fall under the definition of a person as defined under Section 3(23) of IBC.

Further, the court concluded by looking at section 15 (c) and section 15(d) that “the general fund of the trade union can be spent for the purpose prosecution or defence of legal proceedings to which a trade union is a party and the conduct of the trade disputes on behalf of the trade union or any other member of the trade union.” It will surely include the due amount in the present case from the employer to the employees and it will thus be categorized as an “operational debt” which defined under section 5(21) of IBC. Thus, anyone who is duly authorised to make such claims of dues against the Corporate debtor can be categorized as an operational creditor. The court also conceded that Section 13 of the trade union act states that a trade union is entitled to sue and be sued as a body corporate and set aside the impugned judgement of the NCLAT.

The limitation for filing of the case under Section 15 of the payment of wages act,1936 is within 12 months from the date on which the undue deduction was made or from the date of payment of wages and Under Section 20 of the minimum wages act, 1948 it requires to be submitted within 6 months from the date on which minimum wages became due and payable. Under the IBC Section18 limitation for filing of the case is within 3 years from the date of default and if the period of limitation is extended then within 3 years from the date of extension.

The period of settlement of the case under the payment of wages act,1936 is 3 months of the registration of the claim or it can be extended as per the authorities' decision.

Under IBC,2016 the claim can be disposed off within 180 days of the commencement of the Corporate Insolvency Resolution Process, which can be subject to an extension of 90 days and an additional of 60 days from the time consumed in the legal proceedings.


The trade union is covered under the ambit of Operational dues under IBC and if they submit claims in the form of application under Section 9 of the code, they have a speedy, effective, and timely remedy.

Under IBC, workers or trade unions get more time to file their cases. Under section 238A of IBC, it can be made within 3 years from the date of default. The limitation period under IBC is more than the limit given under different labour laws. Thus, there is an interplay between labour laws and IBC.


  1. Hemant Singh, “List of major labour laws in India: A Brief Introduction”, Jagran Josh, May 8, 2020.

  2. Jute Mills Case: CIVIL APPEAL NO.20978 of 2017

  3. Section 2(h) in The Trade Unions Act, 1926










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