# Moser Baer Karamchari Union Through President Mahesh Chand Sharma & Ors. [Writ Petition (C) No. 421 of 2019, 712 & 777 of 2020] vs. Union of India and Ors.

> SC judgment dated 2023-05-02. Citation: TCN-2023-SC-00079. The case involves writ petitions filed under Article 32 of the Constitution of India, challenging…

- **Court:** SC
- **Order date:** 2 May 2023
- **Citation:** TCN-2023-SC-00079
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/moser-baer-karamchari-union-through-president-mahesh-chand-sharma-ors-writ-petit-ed87918e

## Summary

### Background

The case involves writ petitions filed under Article 32 of the Constitution of India, challenging the validity of Section 327(7) of the Companies Act, 2013, and seeking directions to exclude workmen's dues from the waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code (IBC), 2016. The petitioners argue that Clause 19(a) of the Eleventh Schedule of the IBC, which inserts sub-section (7) in Section 327 of the Companies Act, 2013, is unreasonable and violates Article 14 of the Constitution. They also contend that Section 53(1)(b)(i) of the IBC unfairly limits workmen's dues to 24 months preceding the liquidation order and ranks them equally with secured creditors.

## Facts

Moser Baer Karamchari Union filed a writ petition challenging Section 327(7) of the Companies Act, 2013, and seeking exclusion of workmen's dues from the waterfall mechanism under Section 53 of the IBC. Other writ petitions (Manoj Kumar Nagar and Raj Kumar Verma) challenged Clause 19(a) of the Eleventh Schedule of the IBC, arguing it violates Article 14 of the Constitution. The petitioners contended that Section 53(1)(b)(i) of the IBC unfairly limits workmen's dues to 24 months preceding the liquidation order and ranks them equally with secured creditors. The Bankruptcy Law Reforms Committee (BLRC) recommended a waterfall mechanism different from the Companies Act, capping workmen's dues at 3 months with pari passu priority with secured creditors. The Joint Committee

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## Issues and analysis

### Issue 1: Whether Section 327(7) of the Companies Act, 2013, is arbitrary and violative of Article 21 of the …

**Ratio:** Section 327(7) of the Companies Act, 2013, excludes the application of Sections 326 and

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**Reasoning:** The court reasoned that the IBC is a complete code in itself and that the exclusion of

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**Interpretation:** Section 327(7) ensures that the IBC's waterfall mechanism applies in

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**Application:** The court applied this ratio to the facts by stating that the IBC's provisions,

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## Parties

- **Judges:** M.R.…; SANJIV K…
- **Appellants:** Moser Baer…
- **Respondents:** Union of…
- **Other parties:** 7th Edition…; Workmen’s…; +8 more
- **Advocates:** K.V. Viswa…; Gopal Sankaranaray…; +1 more

## Timeline

- **2019-01-01 — Writ Petition (C) No.…**: Moser Baer Karamchari Union filed a writ petition challenging Section 327(7) of the…
- **2020-01-01 — Writ Petition (C) No.…**: Manoj Kumar Nagar filed a writ petition challenging Clause 19(a) of the Eleventh Schedule…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 53 — Distribution of assets](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-53)

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