2019 (10) TMI 1497 - Tri - Insolvency and Bankruptcy

Purchaser Responsible for Liabilities of Unit-1 under SARFAESI Act

Sardar Singh Versus M/s Anil Special Steel Industries Ltd. & Ors. AND MrVikram Bajaj Resolution Professional For Anil Special Steel Mazdoor Sangh & Ors. Versus Rashtriya Anil Steel Mazdoor Sangh, Tarun International Limited, Allahabad Bank, Prudent ARC Ltd., Rajendra Sharma

The tribunal ruled that the purchaser is responsible for all liabilities, including workers' and employees' dues, related to Unit-1 sold under the ... Liabilities of dues against workers and employees and other liabilities - on whom the liability falls? - Whether the liabilities of workers and employees and other liabilities pertaining to Unit- I of the Corporate Debtor which had been sold under SARFAESI Act, 2002, prior to the CIRP commencement date are payable by the purchaser of Unit-1 or the same continue to be admissible against the Corporate Debtor? - HELD THAT:- The Respondent No. 2 is the appellant before the Hon'ble National Company Law Appellate Tribunal in his aforesaid Diary No. 2130/2019 dated 30.09.2019 has not filed the order of the Debt Recovery Tribunal, Jaipur dated 31.01.2019 which is the subject matter before the Hon'ble National Company Law Appellate Tribunal. This Tribunal already held that that this order has no relevance or legal bearing and in the light of this order while deciding this IA No. 32/2018, the said order of Debt Recovery Tribunal, Jaipur dated 31.01.2019 need not be considered at all. This fact, it appears that it was concealed from the knowledge of the Hon'ble National Company Law Appellate Tribunal by Respondent No. 2. In IA No. 178/JPR/2019, the said order of the Debt Recovery Tribunal, Jaipur dated 31.01.2019 in SA No.2212018 was filed and a perusal of the same depicts that the said order of Debt Recovery Tribunal has no bearing on the present issue connected with IA No. 32/60/JPR/2018. The Judgements and Annexures thereon clearly reveals that the Respondent No. 3 made it very clear to the Respondent No. 2 to acquire the Unit No. I of the Corporate Debtor on “AS IS WHERE IS BASIS, AS IS WHAT IS BASIS, WHATEVER TFDRE IS BASIS' which implies that it shall also acquire all the liabilities thereon - the Respondent No. 2 shall bear all the claims of the Respondent No. 1 and Respondent No. 5 - In the event any money which has been deducted towards statutory dues of EPF and is still lying with the corporate Debtor, the pp shall forthwith credit the same to the appropriate accounts of the concerned Authority. Application disposed off. Issues Involved:1. Liability for workers and employees' dues.2. Applicability of SARFAESI Act, 2002.3. Determination of liabilities post-sale of Unit-1.4. Claims against Corporate Debtor vs. Purchaser.5. Statutory dues and their settlement.Detailed Analysis:1. Liability for Workers and Employees' Dues:The primary issue is whether the liabilities of workers and employees pertaining to Unit-1 of the Corporate Debtor, sold under the SARFAESI Act, 2002, are payable by the purchaser (Respondent No. 2) or continue to be admissible against the Corporate Debtor. The Resolution Professional (RP) observed that Unit-1 was sold before the commencement of the Corporate Insolvency Resolution Process (CIRP). The RP contends that as per the sale terms, the liabilities towards employees' salary dues and outstanding labor payments were the liability of the purchaser. The tribunal ruled that the purchaser must bear all claims of the workers and employees.2. Applicability of SARFAESI Act, 2002:The sale of Unit-1 was conducted under the SARFAESI Act, 2002, by the Allahabad Bank (Respondent No. 3). The sale notice explicitly mentioned that the property was sold on 'AS IS WHERE IS BASIS, AS IS WHAT IS BASIS, WHATEVER THERE IS BASIS,' implying that all liabilities would be borne by the purchaser. The tribunal upheld that the sale terms under SARFAESI Act, 2002, were binding and the purchaser was responsible for all liabilities.3. Determination of Liabilities Post-Sale of Unit-1:The RP, upon examining the financials and documents, noted that the sale of Unit-1 included conditions that made the purchaser responsible for all liabilities. The tribunal confirmed that the liabilities of the Corporate Debtor towards employees and other dues were to be borne by the purchaser, as per the sale terms.4. Claims Against Corporate Debtor vs. Purchaser:The tribunal had to decide whether the claims of workers and employees should be admitted against the Corporate Debtor or the purchaser. The tribunal ruled that the liabilities pertaining to Unit-1, sold before the CIRP commencement, were the responsibility of the purchaser, not the Corporate Debtor. The tribunal directed that the Corporate Debtor cannot be fastened with any liabilities of Unit-1 except for statutory dues of EPF if still lying with the Corporate Debtor.5. Statutory Dues and Their Settlement:The tribunal addressed the issue of statutory dues, particularly EPF, and directed that any money deducted towards statutory dues of EPF still lying with the Corporate Debtor should be credited to the appropriate accounts of the concerned authority. The tribunal allowed the respondents to proceed against the purchaser and the bank for recovery of any statutory dues.Conclusion:The tribunal concluded that the purchaser (Respondent No. 2) is responsible for all liabilities, including workers' and employees' dues, pertaining to Unit-1 sold under the SARFAESI Act, 2002. The Corporate Debtor is not liable for these claims except for any statutory dues of EPF still with it. The application was disposed of with these directions.