Application to Modify Order for Employee Payments Dismissed in CIRP

The Tribunal dismissed the Application seeking modification of an order to include distribution of sale proceeds to employees during Corporate Insolvency Resolution Process (CIRP). It upheld the decision to sell a property to settle dues, complying with the Insolvency and Bankruptcy Code (IBC). The Tribunal emphasized that no provision allows for interim payments to employees during CIRP and that the order under challenge could not be modified due to a pending appeal.

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Issues Involved:
1. Modification of the order dated 11th June 2020.
2. Distribution of sale proceeds towards employees' claims.
3. Compliance with Section 53 of the Insolvency and Bankruptcy Code (IBC).
4. Interim payment to employees during Corporate Insolvency Resolution Process (CIRP).

Issue-wise Analysis:

1. Modification of the order dated 11th June 2020:
The Applicants requested the Tribunal to modify Para 11 of the order dated 11th June 2020 in IA No. 998 of 2019 to include a provision for distributing part of the sale proceeds towards the employees of the Corporate Debtor, Jet Airways. The Tribunal noted that the order in IA No. 998 of 2019 was already challenged by another employees' association and was pending before the Hon’ble NCLAT. Moreover, there is no provision under the Insolvency and Bankruptcy Code, 2016, and the National Company Law Tribunal Rules, 2016, for reviewing or reconsidering an order passed by the Adjudicating Authority. The Tribunal also cited a recent judgment by the Hon’ble NCLAT, which held that rehearing and correction of a judgment passed by the Tribunal is impermissible in law.

2. Distribution of sale proceeds towards employees' claims:
The Applicants argued that the sale proceeds from the auction of one of Jet Airways' properties should be partially distributed to the employees, citing Section 53 of the IBC, which prescribes a waterfall mechanism prioritizing the payment of dues to workmen. The Respondents countered that the property sale was necessary to make a payment of USD 13 million to US Exim Bank to release six aircraft worth around USD 100-120 million. The CoC had resolved to sell the property and use the proceeds to settle the dues of US Exim Bank and other CIRP-related expenses. The Tribunal found that the CoC had approved the sale transaction and the distribution of proceeds with a majority vote, and the sale was conducted through an E-auction process.

3. Compliance with Section 53 of the Insolvency and Bankruptcy Code (IBC):
The Applicants contended that R1 and R2 violated Section 53 of the IBC by bypassing the waterfall mechanism for distributing the sale proceeds. The Respondents explained that R3 had a security interest in the property and agreed to cede its charge upon receiving a settlement amount. The Tribunal observed that the settlement ensured R3 was not placed in a better situation than it would have been in the event of liquidation. The sale and distribution of proceeds were approved by the CoC and the Tribunal, complying with the provisions of the IBC.

4. Interim payment to employees during Corporate Insolvency Resolution Process (CIRP):
The Applicants sought interim payment of salaries, arguing that employees are valuable assets and should be retained. The Tribunal noted that there is no provision in the IBC for interim payment to any creditors, including employees, during the CIRP. The Tribunal also referred to its previous order, which emphasized the importance of protecting employees but did not mandate interim payments. The Tribunal concluded that Rule 11 of the NCLT Rules, 2016, could not be invoked to modify an appealable order pending before the Hon’ble NCLAT.

Conclusion:
The Tribunal dismissed the Application, stating that there is no provision for interim payment to employees during CIRP, and the order in IA No. 998 of 2019 could not be modified as it was already under appeal. The Tribunal upheld the CoC's decision to sell the property and use the proceeds to settle the dues of US Exim Bank and other CIRP-related expenses, in compliance with the IBC.

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