2021 (12) TMI 1110 - Tri - Insolvency and Bankruptcy

Tribunal upholds Liquidator's decisions in Excel Glasses ex-employees' appeals, citing lack of statutory forum decisions

Udayappan B. An Others Versus Shri. Ravindra Chaturvedi Liquidator of Excel Glasses Limited

The Tribunal dismissed all appeals filed by ex-employees of Excel Glasses Limited concerning the rejection of their claims by the Liquidator. The Tribunal ... Rejection of claim of wages - Section 40(2) of I&B Code - HELD THAT:- On verification of records it is found that the submission of the Respondent that he has not been provided with any order from the appropriate authority in connection with payment of gratuity etc. Since the Appellants have not produced any order of the Labour Court or such authorities the Liquidator on his own cannot decide on disputed liability of them. He can only act on the strength of crystalized claims. It is the settled position of law that the provident fund, the pension fund and the gratuity fund, do not come within the purview of ‘liquidation estate’ for the purpose of distribution of assets under Section 53 of the Code. Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund can’t be utilised, attached or distributed by the liquidator, to satisfy the claims. Section 36(2) of the I&B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any property of the Corporate Debtor, which is not the part of the Liquidation Estate. It is clear that in terms of sub-Section (4)(a)(iii) of Section 36 all sums due to any workman or employees from the Provident Fund, Pension Fund and the Gratuity Fund, do not form part of the liquidation estate/liquidation assets of the ‘Corporate Debtor. Some of the Appellants failed to provide any proof of having been appointed in service of employment of the Corporate Debtor and that the benefit accruing to the Appellants shall be subject to documents available on record with the Respondent unless otherwise proven with sufficient evidence that the Appellants were in employment of Corporate Debtor and that the Appellants without properly responding to the communication addressed to them, have now come with the above appeals. This cannot be accepted. The claim of wages cannot be sanctioned unless the statutorily constituted forums either under the Industrial Dispute Act, Payment of Wages Act and Bonus Act have rendered its decision - appeal dismissed. Issues Involved:1. Delay in filing the appeals.2. Rejection of claims by the Liquidator.3. Validity of claims for salary arrears, bonus, lay-off compensation, closure/retrenchment compensation, notice pay, and gratuity.4. Compliance with the Insolvency and Bankruptcy Code (IBC), 2016 and related regulations.5. Validity of lock-out and its impact on claims.6. Admissibility of claims based on financial records and actuarial valuation.Detailed Analysis:1. Delay in Filing the Appeals:The Tribunal acknowledged the delay in filing the appeals but decided to consider them along with other connected matters under Section 42 of the Insolvency and Bankruptcy Code, 2016 (IBC).2. Rejection of Claims by the Liquidator:The appeals were filed by ex-employees of Excel Glasses Limited, aggrieved by the Liquidator's decision to reject their claims. The Liquidator had issued a public announcement on 21.10.2019, calling stakeholders to submit proof of their claims by 20.11.2019. The appellants submitted their claims, which were partially admitted by the Liquidator, leading to the appeals.3. Validity of Claims for Salary Arrears, Bonus, Lay-Off Compensation, Closure/Retrenchment Compensation, Notice Pay, and Gratuity:The appellants claimed various amounts, including salary arrears, bonus, lay-off compensation, closure/retrenchment compensation, notice pay, and gratuity. However, the Liquidator admitted only a fraction of these claims based on the audited books of accounts of the Corporate Debtor. The Tribunal found that the Liquidator could not decide on disputed liabilities without orders from appropriate authorities like the Labour Court.4. Compliance with the Insolvency and Bankruptcy Code (IBC), 2016 and Related Regulations:The Liquidator processed the claims as per Regulation 25 read with Regulation 19(4) of Liquidation Process Regulations, 2016, verifying the claims against the audited books of accounts. The Tribunal noted that the Liquidator had sought opinions from leading advocates and appointed an Actuarial Valuer to ascertain the exact amount of gratuity payable.5. Validity of Lock-Out and Its Impact on Claims:The Tribunal referred to a Settlement Agreement dated 02.12.2015 between the Management of Excel Glasses and the Trade Unions, which stated that the lock-out was valid and legally done by the company. This agreement impacted the claims, particularly regarding the legality of the lock-out and the resultant liabilities.6. Admissibility of Claims Based on Financial Records and Actuarial Valuation:The Tribunal found that the Liquidator admitted claims based on financial records and the Actuarial Valuer's report for gratuity liability as of 21.10.2019. The Tribunal emphasized that the provident fund, pension fund, and gratuity fund do not form part of the liquidation estate and cannot be used to satisfy claims. The Tribunal cited Section 36(4)(a)(iii) of the IBC, which excludes these funds from the liquidation estate.Conclusion:The Tribunal concluded that the claims for wages could not be sanctioned without decisions from statutorily constituted forums under relevant acts like the Industrial Dispute Act, Payment of Wages Act, and Bonus Act. The Tribunal found no merit in the appeals, as the claims were admitted based on the Corporate Debtor's financial records and the Actuarial Valuer's report. Consequently, all the appeals were dismissed.Dated this the 18th day of November, 2021.