Provident fund and gratuity dues must be paid in full under a resolution plan, despite other objections.

Provident fund and gratuity dues of employees and workmen are statutorily protected under the Insolvency and Bankruptcy Code and cannot be treated as ordinary claims for partial payment under a resolution plan; they must be paid in full up to the insolvency commencement date, after crediting any sums already disbursed. The approved resolution plan was otherwise not found to suffer from any material irregularity, because objections on undervaluation and process non-compliance were not supported by sufficient evidence to justify wider interference. The plan was therefore substantially upheld, subject to correction for full payment of unpaid provident fund and gratuity dues.

---

---

Issues: (i) Whether provident fund and gratuity dues of employees and workmen were required to be paid in full and kept outside the resolution plan calculations in view of the statutory framework under the Insolvency and Bankruptcy Code, 2016 and the welfare statutes; (ii) Whether the approved resolution plan suffered from any other material irregularity warranting interference on the grounds of undervaluation or non-compliance with the resolution process regulations.

Issue (i): Whether provident fund and gratuity dues of employees and workmen were required to be paid in full and kept outside the resolution plan calculations in view of the statutory framework under the Insolvency and Bankruptcy Code, 2016 and the welfare statutes.

Analysis: Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016 expressly excludes sums due to workmen or employees from the provident fund, pension fund and gratuity fund from the liquidation estate and prohibits their use for recovery in liquidation. The welfare statutes governing provident fund and gratuity carry independent statutory protection, and the resolution process cannot dilute those dues by treating them as ordinary claims to be paid only in part. The prior approval of a resolution plan does not override the obligation to pay admissible provident fund and gratuity dues in full up to the date of commencement of insolvency, after giving credit for any amount already paid under the plan.

Conclusion: The provident fund and gratuity dues were required to be paid in full, and the resolution plan was deficient to the extent it restricted those dues to a partial payment.

Issue (ii): Whether the approved resolution plan suffered from any other material irregularity warranting interference on the grounds of undervaluation or non-compliance with the resolution process regulations.

Analysis: The scope of review over an approved resolution plan is confined to compliance with the statutory requirements under Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The objections relating to undervaluation, alleged lack of proper appreciation of business prospects, and other alleged irregularities were not supported by sufficient evidence to justify wider interference. Apart from the deficiency concerning provident fund and gratuity, no other ground was made out to invalidate the approval of the plan.

Conclusion: No other material irregularity warranting broader interference was established.

Final Conclusion: The approval of the resolution plan was upheld substantially, but it was corrected to ensure full payment of unpaid provident fund and gratuity dues to employees and workmen up to the insolvency commencement date, after adjusting amounts already disbursed.

Ratio Decidendi: Amounts due to employees and workmen towards provident fund and gratuity are statutorily excluded from the liquidation estate and cannot be reduced through a resolution plan; the adjudicating authority may interfere where a plan fails to secure such dues in full.

---