2023 (6) TMI 957 - AT - Insolvency and Bankruptcy

Company Appeal Allows Inclusion of EPFO Dues and Gratuity Fund in Resolution Plan

The Company Appeal was allowed, directing the inclusion of EPFO dues and Gratuity Fund amounts in the Resolution Plan, in accordance with the EPF and NP ... Admission of the claim only to the extent of 35.13% - inclusion of this amount in the Resolution Plan - It is submitted by the Learned Counsel for the Appellant that the RP had classified them as Operational Creditors without approving the Notice of the Adjudicating Authority - waterfall mechanism provided under Section 53 of I&B Code - HELD THAT:- In the Judgment of JET AIRCRAFT MAINTENANCE ENGINEERS WELFARE ASSOCIATION VERSUS ASHISH CHHAWCHHARIA RESOLUTION PROFESSIONAL OF JET AIRWAYS (INDIA) LTD. & ORS; ASSOCIATION OF AGGRIEVED WORKMEN OF JET AIRWAYS (INDIA) LTD. VERSUS JET AIRWAYS (INDIA) LTD. & ORS. [2022 (11) TMI 332 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], a clear direction was given to the Successful Resolution Applicant to make payment of the admitted Claims towards Provident Fund dues and the same was upheld by the Hon’ble Apex Court in JALAN FRITSCH CONSORTIUM VERSUS REGIONAL PROVIDENT FUND COMMISSIONER & ANR. [2023 (3) TMI 223 - SUPREME COURT]. The Hon’ble Apex Court has laid down that the share of workmen dues shall be kept outside the ‘Liquidation assets and the concerned workmen / Employees shall have to be paid the same, out of such Provident fund, Gratuity Fund, if any available. The words, ‘if any available’, cannot be read to mean that the workmen and empolyees are not entitled for Provident fund, Gratuity Fund, Pension fund, if not available with the Liquidator. As ratio of the Judgement in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors. of this Tribunal was upheld by the Hon’ble Apex Court, this Tribunal is of the earnest view that both Provident Fund and Gratuity Fund is to be paid in full as per the Provisions of EPF and NP Act, 1952 and Payment of Gratuity Act, 1972. Appeal allowed with a direction to include these amounts in the Resolution Plan. Issues:The issues involved in the judgment are the classification of claimants as 'Operational Creditors', priority of payment of EPFO dues, and the applicability of the EPF and NP Act, 1952 and Payment of Gratuity Act, 1972 in insolvency proceedings.Classification of Claimants as 'Operational Creditors':The appellant challenged the classification of their claim as 'Operational Creditors' without approval from the Adjudicating Authority, citing the precedent set by the Tribunal in a previous case. The Tribunal referred to the judgment in 'Jet Aircraft Maintenance Engineers Welfare Association Vs Ashish Chhawchharia' and the Apex Court judgment in 'Sunil Kumar Jain vs Sundaresh Bhatt' to address the issue.Priority of Payment of EPFO Dues:The appellant contended that EPFO dues should be paid in priority over other claims, even in liquidation proceedings, as EPFO is outside the waterfall mechanism provided under Section 53 of the Code. The Tribunal referred to the case of 'Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.' and the Supreme Court judgment in 'Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others' to analyze the priority of EPFO dues.Applicability of EPF and NP Act, 1952 and Payment of Gratuity Act, 1972:The Tribunal directed the Successful Resolution Applicant to make full payment of admitted claims towards Provident Fund and Gratuity Fund dues, in accordance with the EPF and NP Act, 1952 and Payment of Gratuity Act, 1972. The Tribunal upheld this direction, citing the judgment in 'Jet Aircraft Maintenance Engineers Welfare Association Vs Ashish Chhawchharia' and the case of 'Mrs. C.G. Vijayalakshmi Vs. Shri. Kumar Rajan, Resolution Professional of Hindustan Newsprint Limited'. The Tribunal emphasized the need to include these amounts in the Resolution Plan to avoid a violation of Section 30(2) of the Code.In conclusion, the Company Appeal (AT) (CH) (Ins) No. 268/2021 was allowed with a direction to include EPFO dues and Gratuity Fund amounts in the Resolution Plan, with no order as to costs. Any connected pending interlocutory applications were closed.