2023 (10) TMI 535 - AT - Insolvency and Bankruptcy

Tribunal directs full payment of PF dues in Resolution Plan, clarifies payment order under 1952 Act.

The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan but directed the Successful Resolution Applicant to pay the Appellant's ... Approval of Resolution Plan - validity of assessment order - Claim of workmen dues in full - section 7A and 7Q of Employees Provident Fund Miscellaneous Provisions Act, 1952 as well as section 14B - exercise of jurisdiction under 1952 Act - HELD THAT:- The submission of Respondent No. 2 with regard to damages as imposed on the Corporate Debtor needs consideration. From the claim forms which was submitted by the Appellant on 18.10.2019 annexed as Annexure C to the Appeal indicates that one of the assessment pertaining under Section 14B for amount of Rs. 68,54,869 was imposed by Order dated 14.10.2019 which is clear from Form-F which was submitted by the Appellant itself. The Copy of Order dated 14.10.2019 by which amount of Rs. 68,54,869/- has been imposed is clearly after initiation of CIRP against the Corporate Debtor vide Order dated 30.09.2019 - it is not necessary in this proceeding to issue any direction for payment of the damages as imposed by the Order dated 18.10.2019 which was subsequent to CIRP imposition of moratorium. No direction need to be issued for payment of damages under Section 14B of Rs. 68,54,869/-. Another part of damages amounting to Rs. 31,16,446 which was imposed by order dated 25th July, 2017 - waive of damages under Section 14B of the Act - HELD THAT:- When Insolvency Resolution Process has been initiated against a Corporate Debtor and Resolution plan has been approved under IBC, power of Central Board to reduce or waive the damages can be exercised with regard to the damages imposed under Section 14B. Paragraph 32 of the 1952 Scheme as extracted above also contemplate recommendation by Board for Industrial and Financial Reconstruction, 1985 Act being not in force and substituted by Insolvency Regime there can be now no recommendation for waiver of the damages under Section 14B of Board for Industrial and Financial Reconstruction. The power of recommendation as contemplated in paragraph 32B scheme can very well be exercised by the NCLT. Another part of the admitted claim i.e. claim for Rs. 1,32,44,314 along with Form F - HELD THAT:- In the amount which is claimed by the Appellant towards 7A and 7Q, the amount which has already been paid to the workmen need to be deducted. Resolution Professional needs to compute the amount paid to the workmen under Resolution Plan towards PF dues. Resolution Professional being ex- Resolution Professional i.e. Respondent No. 1 we direct the Respondent No. 1 to compute the amount of PF dues paid to the workmen under Resolution Plan and thereafter arrive at the amount which is required to be paid to the Appellant as against the admitted claim towards Section 7A and 7Q. Let the aforesaid exercise be completed by the Respondent No. 1 within two months from today and communicate the amount payable to Appellant under 7A and 7Q. The amount to be determined for payment to Appellant has to be the amount after deducting from total claim of Rs. 1,32,44,314 by deducting the amount paid towards PF to the workmen and amount already paid to the Appellant under Resolution Plan. The Order passed by the Adjudicating Authority approving the Resolution Plan is upheld subject to following; (a) SRA shall make the payment of dues of Appellant under Section 7A and 7Q on the basis of computation communicated by the Respondent No. 1 after deducting the amount paid to the workmen under Resolution Plan towards PF and the amount paid to the Appellant under Resolution Plan. SRA shall make the said payment within 30 days from computation as communicated by Respondent No. 1. (b) No direction is issued to the SRA to make payment of amount of damages under Section 14B for amount of Rs. 68,54,869/- which was imposed by Order dated 14.10.2019 after enforcement of the moratorium. (c) With regard to amount of Rs. 31,16,446/- under Section 14B we permit the SRA to make an application to Central Board for waiver of 100 per cent damages along with copy of this order within 30 days from today. Appeal disposed off. Issues Involved:1. Treatment of Provident Fund (PF) dues under the Resolution Plan.2. Entitlement of the Appellant to full payment of admitted claims.3. Validity of damages imposed under Section 14B of the Employees Provident Fund Miscellaneous Provisions Act, 1952.Summary:1. Treatment of Provident Fund (PF) dues under the Resolution Plan:The Adjudicating Authority approved the Resolution Plan submitted by Respondent No. 2, which proposed a payment of only 1.5% of the Appellant's PF dues, treating them as an Operational Creditor. The Appellant contended that PF dues should be paid in full, as established in previous judgments like Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia. The Tribunal agreed that PF dues ought to be paid in full and noted that the Resolution Plan's treatment of PF dues was not in accordance with the law.2. Entitlement of the Appellant to full payment of admitted claims:The Appellant's claims included amounts under Sections 7A, 7Q, and 14B of the 1952 Act. The Tribunal held that the claims under Sections 7A and 7Q should be paid in full after deducting any amounts already paid to the workmen under the Resolution Plan. The Tribunal directed the Resolution Professional (Respondent No. 1) to compute the PF dues paid to the workmen and communicate the amount payable to the Appellant. The Successful Resolution Applicant (SRA) was ordered to make the payment within 60 days of receiving the computation.3. Validity of damages imposed under Section 14B:The Tribunal considered the validity of damages imposed under Section 14B, amounting to Rs. 99,71,315/-. It held that damages imposed by an order dated 14.10.2019, after the initiation of the Corporate Insolvency Resolution Process (CIRP), were not payable. For damages amounting to Rs. 31,16,446/- imposed by an order dated 25th July 2017, the Tribunal noted that the Central Board has the power to waive such damages under Section 14B and Paragraph 32B of the Scheme. The Tribunal recommended that the SRA apply to the Central Board for a 100% waiver of these damages.Conclusion:The Tribunal upheld the Adjudicating Authority's order approving the Resolution Plan, subject to the following directions:- The SRA must pay the Appellant's dues under Sections 7A and 7Q after deducting amounts paid to the workmen and the Appellant under the Resolution Plan.- No payment is required for damages imposed by the order dated 14.10.2019.- The SRA is permitted to apply for a waiver of 100% of the damages amounting to Rs. 31,16,446/- under Section 14B.- Both parties have the liberty to file an appropriate application if any further orders are required.