TaxTMI 
TaxTMI 
2022 (3) TMI 601
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....there were 5 (five) Appellants; but as per the order dated 19th October, 2020 Mr. Santanu, Ld. Counsel for the Appellant made the statement at Bar that Appellants No. 1, 3, 4 & 5 (names given in the memo of parties in bracket as 'withdrawn') have reached settlement with the Respondents and he has instruction to withdraw the Appeal. The Appeal was accordingly 'dismissed as withdrawn' insofar as the same relates to Appellant No.1, 3 4 & 5. Insofar as, the Appellant No.2 (Sikandar Singh Jamuwal, New Delhi) is concerned, the Appeal was heard and finally 'reserved for judgment' on 17th February, 2022. 3. The Appellant is an 'ex-employee of the Respondent No.3' who worked as 'Supervisor' (R&D) and he has a total outstanding dues of Rs. 12,49,702/-. It is the grievance of the employee that the employee and workman are the backbone of the Respondent No.3 Company/Corporate Debtor (CD) in CIRP who stood by Respondent No.3 by not resigning even when their rightful dues and salaries were not being paid / irregularly paid from the year 2012 which is much prior to CIRP. It is also their grievance that the 'Resolution Plan' has not considered the full Provident Fund (PF) dues (1,35,06,391 full....
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.... that the Resolution Application will infuse Rs. 5 crore as working capital requirement of the Company out of the sale proceeds of the assets of the CD. 6. The Ld counsel for the Appellant is stated that the Resolution Applicant / R2 is in the business of manufacturing Ghee and schemed milk powder. It is one of the numerous groups of companies headed by 'Director' Sharad Maheshwari (appearing at page 11 of the Appeal paper book). It is also revealed from page 41 of the Reply of RP / R1 that Sharad Maheshwari has been supporting the CD since 4-5 years by providing financial facilities. 7. Pursuant to the issue of notification directing the 'Prospective Resolution Applicant' to submit their Resolution Plan by 25th March, 2018. The R2/Successful Resolution Applicant who is also one of the Financial Creditor of the CD submitted the Resolution Plan. The said Resolution Plan was presented in the 5th CoC meeting on 18th April, 2018 but could not be approved due to non-receipt of final approval from head office of Bank of India who is majority shareholder comprising approx. 90% of the voting power. The representative of Operational Creditor expressed their displeasure due to non - pa....
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....ance requiring expertise in the related field. They have alleged that the IRP Mr. Jain has leveled allegations in relation to extortionate transactions inter se between the R3 and sister concerned of R2 and others. They have also alleged that the Director of the Resolution Applicant is a related party and is covered by Section 29A of the Code and is disqualified for being considered as Resolution Applicant. 9. The Ld counsel for the Respondent No.1 has submitted that there is no infirmity in the impugned order. He has also submitted that against the verified claims of the workmen / employees of Rs. 8.17 Crore. The RP has proposed an amount of Rs. 1.03 Crore. He has also submitted that the Appeal itself is not maintainable in view of Hon'ble Supreme Court Judgment in case of 'Swiss Ribbon Pvt. Limited and Anr. Vs. Union of India and ors'. 2019 4SCC 17 at Para 46, 82 & 84 are enumerated below: "46. The NCLAT has, while looking into viability and feasibility of resolution plans that are approved by the committee of creditors, always gone into whether operational creditors are given roughly the same treatment as financial creditors, and if they are not, such plans are eithe....
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....idation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely- (a) the insolvency resolution process costs and the liquidation costs paid in full; (b) the following debts which shall rank equally between and among the following- (i) workmen's dues for the period of twenty- four months preceding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in Section 52; (c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date; (d) financial debts owed to unsecured creditors; (e) the following dues shall rank equally between and among the following:- (i) any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date; (ii) d....
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....ubject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable." They have also cited of CoC of Essar Steel India Limited Vs Satish Kumar Gupta and Ors. In Civil Appeal No. 8766-67 of 2019 para 31, 36, 38 &46 have given below: "31. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, Section 21(2) of the Code mandates that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. "Financial creditors" are defined in Section 5(7) of the Code as meaning persons ....
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.... financial institutions maintaining accounts of the corporate debtor for a debit transaction from any such accounts in excess of the amount as may be decided by the committee of creditors in their meeting; (f) undertake any related party transaction; (g) amend any constitutional documents of the corporate debtor; (h) delegate its authority to any other person; (i) dispose of or permit the disposal of shares of any shareholder of the corporate debtor or their nominees to third parties; (j) make any change in the management of the corporate debtor or its subsidiary; (k) transfer rights or financial debts or operational debts under material contracts otherwise than in the ordinary course of business; (l) make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors; or (m) make changes in the appointment or terms of contract of statutory auditors or internal auditors of the corporate debtor (2) The resolution professional shall convene a meeting of the committee of creditors and seek the vote of the creditors prior to taking any of the actions under subsection (1). (3) No action u....
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....e running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits....
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....l for the parties and the documents available on records and laid down provisions of the I& B Code, 2016, r/w the provisions of other related Acts as applicable to the case like the Employee Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act), and we are having the following observations:- a. What is very much clear from the submissions made by the Ld counsel for the parties and the documents available on record that the Resolution Plan fails to consider the payment of provident fund dues as computed by the Assistant Provident Fund Commissioner vide its order dated 19th March, 2019. The Resolution Plan approved by the Adjudicating Authority is on 02nd April, 2019. The amount so computed is Rs. 1,35,06,391/- whereas the provisions has been made for Rs. 78 lacs only. b. Financial Creditors are being paid 21.6% whereas Operational creditors are being paid 12.67%. c. Let us look at the provisions of Section 31 (1), Section 30(2), Section 36(4)(a) (iii) & Section 238 of the I& B Code, 2016. For ease of convenience the same is extracted below: "Section 31: Approval of resolution plan. 31. (1) If the Adjudicating Authority is satisfied that the....
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....also apply to the corporate insolvency resolution process of a corporate debtor- (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; 3A (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. [Explanation. - For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall ....
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..... This aspect is justiciable as a duty has been casted on the Resolution Professional/Adjudicating Authority/ on this Tribunal. This is not a commercial wisdom as compliance of law is a must. The aspect of parity for payment of Finance Creditors and Operational creditors are not being looked into by this Tribunal as it is a commercial wisdom of CoC. d. Since no provisions of the above said Act is in conflict with any of the provisions of the I& B Code, the applicability of even Section 238 of the I& B Code does not arise. PF dues are not the assets of the CD as amply made clear by the provisions of Section 36(4)(a)(iii) of the I& B Code, 2016 e. In this context, the following judgments are also referred to: i. The judgment of this Tribunal (3 Members Bench - comprising of Hon'ble Chairperson & two Members) in C.A (AT)(Ins) No.354 of 2019, decided on 19th August, 2019 Tourism Finance Corporation of India Ltd. Vs. Rainbow Papers Ltd. & Ors. 2019 SCC Online NCLAT 910 para 44 45 & 46 given below: "44.However, as no provisions of the 'Employees Provident Funds and Miscellaneous Provision Act, 1952' is in conflict with any of the provisions of the 'I&B Code' and, ....