TaxTMI 
TaxTMI 
2022 (11) TMI 332
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....Versus Ashish Chhawchharia Resolution Professional for Jet Airways (India) Ltd. & Anr. Justice Ashok Bhushan, Chairperson And Barun Mitra Member (Technical) For the Appellant : Mr. Vikas Mehta, Mr. Mayan Prasad, Ms. Nitika Grover, Mr. Apoorv Khator & Ms. Anshula Grover, Advocates. For the Respondent : Mr. Malhar Zatakia, Mr. Dhiraj Kumar Totala, Ms. Aditi Bhansali, Ms. Tanya Chib and Mr. Parimal Kashyap, Advocates for RP (AZB & Partners) Mr. Raghav Chadha, Advocate. Mr. Krishnan Venugopal, Sr. Advocate with Mr. Raunak Dhillon, Ms. Isha Malik, Ms. Niharika Shukla, Advocates for R-2/ CoC. Mr. Krishnendu Datta, Sr. Advocate, with Mr. Rajat Sinha, Mr. Burjis, Shabir, Ms. Srishty Kaul, Advocates for SRA. JUDGMENT ASHOK BHUSHAN, J. All these Appeals have been filed against the same order dated 22.06.2021 Passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court No.I approving the Resolution Plan submitted by 'Jalan Fritesch Consortium' with respect to the Corporate Debtor - 'Jet Airways (India) Limited'. First five appeals have been filed by workmen and employees of Jet Airways (India) Limited and last three appeals have been filed by Operational Creditors of Je....
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.... Creditors, admitted claim was Rs.1,697,034,005/-. The Appeal has been filed on behalf of 109 workers, whose admitted claims were Rs.37,13,79,866/-. 5. A Notice dated 27th May, 2020 was issued by the Resolution Professional requiring all employees of Jet Airways (India) Limited, who have exited without completing formalities to submit their resignation and complete their formalities. Resolution Professional filed an Application being I.A. No.1263/MB/2020 praying for a declaration that the dues arising after the insolvency commencement date of the workmen and employees of the Corporate Debtor, who are not part of the Asset Preservation Team are not covered under "insolvency resolution process costs under the Code". The Adjudicating Authority did not decide the issue at that point of time and IA was permitted to be withdrawn. Liberty was granted to RP to raise the matter again. The Appellant had also filed an Application before the Adjudicating Authority praying for copy of the Resolution Plan and the right to be heard by Adjudicating Authority, which application was rejected by the order dated 22.02.2021. A clarification note was also filed by the Resolution Applicant in I.A. No.20....
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....(Insolvency) No. 643 of 2021 6. This Appeal has been filed by aggrieved workmen of Jet Airways (India) Limited, which is an Association of workmen of the Corporate Debtor numbering more than 270 workmen. The Members of the Association are aircraft maintenance engineers and have been working for several years on the rolls of the Corporate Debtor. The Successful Resolution Applicant has arbitrarily provided only a sum of Rs.52 crores to employees and workmen. The Resolution Professional did not account the salaries and other benefits due to employees and workmen, which estimated approximately Rs.715 crores as on September 2020 as CIRP cost. The employees and workmen are entitled to their full provident fund, gratuity, leave encashment etc., which have not been provided to employees and workmen. The Appellant has also referred to the Audited Financial Statement for 2019-20, which contained the provisions for employees benefits. The Audited Financial Statement mentions that as many as 13530 workmen and employees have submitted their claims. Various ground to challenge the Resolution Plan have been enumerated in the Appeal. Company Appeal (AT) (Insolvency) No. 801 of 2021 7. The Ap....
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....e Appellants gratuity and provident fund dues upto beginning of CIRP or respective date of resignation, whichever is earlier. The gratuity and provident fund dues are claimed for the employees from different dates prior to initiation of CIRP and from the date of initiation of CIRP, i.e., 20.06.2019. It is stated that admitted claim of workmen and employees is Rs.1254 crores. The case of the Appellants is that gratuity and provident fund are required to be paid in full before making any other payment whatsoever under the Resolution Plan as these payments are outside the Waterfall Mechanism under Section 53 of the Code. The employees are illegally deprived of their statutory dues. The gratuity and provident fund dues are excluded from the Liquidation Estate of the Waterfall Mechanism, so as to enable the employees to realize their savings as well as the matching contribution, which comes from the employer. They are the assets of the workers lying in the possession of the Corporate Debtor. The Resolution Plan does not provide for payment of full gratuity and provident fund of the workmen and employees. By letter dated 29.07.2021, the amount payable to the workmen and employees in the ....
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....a valid Resolution Plan is required to comply with the provisions of the Payment of Gratuity Act, 1972. Company Appeal (AT) (Insolvency) No. 792 of 2021 10. This Appeal has been filed by Department of State Tax, challenging the order dated 22nd June, 2021. The Appellant's case is that the Corporate Debtor is liable to pay GST from the period July 2017 to March 2020, which is Rs.80,60,39,949/-. Out of the above GST dues, the Resolution Professional has admitted claim of Rs.56,85,78,421/-, vide List of Creditors published on the official website of Corporate Debtor. The Resolution Professional has admitted the interest upto the date of commencement of CIRP and rejected the post CIRP GST and interest and penalty. The Appellant was not party to I.A. No.2081 of 2020. The Adjudicating Authority has accepted the Resolution Plan, which presumed the claim of the Appellant to be NIL. The Resolution Plan mentions that the net worth of the Corporate Debtor would be insufficient to cover the debts of the Financial Creditors and therefore, the liquidation value due to the Operational Creditors including government dues, taxes or the other creditors or stakeholders is presumed to be NIL. The A....
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....s been received from IRP. The Plan was approved on 22.06.2021 wherein no provision has been made for EPFO dues. 13. We have heard learned Counsel for the Appellant(s), learned Counsel appearing for Resolution Professional, learned Counsel for the Committee of Creditors and the learned Counsel appearing for Successful Resolution Applicant. 14. The submissions, which have been advanced on behalf of the Appellant(s) can be divided into two groups. The first group of submission are on behalf of employees and workmen of the Jet Airways (India) Limited and the second group of submissions are on behalf of Appellant(s) who are Operational Creditors (other than employees and workmen). The submissions on behalf of employees and workmen have been led by Shri Vikas Mehta, learned Counsel. We may first notice the submissions, which have been advanced on behalf of the employees and workmen. 15. The learned Counsel for the Appellant(s) submits that provident fund/ gratuity, pension is not part of Liquidation Estate by virtue of Section 36(4)(a)(iii) of the Code. The workmen and employees are entitled for payment of their entire dues of provident fund, gratuity, pension subject to distribution ....
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....de. 16. The learned Counsel for the Appellant(s) submitted that this Tribunal can exercise its jurisdiction of judicial review in setting aside the Resolution Plan or remitting the Plan to CoC, since the Plan contravenes statutory and mandatory provisions of Section 30, sub-section (2) and (4). The learned Counsel for the Appellant(s) in support of his submission stated that the Adjudicating Authority and this Tribunal could exercise jurisdiction to interfere with the Resolution Plan, when the Plan contravenes the mandatory provisions of the Code, i.e., Section 30, sub-section (2)(b) and (e). The learned Counsel for the Appellant has referred to judgment of the Hon'ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank (2019) 12 SCC 150 and the judgment of the Hon'ble Supreme Court in (2020) 8 SCC 531 - Committee of Creditors Essar vs. Satish Kumar Gupta. To support his submission in respect of Section 36, sub-section (4)(a)(iii), learned Counsel for the Appellant has relied on BLRC Report para 5.5.5. The learned Counsel further submits that an amount already deposited in the provident fund and gratuity fund is not a sum due. An amount deposited in the provident fund can be wi....
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....dues of Rs.715 crores have been completely wiped out, which dues must have also increased upto the date of approval of Resolution Plan. It is further submitted that Section 53, sub-section (1), treats dues of Secured Creditor to rank equally with dues of 24 months of the workmen's dues. The Resolution Professional while computing the entitlement of the workmen has treated the entire financial debt of the secured creditors, whereas the financial debt only to the extent of value of security interest ought to have been considered. The interest of secured creditor is restricted to the value of their security under Section 53(1)(b)(ii). In view of treating the entire financial debt of the secured creditor under Section 53(1)(b)(ii), the calculation of 24 months of dues of workmen have substantially reduced. The Resolution Professional further has not disclosed the value of secured interest of the secured creditor in the present case. The entire claim of Rs.7258 crores of Financial Creditors has been accepted. In the additional affidavit of Resolution Professional of 25.07.2022, there are various discrepancies in Form-H and CIRP costs is mentioned as Rs.25 crores. In the impugned order a....
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.... Anr. (2021) SCC OnLine SC 707. 20. Ms. Ronita Bhattacharya Bector also contended that the Resolution Plan violates Section 30(2)(b) and Section 30(2)(e). It is submitted that demerger of AGSL and absorption of workers and employees of Jet airways, does not amount to a transfer falling within the scope of the proviso to Section 25FF of Industrial Dispute Act, 1947. The consent of a worker is required in order for him to accept a transfer and agree to waiving his retrenchment compensation under Section 25FF of the Industrial Disputes Act, 1947. The burden of proving the applicability of proviso of Section 25FF lies with the Resolution Professional and Resolution Applicant. The liabilities to pay gratuity, pension and retrenchment compensation and leave encashment etc. cannot be passed on to AGSL. The learned Counsel further submitted that legislative scheme always has been to give priority to payment of provident fund, gratuity and other benefits etc. while creating a first charge over the assets of a Corporate Debtor, which is also reflected in Section 151(3) of the Code on Social Security, 2020. 21. We have heard other learned counsel appearing for the Appellant(s). 22. Learned....
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....pril 2019 and it was not a going concern. In order to preserve the assets of Corporate Debtor, certain existing employees were retained in Asset Protection Team (total 50). As regards, the workmen and employees, who were not part of APT, no dues are payable for the CIRP period. The wages of workmen and employees accrued during CIRP period amounting to Rs.715 crores cannot be considered as CIRP costs as the Corporate Debtor was not a going concern and during the CIRP, the workmen and employees did not work during the said period. The salaries and dues of workmen and employees arising prior to insolvency commencement date has been duly admitted by the Resolution Professional. The Resolution Plan has been in accordance with the Section 30, sub-section (2). Form-H was issued by Resolution Professional after being fully satisfied that Plan complies with the requirement as provided in Section 30. The Plan also provided for effective implementation. The condition precedent in Resolution Plan is not in the nature of contingencies as contemplated by the Hon'ble Supreme Court in Ebix Singapore (P) Ltd. vs. CoC of Educomp Solutions Ltd. (supra) but inter alia relate to mandatory permissions f....
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....mitted that the provision provides exclusion of all sums due to workmen or employees from the provident funds and gratuity funds etc., which constitutes as their assets from the estate of the Corporate Debtor. The said provision uses the term "assets" and does not by definition cover a liability that is owed to the workmen by the Corporate Debtor. Jet Airways was not maintaining any provident fund and gratuity fund of its own. The provision of Section 36(4)(a)(iii) can come in play in liquidation proceeding and in cases where the fund is being maintained by the Corporate Debtor, whereas in the facts of the present case, there was no fund being maintained by the Corporate Debtor for these statutory dues and same were being directly deposited with the Employees Provident Fund Organization. Accepting the submission of Appellants that preference to be given to the dues that become payable under Employees' Provident Fund and Miscellaneous Provisions Act, 1952 or any other Act providing a first charge pertaining to payment to workmen is wholly contrary to the provisions of the Code. The Code itself prescribes a waterfall mechanism for payment of creditors including employees and workmen ....
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....r's estate during liquidation. Insofar as submission that the Resolution Plan is contingent, is also not correct. Condition precedent referred under Clause 7.6.1 of the Resolution Plan relate to obtaining the statutory approvals, which are imperative to be fulfilled, in order to ensure successful revival of the Corporate Debtor. The judgment of Hon'ble Supreme Court in "Ebix Singapore" (Supra) is clearly distinguishable in the facts of the present case. The scheme of demerger is also valid under the Code. The Resolution Plan does envisage a business plan for AGSL by providing for inter alia the Corporate Debtor to transfer of identified related assets book valued at approx. Rs.10 Crores as well as the ground support equipment, after it has received the necessary approvals, to enable AGSL, to start operations. The Adjudicating Authority as well as this Appellate Tribunal does not have the jurisdiction to review or reverse the commercial wisdom of the CoC in pursuance of which Resolution Plan was approved. 24. Shri Krishnendu Datta, learned senior counsel appearing for the Successful Resolution Applicant also supported the Resolution Plan as well as the order of the Adjudicating Aut....
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....salary and other benefits as CIRP cost. The submission of the Appellant that the plan and the scheme of demerger according to which all workers and employees except 50 employees are being transferred to AGSL, amounts to retrenchment as per Section 25F of the ID Act, hence, the Appellants were entitled for retrenchment compensation, is not correct. It is submitted that there was no termination of the employment of the workmen/employees, hence, no question of retrenchment compensation arises. The Resolution Plan falls squarely within the four corners of the proviso to Section 25FF. Since, the service of the workmen has not been interrupted by the transfer and other conditions were fulfilled, the scheme of demerger under the Resolution Plan is neither contrary to law nor against the contours of IBC. The submission of the Appellant that the workmen and employees were entitled to provident fund and gratuity fund in full by virtue of Section 36(4)(a)(iii) of the Code is not correct. Section 36(4)(a)(iii) uses the term 'fund' instead of 'dues'. In absence of any such fund, the Resolution Professional cannot apportion a part of the assets of the Corporate Debtor for payments to be made aga....
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....Regional Provident Fund Commissioner and other Operational Creditors. Learned counsel for the Appellants in support of the above appeals contend that Operational Creditors have filed their claims which are reflected in the List of Creditors maintained by the Resolution Professional. It is submitted that Resolution Plan is in violation of Section 30(2)(b). 27. Learned counsel appearing for the Appellant in the appeal filed by Department of State Tax contends that the name of Department appears in the list of creditors maintained by the Resolution Professional but note has been made that claim are under dispute which are pending before various authorities and appeals. It is contended that charge has been created in favour of State Tax Department by operation of law for the adjudicated amount of Tax payable by the Corporate Debtor. State Tax Department has security interest and it is a secured creditor. The Adjudicating Authority committed error in not treating the Department of State Tax as a secured creditor. The Resolution Plan does not provide for payment of amount to the State Tax Department as per security interest. Plan also violates Section 30(2)(e). At the highest, the Appel....
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....or Air Ltd. was admitted by the Resolution Professional for an amount of Rs.82,61,378/-. It is submitted that the decision regarding feasibility and viability of the Resolution Plan vests with the Committee of Creditors which takes into consideration all aspects of the plan including distribution of funds to various claimant of the Corporate Debtor. The Committee of Creditor has approved the plan with 99.22% majority and all the Operational Creditors have been allocated similar fixed amount, hence, there is no error in the Resolution Plan which may warrant any interference. The plan does not violates Section 30(2)(b). 32. We have considered submissions of learned counsel for the parties and perused the record. 33. From the submissions of learned counsel for the parties and the materials on record following questions arise for consideration in these appeals: QUESTIONS I. What is the extent and the limitation of the judicial review by the Adjudicating Authority and the Appellate Tribunal in context of a Resolution Plan approved by the CoC with requisite majority? II. Whether the workmen and employees are entitled to receive the payment of provident fund, gratuity and other re....
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....t of an order dated 17.10.2018 passed under Section 14B of Employees' Provident Funds & Miscellaneous Provisions Act 1952 can be treated as secured debt and the Appellant was entitled to receive the amount as secured creditors? XII. Whether the claim of Department of State Tax which was submitted within time created a charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law and the State Tax Department has the security interest and is a secured creditor? XIII. Reliefs, if any, to which the appellants are entitled? QUESTION - I 34. Section 31 of the Code provides for approval of Resolution Plan. Section 31(1) provides as follows: "31(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any la....
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....assessment made by their team of experts. The opinion on the subject 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 nonjusticiable." x...x...x "55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational cre....
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.... upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority under Section 31 of the I&B Code dealing with approval of the resolution plan." 39. Next judgment which need to be noticed is judgment of Hon'ble Supreme Court in "Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors., (2020) 8 SCC 531". Justice Nariman referred to and relied on the judgment in K. Sashidhar's case (supra). In Para 65, 72 and 73 following has been laid down: - "65. As has already been seen hereinabove, it is the Adjudicating Authority which first admits an application by a financial or operational creditor, or by the corporate debtor itself under Section 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code, and as expounded upon by our judgments in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 and Macquarie Bank Ltd v. Shilpi Cable Technologies Ltd. (2018) 2 SCC 674, the Adjudicating Authority then appoints an interim resolution professional who takes administrative decisions as to the day to day running of the corporate debtor; collation of claims and th....
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....aken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal." 40. Hon'ble Supreme Court in subsequent judgment in "Kalpraj Dharamrishi vs. Kotak Investment Advisors Ltd. (2021) 10 SCC 401", after referring to the earlier judgments of the Supreme Court reiterated the principl....
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....om the liquidation estate are sums due to any workman or employee from the provident fund, pension fund and gratuity fund. Thus, sums due to any workman from the above funds are excluded from the liquidation estate. Legislative intent is clear that any sums due to any workman from aforesaid fund are excluded and cannot be used for recovery in the liquidation. The object is that sums due to any workman and employee from the aforesaid funds should not be used for recovery in liquidation for dues of other creditors since those dues are exclusive to workmen and employees. 46. Learned counsel for the Appellant has relied on "Report of the Bankruptcy Law Reforms Committee, November, 2015". He has referred to Para 5.5.5. The Committee opined that assets held by the entity in trust, such as employee pension must be kept out of the liquidation process. The submission of the Appellant is that when the sums due to the workmen from provident fund, gratuity fund and pension fund are excluded from the liquidation estate, the sums due to any workmen towards provident fund, gratuity fund and pension fund should be paid in full and waterfall mechanism provided under Section 53(1)(b) should not be ....
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....e following new sub-Clause 155(2)(d) may be added after Clause 155(2)(c). 'all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund.' Clause 155(2)(c) may accordingly be renumbered 155(2)(d)." 48. Learned counsel for both the parties have referred to and relied on various judgment of this Tribunal as well as the Hon'ble Supreme Court in the above context which need to be noticed by us. The first judgment which has been relied by the Appellant is judgment of this Tribunal in "Company Appeal (AT) (Ins.) No.396 of 2019, State Bank of India vs. Moser Baer Karamchari Union & Anr.". In the above case, order of liquidation was passed by the Adjudicating Authority in which proceeding an application was filed by 'Moser Baer Karamchari Union' praying that direction be issued to the liquidator to exclude the amount of provident fund from the waterfall mechanism envisaged under Section 53 of the Code. The Adjudicating Authority allowed the application holding that the provident fund, pension fund dues and gratuity fund dues cannot be part of Section 53 for the Code. State Bank of India filed an Appeal. This Tribunal after noticing Section 36(....
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....t the provident fund, pension fund and gratuity fund do not come within the meaning of liquidation estate which has been specifically noticed in Para 25 of the judgment, as extracted above. 50. Next judgment which we need to notice is judgment of "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors., Company Appeal (AT) (Ins.) No. 354 of 2019 & Other Appeals". Above was a case where Resolution Plan was approved by the Adjudicating Authority. One of the Appeal was filed by the Regional Provident Fund Commissioner. It was submitted in the Appeal that Successful Resolution Applicant was supposed to pay the total provident fund amount but only part of the amount has been allowed by the Resolution Professional. Section 36(4)(a)(iii) was relied. In Para 40 to 45 while allowing the Company Appeal (AT) (Ins.) No. 1001 of 2019 following was held by this Tribunal:- "40. According to Appellant- 'Regional Provident Fund Commissioner', 'Successful Resolution Applicant' is supposed to pay the total provident fund amount, but only a part of the amount has been allowed by the 'Resolution Professional'. 41. It was submitted that the 'Resolution Plan' is against the provisi....
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....ity post Corporate Insolvency Resolution process has not been included. This Tribunal held that no provision of the Employees Provident Funds and Miscellaneous Provision Act, 1952 is in conflict with the provisions of I&B Code and direction was issued to pay the full amount of provident fund by the Successful Resolution Applicant. 53. Learned counsel for the Respondents have placed reliance on two other judgments of this tribunal rendered by two member bench i.e. judgment of this Tribunal in "Company Appeal (AT) (Ins.) No. 1229 of 2019, Mr Savan Godiwala, the liquidator of Lanco Infratech Limited vs. Apalla Siva Kumar". In which case, the Adjudicating Authority has directed the Liquidator to pay gratuity to the employees. An appeal was filed in this Tribunal which has been allowed. After noticing the three member bench judgment in "State Bank of India v Moser Baer Karamchari Union and Another" following observations have been made in Paras 16, 17 and 18:- "16. ..... Thus 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 ....
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....ation estate/liquidation assets of the 'Corporate Debtor'. Therefore, the question of distribution of Provident Fund or the Pension Fund or the Gratuity Fund in order to priority, and within such period as prescribed under Section 53(1), does not arise. It is further held in the above case that 53(1)(b)(i) of the I&B Code, regarding distribution of assets, relating to workmen's dues is confined to a period of 24 months, preceding the liquidation commencement date. This question as already been decided that Gratuity Fund does not form the part of the liquidation asset. 18. Therefore, the question of distribution of the Gratuity Fund in order of priority, provided under Section 53(1) of the Code does not arise. However, the Adjudicating Authority has given direction to the Liquidator that, ―the Liquidator cannot avoid the liability to pay Gratuity to the employees, on the ground, that 'Corporate Debtor' did not maintain separate funds, even if, there is no fund maintained, the Liquidator has to provide sufficient provision for payment of Gratuity to the Applicants according to their eligibility." 54. Against the above judgment, appeal has been filed in the Supreme Court an....
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....ompany, in violation of the Statutory provision of the Sec 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not part of the liquidation estate. On perusal of the statutory provision of Section 5 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. It is apparent that the establishment, to which the said Scheme of Employees' Provident Fund applies, has to create a fund in accordance with the provision of the Act and the Scheme. Section 5(1-a) provides that the Fund shall vest in, and be administered by the Central Board constituted under Section 5(a). Section 4 of the Payment Gratuity Act, 1972 provides that Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years - (a) On his superannuation, (b) On his retirement or resignation, (c) On his death or disablement due to accident or disease. In this case, we are not concerned with determination about the ....
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....cided on 11.03.2022. In the above case, an appeal was filed by ex-employee of Respondent No.3, Corporate Debtor, challenging the order dated 02.04.2019 passed by the Adjudicating Authority approving the resolution plan. Grievance of the Appellant was that they have not been made the full payment of provident fund due to the Corporate Debtor. Other grounds for challenge were also raised. This Tribunal while considering the appeal considered provisions of Section 36(4) and Section 53 of the Code. This Tribunal placed reliance on the judgment of Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd." (Supra) and issued following directions in Para 13(f): "(f) Hence, We direct the Respondent No.2/Successful Resolution Applicant to release full provident fund dues in terms of the provisions of the Employees Provident Funds and Miscellaneous Provident Fund Act, 1952 immediately by releasing the balance amount of (Rs. 1,35,06,391 full dues - (minus) considered in the Resolution Plan Rs.78,00,000). The impugned order dated 02nd April, 2019 approving the 'Resolution Plan' stands modified to the extent above." 58. Against the above judgment of this Tribunal Civil Appeal was fi....
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....ng the Explanation mentioned below Section 326 of the Companies Act, 2013. Explanation to Section 326 of the Companies Act, 2013 is as follows:- "Explanation.-For the purposes of this section, and section 327- (a) "workmen'', in relation to a company, means the employees of the company, being workmen within the meaning of clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947); (b) "workmen's dues'', in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947); (ii) all accrued holiday remuneration becoming payable to any workman or, in the case of his death, to any other person in his right on the termination of his employment before or by the effect of the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of....
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....of the Tribunal in "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.", as noted above. 63. Learned counsel for the Respondent has relied on two two members judgments delivered by this Tribunal in "Sawan Godiwala vs. Apalla Siva Kumar" and "Regional Provident Fund Commissioner, Employees Provident Fund Organisation vs. Vandana Garg" (Supra) where direction issued by the Adjudicating Authority for payment of provident fund was interfered with by this Appellate Tribunal. The judgment of "Sawan Godiwala" only refers to the judgment of "State Bank of India vs Moser Baer Karamchari Union", and does not notice the another three member bench judgment in "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.". The two member bench judgment in "Sawan Godiwala" also follows the three member bench judgment in "State Bank of India vs Moser Baer Karamchari Union" and does not take any different view. However, with regard to direction to pay gratuity the two member bench judgment set aside the order of Adjudicating Authority holding that no gratuity fund was created. Another judgment in "Regional Provident Fund Commissioner, Employees Provident Fund Organisation vs. ....
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....ow so far as the dues of the workmen/employees on account of provident fund, gratuity and pension are concerned, they shall be governed by Section 36(4) of the IB Code. Section 36(4)(iii) of the IB Code specifically excludes "all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund", from the ambit of "liquidation estate assets". Therefore, Section 53(1) of the IB Code shall not be applicable to such dues, which are to be treated outside the liquidation process and liquidation estate assets under the IB Code. Thus, Section 36(4) of the IB Code has clearly given outright protection to workmen's dues under provident fund, gratuity fund and pension fund which are not to be treated as liquidation estate assets and the Liquidator shall have no claim over such dues. Therefore, the concerned workmen/employees shall be entitled to provident fund, gratuity fund and pension fund from such funds which are specifically kept out of liquidation estate assets and as per Section 36(4) of the IB Code, they are not to be used for recovery in the liquidation. 54. In view of the above and for the reasons stated above, it is held as under: i) that th....
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....t other stakeholders. 68. The judgment of Hon'ble Supreme Court as relied by learned counsel for the Respondent also in Para 53 clearly held that Section 53(1) of the Code shall not be applicable to such sums, which are to be treated outside the liquidation process and liquidation estate assets under the Code. Direction issued by Hon'ble Supreme Court in Para 54(i) was with regard to wages and salary of the workmen/employees of the Corporate Debtor during the CIRP period and under direction (ii) at Para 54, Hon'ble Supreme Court directed in reference to Section 36(4) of the Code that provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets and the share of the workmen dues shall be kept outside the liquidation process. Learned counsel for the Respondent has relied on words "if any, available" occurring in direction (ii). The above words cannot be read to mean that the workmen and employees are not entitled for provident fund, gratuity fund and pension fund if not available with the Liquidator. 69. The present is a case where resolution plan has been approved; present is not a case of liquidation. Under the provisions of 1952 Act, the Corporate ....
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....ddition to part amount of provident fund and gratuity as proposed in Resolution Plan to workmen, Successful Resolution Applicant is obliged to make payment of balance unpaid amount of provident fund and gratuity to workmen and employees. 72. Our answer to Question II and III is as follows: (i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii). (ii) The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 32(2)(b) read with Section 53(1). 73. To further examine the issues, we need to look into few more provisions of the Code as well as facts on record relating to provident fund, gratuity fund and other retirement benefits. 74. Although Section 36, sub-section (4)(a)(iii) of the Code applies to liquidation, but the purpose and object for which the above provisions was enacted also finds reflections in Section 18 of the Code. Section 18 enumerates the duties of IRP. Section 18, sub-section (f) provides as follows: ....
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.... inviting the Resolution Plan. 77. Now we look into the facts of the present case. The Resolution Professional has filed an additional affidavit dated 25.07.2022 as directed by this Tribunal vide its order dated 22.07.2022. In paragraph 11.1 while dealing with provident fund, following has been stated: "11.1 I say that the amounts deposited by the erstwhile management of the Corporate Debtor into Employee Provident Fund Organisation ("EPFO") do not form part of the estate of the Corporate Debtor and accordingly, such amounts do not form part of the Resolution Plan. I state that the provident fund deductions from the salaries of the employees/workmen which were deposited into the respective accounts of such workmen/employees maintained with the EPFO can be withdrawn by the respective employees/workmen from their respective accounts, without the knowledge of the employer. Hence, pursuant to the ICD when I assumed control of the accounts of the Corporate Debtor, the amounts in the above accounts of the workmen/employees which were deposited with the EPFO did not form part of the records of the Corporate Debtor. Hence, I am unaware of the total amounts deposited prior to the ICD or ....
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....t the dues of the workmen (for the period of twenty-four months) and employees (for the period of twelve months) under Section 53 of the Code are as follows: Details of dues of workmen (24 Months) and employees (12 Months) In INR Cr. Category Salary Provident Fund Leaves Gratuity Total Workmen 411.6 9.8 25.2 18.7 465.3 Employees 466.8 6.7 16.0 9.6 499.1 Total 878.4 16.5 41.2 28.3 964.4 Details of dues of workmen (beyond 24 Months) and Employees (12 Months) In INR Cr. Category Salary Provident Fund Leaves Gratuity Total Workmen -- -- 2.2 111.2 113.4 Employees -- -- 39.2 136.6 175.8 Total -- -- 41.4 247.8 289.2 79. The above table indicates that the claim admitted by the Resolution Professional includes the provident fund, gratuity fund and leave encashment also. The above claim submitted by employees and workmen were obviously the claim of unpaid provident fund, leave encashment and gratuity fund as well as salary. When no provident fund, gratuity fund and fund for leave encashment is maintained by the Corporate Debtor, obviously, such claim which have been filed before Resolution Professional and admitted b....
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....shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1. - For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2. - For the purpose of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall 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;" 82. We need to examine as to whether the Resolution Plan approved by the Committee of Creditors on 03.10.2020 and by Adjudicating Authorit....
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....INR 56 lakhs has been deducted in computing the payouts to be made to the Operational Creditors (other than workmen and employees). 3. Total Payout to Workmen & Employees 11,300 85. The above breakup, which is part of Form-H estimate minimum liquidation value due to the workmen is INR 11,300 lakhs, i.e., Rs.113/- Crores. 86. At this stage, we may also notice the paragraph 6.42 of the Resolution Plan, which refers to treatment of employees/ workmen dues. Para 6.4.2, (a), (b) and (c) is as follows: "6.4.2 Treatment of Employees/ Workmen dues, including dues of Authorized Representatives of Employees/ Workmen (a) The Resolution Applicant proposes to pay a fixed sum of Rs.52 Crores to the Workmen/ Employees towards settlement of all the claims made by the Employees and Workmen of the Corporate Debtor, including to the Authorized Representatives of Employees and Workmen as set out in the List of Creditors ("Admitted Workmen and Employees Dues"). (b) The payments towards Admitted Workmen and Employees Dues shall be made out of funds infused by the Resolution Applicant in the Corporate Debtor and as per the Implementation Schedule set out in Clause 7.7 below. The sai....
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....ntion pressed by the Appellant is that provisions of Section 25F and 25FF of the Industrial Dispute Act, 1947 are the law time being in force and demerger of the workmen and employees of the Corporate Debtor to AGSL is in essence retrenchment of the workmen and workmen were entitled for retrenchment compensation and no retrenchment compensation having been paid to the workmen, there is violation of Section 25F and 25FF of the Industrial Disputes Act, 1947. 90. Before we proceed further, we may notice Section 25F and 25FF of the Industrial Disputes Act, 1947, which is as follows: "25F. Conditions precedent to retrenchment of workmen.--No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until-- (a) the workman has been given one months notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay 3[for every completed year of....
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.... part of such demerger, all the past dues towards salaries and other benefits (such as PF dues, leave encashment, retirement benefits, notice pay, termination dues etc.) of the Demerged Employees for the period after the ICD and until the Approval Date; and/ or retirement benefits accruing to Demerged Employees which have arisen after the ICD, shall also stand demerged from the Corporate Debtor to AGSL with effect from the Approval Date and the Corporate Debtor shall absorb no liability or responsibility for such payments as the Resolution Professional has not accounted such salaries and other benefits as CIRP Costs of the Corporate Debtor. (iv) As part of such demerger, ground handling services business of the Corporate Debtor will be demerged into AGSL along with identified related assets of the Corporate Debtor book valued at approx. Rupees Ten Crore. The business of AGSL will be to provide third party ground handling services in India to any person interested in taking their services and AGSL will apply for all necessary approvals from the relevant Governmental Authority for carrying out such third party ground handling business after the Approval Date. (v) The Resolution....
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....its: * Demerger is in the commercial interest of the Demerged Employees, given as part of such demerger, AGSL will be entitled to carry out ground handling services, subject to receipt of approvals under Applicable Laws. * It would facilitate focused growth, concentrated approach, business synergies and increased operational and focus of the Demerged Employees in the business verticals they have knowledge of. * The demerger will help in the rationalization of operations, with greater degree of operational efficiency and optimum utilization of various resources for both AGSL and the Corporate Debtor. * Demerger is the most suited manner to address unemployment in skilled/ unskilled sectors associated to aviation and welfare of the Demerged Employees will be taken care of through such demerger and concentrating of resources and associated manpower in the relevant entity and business vertical. * Demerger of AGSL will be enable it to address its independent business opportunities with efficient capital allocation and attract different set of investors, strategic partners, lenders and other stakeholders, thus leading to enhanced value creation for the employees and shareh....
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.... employment to a subsidiary of the Corporate Debtor. The Scheme is beneficial for all the employees, who have been out of the employment for last three years. The decision of hiving-off of Ground Handling Business to AGSL was contemplated and considered by the erstwhile Corporate Debtor, in its commercial wisdom to ensure stability in the primary aviation business. The Resolution Plan, which had received approval by the Committee of Creditors by 99.22% vote share is a business decision of the Committee of Creditors, which has to be given paramount importance. The submission of the Appellant(s) that AGSL is only a smoke screen, who has no capacity to carry on any business or to make payment of salary and wages to workmen and employees, this submission needs to be considered in the background of the fact that Corporate Debtor is in CIRP and efforts are being made to revive the Corporate Debtor by Resolution Applicant. The Corporate Debtor was a sinking ship, due to its inability to carry on the weight of its debt. The submission that Corporate Debtor is obliged to continue with all liabilities of its employees and workmen even after insolvency commencement date, cannot be accepted ke....
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....reated to be terminated were not entitled for any gratuity or leave encashment. 97. The above deficiencies in the plan need to be remedied by issuing appropriate direction to the Successful Resolution Applicant to make requisite plan so that plan may become compliant of Section 30(2)(e). QUESTION - VII 98. The workmen and employees attacked the Resolution Plan on the ground that it does not take into consideration payment of Rs.750 crores or more, which was dues of the workmen and employees after insolvency commencement date. The Resolution Professional in his additional affidavit in paragraph 7, while dealing with the aforesaid contention stated following: "7. In view thereof, wages of workmen/employees accrued during CIRP (amounting to approx. INR 715 crores) cannot be considered as CIRP costs as the Corporate Debtor was not a going concern during the CIRP and the workmen/employees did not work during such period. Accordingly, the dated June 22, 2021. approving the Resolution Plan, has rightfully records that claims of employees and workmen are not CIRP costs as the workmen/employees did not work for the Corporate Debtor during the CIRP period and any payments to such perso....
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....during the CIRP period when the resolution professional managed the operations of the corporate debtor as a going concern, shall be paid treating it and/or considering it as part of CIRP costs and the same shall be payable in full first as per Section 53(1)(a) IBC. 25.2. Considering Section 36(4) IBC and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen's dues shall be kept outside the liquidation process and the workmen/employees concerned shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds." 101. The Corporate Debtor had stopped its airline operations since April 2019 and during CIRP period till the approval of Resolution Plan, Corporate Debtor was not a going concern. There is no material on record to indicate that Corporate Debtor was a going concern during CIRP period. Hon'ble Supreme Court has clearly laid down in the above case that dues towards wages and salaries of only those workmen and employees who actually worked during CIRP are to be included in the CIRP Costs. We, th....
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.... to a secured creditor is a debt which is relatable to his claim as admitted in CIRP Process. The claim/debt of a secured financial creditor which is admitted in CIRP Process of a secured creditor is a fixed amount determined in CIRP process as reflected in Information Memorandum prepared by the Resolution Professional. The debt owed to a secured creditor is not the value of security of a secured creditor. The value of security of secured creditor is not the debt owed to a secured creditor in the CIRP Process. Section 53(1) does not contemplate distribution as per value of security of a secured creditor. Submission of the Appellant that he is entitled to distribution of the proceeds of the plan value as per value of security possessed by him is not in accord with the legislative scheme as delineated in Section 53(1) of the Code. The above issue has been decided by this Appellate Tribunal in Company Appeal (AT) Ins. No. 665 of 2022 "Union Bank of India Vs. Resolution Professional of M/s Kudos Chemie Ltd. & Ors.". In the above case also, the Financial Creditor of the Corporate Debtor has filed an Application seeking direction to distribute the resolution plan amount as per value of t....
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.... value of the security interest. Paragraph 13.1 of the judgment is as follows:- "13.1.Thus, what amount is to be paid to different classes or sub-classes of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest."" 15. The Judgment of the Hon'ble Supreme Court in Civil Appeal No. 1700/2021 "India Resurgence" (supra) was a case where Hon'ble Supreme Court had occasion to consider where also the Financial Creditor has objected to distribution contending that distribution should be as per value of the security interest held by the financial creditor. Hon'ble Supreme Court after referring to Section 30(2) and submission of the Appellant that distribution ought to have been as per value of security interest expressly rejected the submission. In paragraph 13, 13.1 and 14.2, following was laid down: "13. The repeated submissions on behalf of the appellant with reference to the value of its security interest neither carry any meaning nor ....
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....the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest. .............. 14.2. The extent of value receivable by the appellant is distinctly given out in the resolution plan i.e., a sum of INR 2.026 crores which is in the same proportion and percentage as provided to the other secured financial creditors with reference to their respective admitted claims. Repeated reference on behalf of the appellant to the value of security at about INR 12 crores is wholly inapt and is rather ill-conceived." 105. In the above judgment, the Report of the Insolvency Law Committee (February 2020) also was considered, in reference of which, following observation was made in paragraph 21: "21. Learned Counsel for the Appellant has also referred to Report of Insolvency Law Committee (February, 2020) which report discussed Section 52, 53(1)(b)(ii). The Committee in paragraph 7.4 opined that provision does not necessitate any further amendment to the provisions of the Code. What was said by the Committee was ....
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....rence was warranted by the Adjudicating Authority and by this Tribunal. The case of the Successful Resolution Applicant is that the condition precedents are the conditions which are necessary for revival of the business of the Corporate Debtor. Condition precedent are, in fact, business pre-requisites. For running the aviation business, several approvals from DGCA, Ministry of Civil Aviation and other statutory authorities are required. As per requirement of international traffic license, the said license is granted only to airlines which has a minimum 20 aircrafts or 20% total capacity in its fleet. The Successful Resolution Applicant has scheduled the recommencement with only six airplanes for domestic operations, hence, the said condition is not applicable in the present case. Learned counsel for the Appellant relied on the judgment of Hon'ble Supreme Court in "Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited & Anr., (2022) 2 SCC 401". We may first notice the judgment of Hon'ble Apex Court in "Ebix Singapore" (Supra). In the Ebix Case, the NCLT had allowed an application filed by the Resolution Application to withdraw from the Resolution Pla....
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....e plan which has also been captured by the Resolution Applicant in Form H. Para 7.6.1 refers to condition precedents i.e. obligation of the Resolution Applicant to recommence operations as an aviation company subject to fulfillment of conditions after the approval date mentioned therein. Para 7.6.2 deals with fulfilment of condition precedents and Para 7.6.4 deals with automatic withdrawal. In view of the judgment of Hon'ble Supreme Court in "Ebix Singapore" (Supra), as noted above, after approval by the CoC, the clause for automatic withdrawal becomes redundant and Resolution Applicant has no jurisdiction to withdraw from the Resolution Plan. The condition precedents as mentioned in Para 7.6.1 are basically condition precedents required for aviation business which are must for any company carrying on aviation business. Enumeration of condition precedent is only for purposes of noticing obligations of the Resolution Applicant to recommence the operations as an aviation company after obtaining necessary approvals. Such condition precedent cannot be said to be any hindrance in the approval of the plan by the Adjudicating Authority. We, thus, do not find any substance in the submissio....
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....' dues being lower in priority is nil. Similarly with other Operational Creditors, the priority of the other Operational Creditors is below the employees who are referred in Section 553(1)(c), hence, the liquidation value payable to the other Operational Creditors shall also be nil. Under Section 30(2) of the Code, the statutory requirement is that amount paid to Operational Creditors shall be minimum which is to be paid in the event of the liquidation of the Corporate Debtor under Section 53 and when the amount to be distributed under the resolution plan has been distributed in order of priority under Sub-section (1) of Section 53 no exception can be taken. From the above it is clear that the contention of the Appellant that payment to the employees and other Operational Creditors is not in accordance with Section 30(2)(b) cannot be accepted. 112. We have noticed the judgment of Hon'ble Supreme Court in "K. Sashidhar vs. Indian Overseas Bank" (Supra), where it has been held that the commercial wisdom has been given the paramount status without any judicial intervention. The limited enquiry which can be made by the Adjudicating Authority while examining the plan is as to whether t....
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....to ensure that every resolution plan provides for payment of at least the liquidation value to all operational creditors. Regulation 38(1)(b) of the CIRP Regulations provides that liquidation value must be paid to operational creditors prior in time to all financial creditors and within thirty days of approval of resolution plan by the NCLT. The BLRC Report states that the guarantee of liquidation value has been provided to operational creditors since they are not allowed to be part of the CoC which determines the fate of the corporate debtor. (BLRC Report, 2015) 18.2 However, certain public comments received by the Committee stated that, in practice, the liquidation value which is guaranteed to the operational creditors may be negligible as they fall under the residual category of creditors under section 53 of the Code. Particularly, in the case of unsecured operational creditors, it was argued that they will have no incentive to continue supplying goods or services to the corporate debtor for it to remain a 'going concern' given that their chances of recovery are abysmally low. 18.3 The Committee deliberated on the status of operational creditors and their role in the CIRP.....
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....guaranteed to them statutorily, but by improving the quality of resolution plans overall. This could be achieved by dedicated efforts of regulatory bodies including the IBBI and Indian Banks' Association. 18.5 Finally, the Committee agreed that presently, most of the resolution plans are in the process of submission and there is no empirical evidence to further the argument that operational creditors do not receive a fair share in the resolution process under the current scheme of the Code. Hence, the Committee decided to continue with the present arrangement without making any amendments to the Code." (emphasis supplied) Ultimately, the Committee decided against any amendment to be made to the existing scheme of the Code, thereby retaining the prescription as to the minimum value that was to be paid to the operational creditors under a resolution plan." 114. It is, thus, clear that in the event of minimum liquidation value which is payable to the Operational Creditor is paid there shall be compliance of Section 30(2)(b). 115. The facts of the present case indicate that the Resolution Plan proposed almost nil amount to the Operational Creditor except the workmen. Acc....
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....xception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. We make it clear that our observation is only to facilitate the Government and other competent Authority to consider this issue and take decision, so as to the objective of equitable and fair distribution can be fulfilled with clear parameters to guide the all concerned to arrive at the fair and equitable distribution." 116. In the present case, there is material on record to indicate that as explained by the Resolution Professional in Additional Affidavit dated 25.07.2022 that liquidation value for employees and other Operational Creditors except workmen is nil. We have already held that the employees were also entitled to receive their full amount of provident fund to which they were entitled under 1952 Act and gratuity due till commencement of insolvency u....
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..... The expression "any amount due from an employer" appearing in sub-section (2) of Section 11 has to be interpreted keeping in view the object of the Act and other provisions contained therein including sub-section (1) of Section 11 and Sections 7A, 7Q, 14B and 15(2) which provide for determination of the dues payable by the employer, liability of the employer to pay interest in case the payment of the amount due is delayed and also pay damages, if there is default in making contribution to the Fund. If any amount payable by the employer becomes due and the same is not paid within the stipulated time, then the employer is required to pay interest in terms of the mandate of Section 7Q. Likewise, default on the employer's part to pay any contribution to the Fund can visit him with the consequence of levy of damages." 119. The above judgment lays down that any amount due from employer appearing in sub-section (2) of Section 11 also covers the amount determined under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon'ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in v....
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....of the Corporate Debtor. The letter by which the claim was submitted by the Appellant is filed as Annexure A-3 of the appeal paper book in which the claim been filed in Form B, which is proof of claim by Operational Creditor except workmen and employees and now Appellant is claiming his claim as Financial Creditor, hence, we do not find any error in admitting the claim by Resolution Professional as an Operational Creditor. Whether the Appellant will be a secured creditor of the Corporate Debtor also needs consideration. In the Resolution Plan the allocation to the Appellant is nil, its liquidation value being nil. We may notice the provision of Section 82 of Maharashtra GST Act, 2017, which provides as follows:- "Tax to be first charge on property. - Notwithstanding anything to the contrary contained in any law for the time being in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), any amount payable by a taxable person or any other person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person or such person. [Emphasis supplied] " 122. The first ....
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....the IBC as well. Additionally, we may note that Section 238 of the IBC clearly overrides any provision of law which is inconsistent with the IBC. Section 238 of IBC provides as under: 238. Provisions of this Code to override other laws - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 124. The provisions of Section 82 of the Maharashtra GST Act, 2017, as extracted above, clearly contains an exception with regard to I&B Code, hence, on the strength of dues under Maharashtra GST Act, 2017, no charge can be claimed on the assets of the Corporate Debtor. 125. We may also notice a recent judgment of the Hon'ble Supreme Court in "Civil Appeal No. 1661 of 2020, State Tax Officer vs. Rainbow Papers Limited". In the above case, the Hon'ble Supreme Court had occasion to consider Section 48 of the Gujarat Value Added Tax Act, 2003. Section 48 was set out in Para 2 of the judgment, which is to the following effect: "2. The short question raised by the appellant in this appeal is, whether the provisions of the IBC and , in part....
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....d above. We, thus, are of the view that Department of State Tax, the Appellant, is an Operational Creditor and its liquidation value being nil, on the ground raised by the Appellant, no interference is called for in approval of the Resolution Plan. QUESTION - XIII Reliefs, if any to which Appellant(s) are entitled? 128. In the forgoing discussions, we have noted that the liquidation value of the workmen as has been referred to in Form-H preferred by the Resolution Professional is Rs.113 crores and workmen were entitled to receive at least Rs.113 crores as per Section 30(2)(b) read with Section 53(1)(b) of the Code. Shri Krishnendu Datta, learned Counsel for Successful Resolution Applicant during his submission, submitted that Successful Resolution Applicant shall be paying an amount of Rs.113 crores to the workmen as per the Resolution Plan, since it was contemplated that, if liquidation value is more than Rs.52 crores, the liquidation value shall be payable to the workmen. To clear any doubt, we deem it fit and proper to issue direction to Successful Resolution Applicant to make payment to the workmen of Rs.113 crores as per the Resolution Plan. 129. Now we come to the entitl....
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....cept 50 workmen and employees, who were part of the Asset Protection Team, the salary and other dues of the workmen and employees have not been rightly treated to be CIRP costs. 132. With regard to payment of gratuity to the workmen and employees, we are of the view that workmen and employees are entitled to gratuity payments, due to them before the insolvency commencement date. Any claim towards gratuity payment after insolvency commencement date is not admissible, since the workmen and employees having demerged into AGSL and their services were not deemed to have been terminated. Thus, gratuity payment under the provisions of Payment of Gratuity Act, 1972 is confined only to the date of insolvency commencement date and Successful Resolution Applicant is also liable to make the said payment. It goes without saying that with regard to payment of gratuity to workmen, any amount towards gratuity paid under the Resolution Plan is liable to be deducted and adjusted. 133. In view of forgoing discussions, we have found that non-payment of full provident fund amount to the workmen and employees and the gratuity payment till the insolvency commencement date amounts to noncompliance of pr....