AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 332
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....Anr.; Regional P.F. Commissioner 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....
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....h List of Creditors. The List of Creditors was revised and in the 9th List of 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 The Adjudicating Authority did not decide the issue at that point of time and IA was permitted to be withdrawn.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....
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....t aggrieved by the Resolution Plan has filed this Appeal. Company Appeal (AT) (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 enume....
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....the appeal challenges the order dated 22nd June, 2021 and pray for a direction to pay the 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 employ....
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....y being covered under Section 36(4) of the Code, there is no question of inconsistency and 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 includ....
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....019. The Appellant issued a letter to IRP for status of claim and also sent reminder, but no reply has 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 ....
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....time being in force. The Resolution Plan contravenes provisions of Section 30, sub-section (2)(e) of the Code. 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 ....
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....ere in the rolls of the Corporate Debtor and were not allocated any duties by the Resolution Professional. The 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,....
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....per judgment of Hon'ble Supreme Court in Ebix Singapore vs. Committee of Creditors of Educomp Solutions Limited and 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....
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....d employees with effect from 20.06.2019 are not CIRP dues. The Corporate Debtor has ceased its airline operations since April 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 Co....
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....475 Crores. Replying to the submission of learned counsel for the Appellant on Section 36(4)(a)(iii) of the Code, it is submitted 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 provisi....
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....or such creditors is to promote relinquishment, so as to promote overall value maximization of value of the Corporate Debtor'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 appe....
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....mployees after initiation of CIRP are not CIRP cost. Only 50 workmen and employees who were retained are entitled to receive 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 suc....
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....l (AT) (Ins.) No. 361 of 2022 has been filed by Concor Air Ltd. and Company Appeal (AT) (Ins.) No. 987 of 2022 has been filed by 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 pay....
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....l appearing in Company Appeal (AT) (Ins.) No. 361 of 2022 - Concor Air Ltd., it is submitted that claim as Operational Creditor of the Concor 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 b....
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....n can be held to be fair and equitable and deserves no interference by this Appellate Tribunal? XI. Whether the claim of Regional Provident Fund Commissioner verified to the extent of Rs.24,40,65,594/- arising out 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 reso....
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....scribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and 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 Secti....
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....nancial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan 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 Indus....
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....ee 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 with the commercial decision taken 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 ha....
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....shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation". We, in the present case, are concerned with clause (iii) of sub-section 4(a) which is "all sums due to any workman/employee from the provident fund, pension fund or the gratuity fund". 45. A plain reading of the above provision indicate that what is excluded from 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 kep....
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....orkman or employee from the provident fund, the pension fund and the gratuity fund should not be included in the liquidation estate assets and estate of the bankrupt. In view of the above the Committee decide that the Clause 36(4)(a)(iii) may be substituted by the following: 'all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund' Similarly, the 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....
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....ing Authority having come to such finding that the aforesaid funds i.e., the provident fund, the pension fund and the gratuity fund do not come within the meaning of 'liquidation estate' for the purpose of distribution of assets under Section 53, we find no ground to interfere with the impugned order dated 19th March, 2019." 49. In the above case, this Tribunal approved the decision of the Adjudicating Authority by which the Adjudicating Authority directed that 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 Professi....
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....ch was dismissed on 22.05.2020 by following order: "ORDER We find no merit in this appeal. The Civil Appeal is, accordingly, dismissed." 52. In the above case, it is clear that the case of the Regional Provident Fund Commissioner was that the total provident fund amount has not been included in the Resolution Plan whereas the Successful Resolution Applicant has contended that Principal Amount of provident fund has been taken in consideration, whereas the order of levying of interest by the PF Authority 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 t....
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....es depends on their entitlement of Gratuity, subject to the fulfilment of the conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard. 17. Based on the judgment of this Appellate Tribunal in case of the State Bank of India Vs. Moser Baer Karamchari Union and Another, 2019 SCC Online NCLAT 447, it is clear that in terms of sub-Section (4)(a)(iii) of Section 36 all sums due to any workman or employees from the Provident Fund, Pension Fund and the Gratuity Fund, do not form part of the liquidation 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 G....
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....istribution of assets under Section 53 of the Code. Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund can't be utilised, attached or distributed by the Liquidator, to satisfy the claim of other creditors. Sec 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate. In a case, where no fund is created by a company, 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 creat....
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....cording to their eligibility."" 56. In the above case the claim submitted by EPFO of Rs.1,95,01,301/- was admitted by Resolution Professional and reflected in the Resolution Plan. In appeal enhanced claim of Rs.2,84,69,497/- was sought to be raised which was not accepted by this Appellate Tribunal. Further the Judgment of this Tribunal in above case is based on Judgment of "Savan Godiwala" which is pending consideration before Hon'ble Supreme Court. 57. Learned counsel for the Appellant has relied on Judgment of this Tribunal in "Sikander Singh Jamuwal vs. Vinay Talwar & Ors., Company Appeal (AT) (Ins.) No. 483 of 2019", decided 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 Financ....
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....ench judgments of this Tribunal in "State Bank of India vs Moser Baer Karamchari Union" (Supra) and "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd." (Supra). The judgment of "State Bank of India vs. Moser Baer Karamchari Union" was a case relating to liquidation proceeding, in which proceeding, relying on Section 36(4)(a)(iii) the Adjudicating Authority has directed the Liquidator to make the payment of provident fund, pension fund and gratuity fund. The basis of judgment of this Tribunal in State Bank of India's Case was that the I&B Code will have overriding effect and the Section 53(1) (b) read with Section 36(4) will have overriding effect on Section 326(1) (a), including 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, mean....
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....ues, which is to be paid by the Corporate Debtor, in event of liquidation under Section 53(1)(b) workmen's dues are ranked equally with the secured creditors. The question which has arisen before us is with regard to payment of provident fund and gratuity which is due to an applicant. 62. Three Member Bench judgment in both "State Bank of India vs Moser Baer Karamchari Union and Another" (Supra) and "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd." (Supra) where this Tribunal has categorically held that provident fund has to be paid to workmen and employees in full and that cannot be made subject to distribution under waterfall mechanism of Section 53(1). Hon'ble Supreme Court has dismissed the appeal against the judgment 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 wa....
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....mployees of the Dahej Yard and Mumbai Head Office are at least entitled to the wages/salaries during the period of CIRP and are also entitled to the amount due and payable towards provident fund, gratuity and pension. Learned counsel appearing on behalf of the appellants has taken us to Section 3(36); Section 5(13); Section 5(14); Section 5(23); Section 17, Section 18; Section 19; Section 20; Section 25; Section 33(7); Section 36(4) and Section 53 of the IB Code." 65. Hon'ble Supreme Court has noticed all provisions of I&B Code including Section 36(4) and Section 53. While considering the claim of dues of employees and workmen towards provident fund, pension fund and gratuity following was laid down by Hon'ble Supreme Court in Para 53 and 54:- "53. Now 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....
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....sion fund, if any, available. 67. Thus, from the above preposition it is clear that share of workmen dues have to be kept out of liquidation process and same shall have to be paid to the employees and workmen out of such provident fund, gratuity fund and pension fund, if any, available. Thus, it is clear that if any provident fund, gratuity fund and pension fund is available with the Corporate Debtor, the share of employees and workmen has to be paid from the said fund which has to be kept out of the liquidation process. Thus, if the claim of workmen/employees regarding payment of provident fund, gratuity fund and pension fund can be satisfied from the fund maintained by the Corporate Debtor that has to be kept out of the liquidation and cannot be utilized for distribution amongst 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 ....
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....iability has to be discharged by the Successful Resolution Applicant. 70. It is further relevant to notice with regard to pension no materials have been brought before us to indicate that the Corporate Debtor has any rules /provisions for payment of pension, hence, no direction with regard to pension need to be issued. 71. In view of the aforesaid discussion, we arrive at following conclusions: (i) The workmen and employees are entitled for payment of full amount of provident fund and gratuity till the date of commencement of the insolvency which amount is to be paid by the Successful Resolution Applicant consequent to approval of the Resolution Plan in addition to the 24 months workmen dues as the workmen is entitled to under Section 53(1)(b) of the Code. It is made clear that in addition 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 gr....
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....set, but IRP is required to take control and custody of the assets over which the Corporate Debtor has ownership rights by virtue of Section 18(1)(f)(i). When we look into the Explanation to Section 18(1), the assets comprising of provident funds, gratuity funds or a pension fund and belonging to be maintained by Corporate Debtor, are assets on which employees and workmen have right although assets are in possession and control of the Corporate Debtor. The above mentioned assets, thus, are not to be taken control by IRP, after initiation of CIRP. Hence, the said funds, i.e., provident fund, pension fund and gratuity fund maintained by the Corporate Debtor, have to be utilized fully for payment of provident fund, pension fund and gratuity fund of the workmen and employees and thus, these assets cannot be included in the Information Memorandum as the assets of the Corporate Debtor, while 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 sta....
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....uance of publication by the Resolution Professional, claims have been filed by the workmen and employees before the Resolution Professional towards their salary, provident fund, gratuity etc., which after verification were admitted by the Resolution Professional. The Resolution Professional in paragraph 8.3 of the additional affidavit dated 25.07.2022 has given details of workmen dues (for the period of 24 months) ICD as well as employees dues (for the period of 12 months) ICD in paragraph 8.3 is as follows: "8.3 It is pertinent to note that under Section 30(2)(b) read with Section 53 of the Code: (i) workmen's dues for the period of twenty-four months preceding the ICD rank pari passu with the dues of the financial creditors terms of Section 53(1)(b); and (ii) employees' dues for the period of twelve months preceding the ICD are to be calculated in terms of Section 53(1)(c). I say that 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 Le....
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....ared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; [(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which 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 c....
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....l along with additional compilation filed on 06.07.2022. FormH mentions the liquidation value as Rs.2555,21,40,000/-. Form-H in Clause-7 refers to Annexure-A. Note-3 deals with breakup of payments to workmen and employees. It is relevant to extract Note-3, which is to the following effect: Sl. No. Particulars Amount (INR Lakhs) Remarks 1 Total amount proposed by Resolution Professional 52,00 Please refer S. No.11 in the table in Annexure A for details 2 Add: Additional payout towards the workmen & employees 6100 Resolution Applicant has proposed total INR 5200 lakhs towards the dues of workmen & employees The estimated minimum liquidation value due towards the workmen is INR 11300 lakhs. For the purposes of the computations set out herein, the shortfall of INR 6100 lakhs has been deducted from the amount allocated to the assenting FCs & Operational Creditors in the ratio of their payouts. In relation to the above, for the purposes of this table, an amount of INR 6044 lakhs has been deducted in computing the payout to be made to the assenting FCs and an amount of INR 56 lakhs has been deducted in computing the payouts to be made to the Operational....
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....led to at least Rs.113 crores, which is their minimum liquidation value estimated by Resolution Professional. The above fact clearly mandates direction to be issued to Resolution Applicant to pay at least Rs.113 crores towards workmen dues as per their entitlement under Section 30, sub-section (2) (b) read with Section 53(1) of the Code. 88. We, thus, arrive at a conclusion that had there not been an undertaking as contained in paragraph 6.4.2 (c) for payment of liquidation value, allocation of Rs.52 crores only was in clear violation of Section 30, sub-section (2), sub-clause (b), but in view of the undertaking by the Resolution Applicant, we do not find any necessity of interfering with the Resolution Plan except issuing a direction for payment of Rs.113 crores, which is a minimum liquidation value of workmen dues. QUESTION - V & VI 89. The issue to be considered is as to whether the Resolution Plan as approved by the Adjudicating Authority violates provisions of Section 30(2)(e) of the Code. Section 30(2)(e) requires that Resolution Plan does not contravene any of the provisions of the law for the time being in force. The contention pressed by the Appellant is that prov....
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....sfer; and (c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer." 91. We may also first notice certain clauses of Resolution Plan. The Scheme of demerger is contained in Clause 6.4.2 (i), which is as follows: "6.4.2 (i) Scheme (i) The Resolution Applicant propose to retain 50 (fifty) employees and workmen forming part of the APT. Such employees will be given the option to resign and seek re-employment by the Corporate Debtor on fresh employment terms as agreed between the Resolution Applicant and such employees, commencing from the Approval Date. An employee who refuses to exercise such option shall not be retained by the Corporate Debtor ("Retained Employees"). (ii) Excluding the Retained Employees, all employees and workmen of the Corporate Debtor on the payrolls of the Corporate Debtor ("Demerged Employees") as on September 15, 2020 ("Record Date") will be demerged from the Corporate Debtor into Airjet Ground Services Limited, with effect from th....
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....e IBC for the demerger as stated herein and the approval of this Resolution Plan by the Adjudicating Authority along with the Scheme shall be treated as if the necessary approvals required to have been obtained under the CA 2013, including the consent of shareholders or creditors of the Corporate Debtor and AGSL and application for demerger to Adjudication Authority or any other person/ appropriate authority, as required under CA 2013 (including Chapter XV of the CA 2013), together with the process laid down under the CA 2013, have been obtained and duly complied with. No further approval of the Adjudicating Authority or any other person or authority will be required to give effect to the Scheme, as proposed hereunder. (ix) The demerger will be on the above-mentioned principal terms and a Scheme will be filed before the Adjudicating Authority for its approval as part of this Resolution Plan. For the purposes of such demerger, the Scheme as set out in its present form or with any modification(s) approved or imposed or directed by the Adjudicating Authority, shall be effective and operative from the "Appointed Date", being the Approval Date for the purposes of this Resolutio....
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....kmen and employees of Resulting Company with effect from the Appointed Date on terms to be notified by the Resulting Company. The Resulting Company shall make best efforts to retain the Demerged Employees, subject to assessment and due diligence on the basis of their competencies and abilities to perform their functional obligations. It is clarified that no employee or workman of Demerged Undertaking will be laid off in contravention to the law or of the contracts already entered into between the Corporate Debtor and the respective employee or workmen, before the Appointed Date provided the employee or workmen have adhered to the same. The position, rank and designation of the employees and workmen would however be decided by the Resultant Company." 93. It is submitted that allegation regarding the purported future prospect of AGSL is only an apprehension. The Scheme of demerger cannot be turned down. The facts of present case squarely falls within the four corners of proviso to Section 25FF of Industrial Disputes Act. The Resolution Plan fulfill the requirement under the proviso. The Committee of Creditors has approved the Resolution Plan, which contains Clause 8.1 of the Schem....
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....2)(e). Further, the payment of Gratuity Act, 1972 also cast a statutory obligation on Corporate Debtor to make payment of Gratuity for those workmen and employee for which it became due till insolvency commencement date. 95. The Successful Resolution Applicant in plan has not made provision of full payment of provident fund dues which were due till insolvency commencement date. Ends of justice be served in directing the Successful Resolution Applicant to move payment of full provident fund dues which were unpaid till insolvency commencement dated after adjusting the payment to workmen towards provident fund in the Plan. 96. The employees have not been paid anything in the plan towards provident fund which became due till insolvency commencement date. The employees are entitled to be paid provident fund amount as admitted by Resolution Professional till insolvency commencement date. Similarly, the workmen whose gratuity amount became due before insolvency commencement date are also entitled to receive the same after adjusting the part amount of gratuity paid in the Plan. Employees who became entitled to gratuity before insolvency commencement date are also entitled to receive ....
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....he expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board;" 100. As per above definition any costs incurred by the Resolution Professional for running the business of the Corporate Debtor as a going concern is CIRP Costs. The Resolution Professional has not utilized services of workmen and employees apart from 50 employees and workmen during the CIRP period. The issue, which has been raised is fully covered by the Hon'ble Supreme Court judgment in Sunil Kumar Jain & Ors. vs. Sundaresh Bhatt & Ors. - (2022) SCC OnLine SC 467. In the above case also, an application was filed by workmen and employees for payment of their wages during the CIRP period, which Application was rejected by the Adjudicating Authority. In paragraphs 25.1 and 25.2, Hon'ble Supreme Court laid down following: "25.1. That the wages/salaries of the workmen/employees of the corporate debtor for the period during CIRP can be included in the CIRP costs provided it is established and proved that the interim resolution professional/resolution professional managed the operations of the corporate debtor as a going concern du....
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....od of twentyfour 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; 103. Section 53(1)(b)(ii) uses the expression "debts owned to a secured creditor". The plain meaning of the expression is that debt owned to secured creditor has to be taken into consideration. The submission of the Appellant(s), if accepted, shall be adding words to Section 53(1)(b)(ii), i.e., by adding word 'value of security interest of the secured creditors', which is impermissible. 104. The learned Counsel for the Appellant has relied on Report of Insolvency Law Committee (February 2020), which discussed Section 52, 53(1)(b)(ii). We had occasion to examine a similar contention in Company Appeal (AT) (Insolvency) No. 570 of 2022 - Small Industries Development Bank of India (SIDBI) vs. Vivek Raheja and Ors., where the Appellant Financial Creditor claimed that it was entitled for distribution of proceeds of the Plan as per value of the security interest of the Appellant and not as per the debt of the Appellant. The said submission was rejected in the above jud....
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....t tenable because the distribution of the amount was made by the Committee of Creditors resting on total dues of voting share of individual creditors which is neither whimsical nor arbitrary in any manner. Although the applicant gave a dissenting vote for approval of the Plan, based on the reason that distribution of resolution fund was discriminatory against it and despite the plea that it was entitled to the equal share in regard to the distribution of the resolution fund on the value of the assets of the corporate debtor as security. However, the committee of creditors, deciding to go with option no.1 i.e. distribution of plan amount as per claims admitted, has approved the resolution plan by 97.61% votes." 5. The decision of the CoC regarding the distribution of amount is in its commercial wisdom which we cannot question or be questioned by the Appellant. The Adjudicating Authority has rightly referred the judgment of the Hon'ble Supreme Court in "India Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr.- Civil Appeal No. 1700 of 2021" where in paragraph 13.1, the Hon'ble Supreme Court has held that what amount is to be paid to different classes or sub-classes....
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....to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, preamendment, secured financial creditors may cram down unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in subsection (2). Ms Madhavi Divan is also correct in stating that the order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as amended. Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to diffe....
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....helps the appellant to support the submission which is canvassed before us. 106. The Report of the Insolvency Law Committee (February 2020) has opined that priority under Section 53(1)(b)(ii) should be only to the extent of the security interest of the Secured Creditor, but in the earlier part of the Report, it was opined that provision does not necessitate any further amendment. When no amendments have been made in the statute, i.e., Section 53(1)(b)(ii), the provisions cannot be interpreted in any manner except the plain and literal reading of the provisions. The Report of Insolvency Committee (February 2020) can at best be reason for making any further amendment in the statute, but till amendment is made, the provision of the statute has to be read as it exists as on the date. 107. We, thus, do not find any substance in the submission of the learned Counsel that payment to the Secured Financial Creditors under Section 53(1)(b) has to be made as per their value of the security interest and the Resolution Plan did not take into consideration their debt, which is the debt of the Financial Creditors while allocating the amount. QUESTION - IX 108. The Appellant submits th....
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.... CoC issues a LOI to a successful Resolution Applicant stating that it has been selected as the successful Resolution Applicant and its Plan would be submitted to the Adjudicating Authority for its approval. The successful Resolution Applicant is typically required to accept the LOI unconditionally and submit a PBG. Sequentially, the issuance of an LOI is followed by its unconditional acceptance by the successful Resolution Applicant." "172. Based on the plain terms of the statute, the Adjudicating Authority lacks the authority to allow the withdrawal or modification of the Resolution Plan by a successful Resolution Applicant or to give effect to any such clauses in the Resolution Plan. Unlike Section 18(3)(b) of the erstwhile SICA which vested the Board for Industrial and Financial Reconstruction with the power to make modifications to a draft scheme for sick industrial companies, the Adjudicating Authority under Section 31(2) of the IBC can only examine the validity of the plan on the anvil of the grounds stipulated in Section 30(2) and either approve or reject the plan. The Adjudicating Authority cannot compel a CoC to negotiate further with a successful Resolution Appl....
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....plan deserves to be set aside on this ground alone. We have noticed above that the Adjudicating Authority has ample jurisdiction to interfere with the resolution plan which violates, does not comply with, any of the provisions of Section 30(2). The question to be answered is as to whether the resolution plan violates Section 30(2) on the ground that Operational Creditors including the employees except workmen have been allocated only an amount of Rs.15,000/- each. Resolution Professional in his Additional Affidavit dated 25.07.2022 has mentioned in tabular form the claim admitted of the employees. The claim of employees for 12 months as per Section 53(1)(c) has been mentioned as amount of Rs.499.1 crore which include Salary - Rs.466.8 crore, Provident Fund - Rs.6.7 crore, Leave Encashment - Rs.16.0 crore and Gratuity - Rs.9.6 crore. In Para 10 under the heading 'Treatment of employees of the Corporate Debtor under the Resolution Plan' following has been stated in Para 10.1: "10.1 I say that as regards the employees of the Corporate Debtor, their dues are referred to in Section 53(1)(c) of the Code. Since the amount allocated under the Resolution Plan payable towards the wo....
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....legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority." 113. This principle was again reiterated by the Hon'ble Supreme Court in "Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors." (Supra). In Para 70, the Hon'ble Supreme Court has held that minimum value that is required to be paid by the Operational Creditor is set up under Section 30(2)(b) apart from the minimum value nothing more is required. Para 70 is as follows: "70. The minimum value that is required to be paid to operational creditors under a resolution plan is set out under Section 30(2)(b) of the Code as being the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53. The Insolvency Committee constituted by the Government in 2018 was tasked with studying the major issues that arise in the working of the Code and to recommend changes, if any, required to be made to the Code. The Insolvency Committee Report, 2018 (hereinafter referred to as "The C....
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....eemed suitable. 18.4 It was stated to the Committee that liquidation value has been provided as a floor and in practice, many operational creditors may get payments above this value. The Committee appreciated the need to protect interests of operational creditors and particularly Micro, Small and Medium Enterprises ("MSMEs"). In this regard, the Committee observed that in practice most of the operational creditors that are critical to the business of the corporate debtor are paid out as part of the resolution plan as they have the power to choke the corporate debtor by cutting off supplies. Illustratively, in the case of Synergies-Dooray Automative Ltd. (Company Appeal No. 123/2017, NCLT Hyderabad, Date of decision - 02 August, 2017), the original resolution plan provided for payment to operational creditors above the liquidation value but contemplated that it would be made in a staggered manner after payment to financial creditors, easing the burden of the 30-day mandate provided under regulation 38 of the CIRP Regulations. However, the same was modified by the NCLT and operational creditors were required to be paid prior in time, due to the quantum of debt and nature of ....
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....Dimension Steel and Alloys & Ors.", where in Para 31 following observations have been made: "31. The Operational Creditors normally had claims pertaining to supply made to the Corporate Debtor, which amounts normally as compared to the Financial Creditors' claim are less. Operational Creditors consist of various type of industries including MSMEs, public sector organization and small entities. Altogether denying their claim or receiving ineligible amount in the Resolution Plan causes hardship and misery to the Operational Creditors. Even the statutory dues, which by virtue of law as it exists today are dealt in the same manner, resulting in no payment or negligible payment and some time even less than 1% of the claim. The Operational Creditors are not part of CoC like Financial Creditors and they have no control over the CIRP. It is the Financial Creditors, who control the entire process and take commercial decision regarding payment to the Financial Creditors, Operational Creditors and other creditors. Law gives complete freedom to the Committee of Creditors to take commercial decision and it is not obligatory that in the Resolution Plan, if the liquidation value of O....
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....eous Provisions Act 1952, as per the order dated 17.10.2018. It is further mentioned that interest under Section 7Q was also levied of Rs.12,85,92,763/-, which amount was paid by the establishment. The amount which was claimed by the Appellant was fully admitted by the Resolution Professional. List of Creditors mentions the admitted amount of the Appellant. The Appellant has filed his claim in Form B, which Form B is at page 102 to 104 of the Appeal. The Appellant's claim was not in the nature of workmen dues. The claim was also with regard to damages imposed under Section 14B of the 1952 Act. The Appellant was treated as Operational Creditor by the Resolution Professional, hence, the Appellant was allocated a fixed amount of Rs.15,000/- which was allocated to all Operational Creditors except the workmen. 118. Challenge to the Resolution Plan by the Appellant is on the ground that Section 11 of the 1952 Act requires priority over all other dues and further Section 36(4)(a)(iii) excludes provident fund dues from the liquidation estate of the Corporate Debtor. We have already dealt with provisions of Section 36(4)(a)(iii) in foregoing paras of this judgment. Now, we, need to look ....
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.... 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity. QUESTION - XII 120. The Department of State Tax has filed an appeal challenging the approval of resolution plan. The case of the Appellant is that the claim of the Department of State Tax was admitted by the Resolution Professional with a note "under disputes which are pending before various authorities and/or under appeals" and the liability of the Corporate Debtor is subject to the outcome of these Appeals. The claim for which proof was filed by the Appellant was total Rs.77,81,53,013/- out of which claim of Rs.56,49,40,491/- was admitted by Resolution Professional by rejecting the claim of interest and penalty in the List of Creditors as updated on 03.10.2020. The Appellant in this Appeal has claimed his entitlement to make full payment of the claim. Appellant also claimed that in view of the claim for GST they can be treated as Financial Creditor which issue has not been decided by the Hon'ble Supreme Court. It has been further pleaded that Appell....
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.... take note of Section 142A extracted below: 142A. Liability under Act to be first charge.- Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assesse or any other person under this Act, shall, save as otherwise provided in section 529A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993), and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2016 (31 of 2016) be the first charge on the property of the assesse or the person, as the case may be.." 123. Hon'ble Supreme Court considered the provisions of Section 142A of the Customs Act and similar provisions of I&B Code and ultimately has held that I&B Code clearly overrides the Customs Act. In para 40 of the judgment following has been held: "40. We may note that the IBC, being the more recent statute, clearly overrides the Customs Act. This is clearly made out by a reading of Section 142A of the Customs Act. The aforesaid provis....
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....lowing has been laid down: "55. In our considered view, the NCLAT clearly erred in its observation that Section 53 of the IBC over-rides Section 48 of the GVAT Act. Section 53 of the IBC begins with a non-obstante clause which reads :- "Not withstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority..........." 56. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of the IBC. Under Section 53(1)(b)(ii), the debts owed to a secured creditor, which would include the State under the GVAT Act, are to rank equally with other specified debts including debts on account of workman's dues for a period of 24 months preceding the liquidation commencement date. 57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definiti....
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....rores, as per the case of Resolution Professional also contains the payment towards provident fund dues. The payment of amount to the workmen regarding salary of 24 months as well as the provident fund, gratuity etc. were not paid in full. In view of provisions of Section 53(1)(b), we having held that payment of provident fund has to be in full, the workmen are entitled to receive unpaid provident fund dues in full minus the amount which they have already received under the Resolution Plan towards provident fund and gratuity dues. 130. Now coming to the employees of the Corporate Debtor, the liquidation value of the employees having been found "NIL", no amount has been paid to them under the Resolution Plan. We having held that employees are entitled to receive the full amount of provident fund till the insolvency commencement date. Thus, Successful Resolution Applicant is to make payment of amount of provident fund payable to the employees till the insolvency commencement date in full. We make it clear that any amount towards provident fund dues for workmen and employees, which has been deposited with the EPFO can be withdrawn by the workmen and employees and the amount deposit....
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....021, 771 of 2022 are partly allowed with following directions: (a) Successful Resolution Applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the Resolution Plan to the workmen. (b) The workmen are also entitled for payment of their gratuity dues as on insolvency commencement date, after adjusting any amount towards gratuity paid under the Resolution Plan. It is made clear that entitlement of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not been treated as termination of their services. (c) The employees are also entitled for the payment of their full provident fund, unpaid up to the date of insolvency commencement date. It is made clear that full payment of provident fund would be of that unpaid part of provident fund, which has not been deposited by the Corporate Debtor in the EPFO. (d) Employees shall also be entitled for the gratuity, which fell due up to insolvency commencement date. (e) The rest of the prayers of the workmen and employees are den....