TaxTMI 
TaxTMI 
2023 (3) TMI 18
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....I.A. Nos.147 & 257/2021, 78/2021 & I.A. Nos.148 & 258/2021, 79/2021 & I.A. No.270/2021, 80/2021 & I.A. Nos.149 & 269/2021, 81/2021 & I.A. No.261/2021, 82/2021 & I.A. No.262/2021, 83/2021 & I.A. No.244/2021, 84/2021 & I.A. Nos.150 & 271/2021, 85/2021 & I.A. Nos.151 & 263/2021 with 86/2021 & I.A. Nos.152 & 259/2021. [ Justice M. Venugopal ] Member ( Judicial ) And [ Ms. Shreesha Merla ] Member ( Technical ) For the Appellant : Mr. K.R. Jinan, Advocate & Mr. Abhilash Nediyalil Abraham, PCS. For the Respondents Nos. 1 & 3 : Mr. P.V. Dinesh, Advocate & Resolution Professional Mr. P.V. Vinod, Advocate For the Respondent No. 4 : Mr. P.H. Arvindh Pandian, Successful Resolution Senior Advocate Applicant For Mr. Shivshankar R. Panicker & Ms. Sirshti Thukral, Advocates. JUDGMENT ( Virtual Mode ) [Per; Ms. Shreesha Merla, Member (Technical)]: 1. Challenge in these 'Appeals' is to the `Impugned Order' dated 29.01.2021 in IA(IBC)/21/KOB/2021 in TIBA/03/KOB/2019, passed by the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench, Kerala), by which 'Order', the 'Application' filed by the Resolution Professional ('RP') seeking approval of the 'Resolution Plan....
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....d herein above shall be effective from the date of this Order. viii. The Applicant and the Monitoring Committee shall supervise the implementation of the 'Resolution Plan' and the Applicant shall file status of its implementation before this Tribunal. ix. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. Liberty is hereby granted for moving any Miscellaneous Application, if required, in connection with implementation of this 'Resolution Plan'. x. The Applicant shall forthwith send a copy of this Order to the CoC and the Resolution Applicant for necessary compliance." 2. Since all these 'Appeals' challenged the 'Resolution Plan' whereby and whereunder 35.13% of their 'Provident Fund' and 'Gratuity Claims' were admitted, they are being disposed of by way of this 'Common Order'. 3. Succinctly put, the facts in brief are that 'HNL' is a wholly owned subsidiary of 'Hindustan Paper Corporation Limited' ('HPCL'), a 'Public Sector Undertaking' governed by the 'Ministry of Heavy Industries and Heavy Public Enterprises', 'Department of Heavy Industries', 'Government of India'. 'HNL' was established pursuant to an ....
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....ing to the gratuity on Employees/Workman cannot be made available to the Creditors and is not liable to attachment under any decree or order of any Court as per Section 10 of the EPF Act, 1952. * Learned Counsel placed reliance on a 'Judgement' of this Tribunal in 'State Bank of India' Vs. 'Moser Baer Karamchari Union & Anr.' Comp. App. (AT) (Ins.) No. 369/2019, by which order, this Tribunal affirmed the findings of the 'Adjudicating Authority' in the Liquidation Proceedings and held that 'claim of 'Provident Fund', 'Gratuity Fund' and 'Pension Fund' is exempted from the waterfall mechanism envisaged under Section 53 of the Code and directed to pay the dues preferentially as these do not constitute a part of liquidation estate'. * Learned Counsel for the Appellant placed reliance on 'Regional Provident Fund Commission -I, Ahm.' Vs. 'Ramachandran D. Choudhary' Comp. App. (AT) (Ins.) No. 1001/2019, by which Order, this Tribunal had rejected the contention of the 'Resolution Professional' and the 'Resolution Applicant' observing that "as no provisions of Employees' Provident Funds and Miscellaneous Provision Act, 1952, is in conflict with any of the provisions of the....
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....ction 29 and Regulation 36 of CIRP. * It is submitted that Form 'H' is not annexed with the 'Resolution Plan' in contravention of the provisions under Regulation 39(4), 38(1A) and (1B) of CIRP Regulations. The statement as to how the ''Resolution Plan'' dealt with the interests of workmen and employees other than the financial proposals set forth in Chapter VIII is absent in the approved plan. The rejection of the claim unilaterally by the 'RP' is in violation of Section 18 read with Section 25(e) of the Code and Regulations 13 and 14 of the CIRP Regulations, 2016. The rejection of part of the claim has not been communicated to the employees and therefore non-filing of an Application under Section 60(5) is not fatal. * It is submitted that the 'CoC' had failed to maximize the value of the distressed assets of the 'Corporate Debtor' and failed to protect the employment of existing employees. It is submitted that the said valuation of the property is undervalued and is detrimental to all the stakeholders especially workmen and employees. The 'Resolution Plan' is not interested in resuming the Company but only in utilizing the land for the business purpose. ....
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....43-2944/2020. * It is submitted that the RP has admitted the entire gratuity and PF of the Applicants and has not committed any material irregularity. It is contended that the RP has admitted the full gratuity of Rs. 10 Lakhs and interest of Rs. 1.99.452/- in respect of Appellant-C.G. Vijaya Lakshmi, till the date of commencement of the CIRP. All the claims raised by the PF Authority on behalf of Employees were fully admitted and since the employees have also raised the same claim, the claims of PF Authority were only admitted in order to avoid duplication. RP has also given an undertaking before the 'Adjudicating Authority' that the entire gratuity and interest on gratuity of all employees is admitted till the date of commencement of CIRP, prior to approval of the plan. * Under Section 31(1) of the Code, once the 'Resolution Plan' is approved, it is binding on all the stakeholders including the employees and the same has been reiterated by the Hon'ble Supreme Court in several judgements namely 'Ghanashyam Mishra and Sons Private Limited' Vs. 'Edelweiss Asset Reconstruction Company Limited' 2021 SCC OnLine SC 313 and in the matter of 'Essar Steel India Limited' Vs....
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....s of the subsidiary do not form part of the liquidation estate of HPCL under Section 36(4) (d) of the Code. Hence, after commencement of CIRP of HNL, the State Proposal had become infructuous and as such, the Government of Kerala through KINFRA has participated in the Resolution Process of HNL and submitted the 'Resolution Plan' therefore any proposal made by Kerala prior to CIRP of HNL with the Liquidator of HPCL has no relevance with respect to the CIRP of the CD. 6. Submissions of Learned Counsel on behalf of R-3:- * It is reiterated by Learned Counsel that the 'Resolution Plan' is approved in accordance with law and for the sake of brevity submissions which have been made on behalf of RP and have been repeated for and on behalf of COC, is not being reproduced here. 7. Submissions of Learned Sr. Counsel -Mr. P.H. Arvindh Pandian appearing on behalf of R-4 (SRA): * It is submitted by Learned Sr. Counsel that the 'Resolution Plan' was approved after proper application of mind by the 'Adjudicating Authority' and that it was in compliance with all the legal provisions; that the decision of Labour Court which was granted in favour of the ''Appellants'' was dul....
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....quidation commencement date. 21. While applying Section 53 of the 'I&B Code', Section 326 of the Companies Act, 2013 is relevant for the limited purpose of understanding 'workmen's dues" which can be more than provident fund, pension fund and the gratuity fund kept aside and protected under Section 36(4) (iii). 22. On the other hand, the workmen's dues as mentioned in Section 326(1) (a) is not confined to a period like twenty-four months preceding the liquidation commencement date and, therefore, the Appellant for the purpose of determining the workmen's dues as mentioned in Section 53(1) (b), cannot derive any advantage of Explanation (iv) of Section 326 of the Companies Act, 2013. 23. This apart, as the provisions of the 'I&B Code' have overriding effect in case of consistency in any other law for the time being enforced, we hold that Section 53(1) (b) read with Section 36(4) will have overriding effect on Section 326(1) (a), including the Explanation (iv) mentioned below Section 326 of the Companies Act, 2013. 24. Once the liquidation estate/ assets of the 'Corporate Debtor' under Section 36(1) read with Section 36 (3), do not include all sum ....
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....s 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 entitlement of Gratuity by the employees of the 'Corporate Debtor'. Payment of Gratuity to employees 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 v. Moser Baer Karamchari Union, 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 distribut....
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....pal objects of I&B Code is, providing for revival of the Corporate Debtor and to make it a going concern. I&B Code is a complete Code in itself. Upon admission of petition under Section 7, there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The 'Resolution Plan's undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure, that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the Corporate Debtor is revived and is made an ongoing concern. After CoC approves the plan, the 'Adjudicating Authority' is required to arrive at a subjective satisfaction, that the plan conforms to the requirements as are provided in subsection (2) of Section 30 of the I&B Code. Only thereafter, the 'Adjudicating Authori....
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....App. (AT) (Ins.) No.752/2021, stating that in that case the 'fund' was available with the Corporate Debtor. It is argued that, subsequent to the 'Jet Aircarft' (Supra) is a two Judge Bench Judgement of 'Assam Tea Employees Provident Fund Organization, through an Authorized Representative' Vs. 'Mr. Madhur Agarwal & Anr.' Comp. App. (AT) (Ins.) No.262/2022, which was upheld in Civil Appeal 9383 of 2022 by the Hon'ble Apex Court, but it is contended by the Learned Sr. Counsel that no point of law was discussed on 'merits' in the 'dismissal Order' and therefore, the question of the availability of 'fund' was not adjudicated even in the Assam Tea Employees Provident Fund Organization' (Supra). * The 'Resolution Plan' already includes provisions for payment of Provident Fund and Gratuity Fund of the employees and the Learned Sr. Counsel has drawn our attention to the internal pages of the 'Resolution Plan' which deals with this issue. * It is vehemently denied that the SRA is not interested in the Company but is merely forming the Board for the purpose of maintaining a rubber industry. It is argued that the allegations made by the 'Appellants' with respect to the conduc....
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....reditor Names Amount of Claim Submitted Amount admitted a per Resolution Professional Amount of Estimated claim Total amount proposed to pay off Percentage of Payment to Amount admitted Operational Creditors - PF Claims 3,046.32 3,046.32 3,046.32 1,070.05 35.13% Operational Creditors- Workmen Gratuity 2961.46 2961.46 2961.46 2961.46 35.13% Operational Creditors- Employees Gratuity 1410.75 1410.75 1410.75 1410.75 35.13% 11. It is submitted by the RP that Legislature has not framed any such provision for payment of such dues in the 'Code'. 12. The issue in this matter is regarding entitlement to payment of 'Provident Fund', 'Gratuity' and other retirement benefits in full. The submission is supported by provisions of Section 36 Sub-section (4) of the Code. Section 36 deals with 'Liquidation Estate'. Section 36(1) reads as follows: "36. Liquidation Estate. - (1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-sectio....
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.... scheme came into existence prior to the two beneficial statutes and Parliament when enacting these legislations must have clearly intended extra benefits being conferred on employees. Such a consequence will follow only if over and above the normal pension, the benefits of provident fund and gratuity are enjoyed. On the other hand, if consequent on the receipt of these benefits there is a proportionate reduction in the pension, there is no real benefit to the employee because the Management takes away by the left hand what it seems to confer by the right, making the legislation itself left-handed. To hold that on receipt of gratuity and provident fund the pension of the employee may be reduced pro tanto is to frustrate the supplementary character of the benefits. Indeed, that is why by Sections 12 and 14 overriding effect is imparted and reduction in the retrial benefits on account of provident fund and gratuity derived by the employee is frowned upon. We, accordingly, hold that it is not open to the second respondent to deduct from the full pension any sum based upon Regulation 16 read with Regulation 13. If Regulation 16 which now has acquired statutory flavour, having been adap....
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....uthority' holding that no gratuity fund was created. Another judgment in "Regional Provident Fund Commissioner, Employees Provident Fund Organization vs. Vandana Garg" (Supra) delivered by two member bench does not refer to any of the earlier three member bench judgments and has relied on "Sawan Godiwala" judgment. We find ourselves bound to follow the three member bench judgment in "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd." where direction was issued to the Successful Resolution Applicant to release full provident fund and interest thereof in terms the Employees' Provident Funds and Miscellaneous Provision Act, 1952, which judgment has also received approval by the Hon'ble Supreme Court. 64. The Hon'ble Supreme Court in "Sunil Kumar Jain vs Sundaresh Bhatt, Civil Appeal No. 5910 of 2019" decided on 19th April, 2022, had occasion to consider a case where an appeal by workmen/employees of M/s ABG Shipyard Limited Mumbai was dismissed by this Tribunal. The facts of the above case need to be noticed in some details. The 'Adjudicating Authority' admitted an application under Section 7 on 01.08.2017 against the Corporate Debtor. An order of liq....
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....ate 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 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 during the CIRP and that the concerned workmen/ employees of the Corporate debtor actually worked during the CIRP and in such an eventuality, the wages/salaries of those workmen/ employees who actually worked 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) of the IB Code; ii) considering Section 36(4) of the IB code and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be....
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....led for provident fund, gratuity fund and pension fund if not available with the Liquidator." 20. In the aforenoted Judgement, the following conclusion has been arrived at: "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." 21. This conclusion has been upheld by the Hon'ble Apex Court in Civil Appeal No. 407 of 2023 dated 30.01.2023. 22. Having regard to the ratio laid down by this Tribunal in 'Jet Aricraft' (Supra) and the Order having been upheld by the Hon'ble Supreme Court in Civil Appeal No. 407 of 2023 ....
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....t in "Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others, (2009) 10 SCC 123". The Hon'ble Supreme Court dealing with Section 11 of 1952 Act laid down following in Para 67: "67. 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....
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.... (2022) 7 SCC 540, and the Judgement of this Tribunal in 'Jet Aircraft Maintenance Engineers Welfare Association' which was upheld by the Hon'ble Supreme Court in Civil Appeal No. 407 of 2023 dated 30.01.2023 and the ratio laid down by this Tribunal in 'Assam Tea' (Supra) which has also been upheld by the Hon'ble Apex Court in Civil Appeal No. 9383 of 2022. 25. Further, it is the case of the Appellant that a 'trust fund' was formed under HNL Company and that on 01.01.2019 production was stopped and CIRP was initiated against the Company 11 months later, on 28.11.2019. It has also been categorically observed by the Hon'ble Apex Court in 'Sundresh Bhatt' that the wages/salaries of the Workmen/Employees of the Corporate Debtor for the period during CIRP can be included in the CIRP Cost provided it is established and proved that the IRP/RP managed the operations of the Corporate Debtor as a going concern during the CIRP and that the concerned workmen/employees actually worked during the CIRP and in such a situation, the wages/salaries of those workmen/employees who actually worked during the CIRP period (when it was managed as a going concern), shall be paid and treated as part of t....