TaxTMI 
TaxTMI 
2026 (7) TMI 246
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....r/ Jet Airways. JUDGMENT ASHOK BHUSHAN, J. Comp. App. (AT) (Ins.) No.419 - 420/2026 has been filed against the order dated 04.02.2026 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court - I ("adjudicating authority") in I.A. No.3426/MB/2025 & I.A. No.4627/MB/2025. Comp. App. (AT) (Ins.) No.440/2026 has been filed challenging the order dated 03.02.2026 passed by the adjudicating authority in I.A.4757/2025. Adjudicating Authority vide order dated 03.02.2026, disposed of the I.A.4757/2025, directing the liquidator to proceed with the distribution in accordance with the waterfall mechanism under Section 53 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as "IBC" or the "Code") while ensuring adequate safeguards to protect the interests of workmen and employee who are claiming priority under I.A.4426/2025 & I.A.4627/2025. Comp. App. (AT) (Ins.) No.551/2026 has been filed by Sanjeev Chadha and 351 workmen of the corporate debtor, Jet Airways challenging the order dated 04.02.2026 passed by the adjudicating authority in I.A.3426/2025, insofar as order directed the recovery certificate dated 16.05.2019 shall be dealt with in accordance ....
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....ards provident fund and gratuity in the resolution plan. The order dated 21.10.2022 was challenged by the SRA before the Hon'ble Supreme Court in Civil Appeal No.407/2023, which came to be dismissed by the Hon'ble Supreme Court on 30.01.2023. vii. After the approval of the resolution plan by the adjudicating authority, several applications came to be filed before the adjudicating authority by the SRA regarding fulfilment of conditions precedent under the resolution plan, there has been series of litigation between the SRA and the financial creditor which travelled up to this Tribunal and thereafter Hon'ble Supreme Court on several occasions. viii. Lastly, in Civil Appeal Nos.5023-5024/2024, in 'State Bank of India & Ors.' Vs. 'The Consortium of Mr. Murali Lal Jalan and Mr. Florian Fritsch & Anr.' decided on 07.11.2024, Hon'ble Supreme Court held that SRA has failed to implement the resolution plan. Hon'ble Supreme Court invoked its jurisdiction under Article 142 of the Constitution of India and directed the corporate debtor, Jet Airways to be taken in liquidation. NCLT Mumbai was directed to take steps for appointment of liquidator and all other necessary formalit....
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.... manner that neither prejudices pending claims nor paralyses the liquidation process. In this context, the Tribunal holds that the liquidation process cannot be brought to a standstill merely because issues of priority and exclusion are pending before it. The Liquidator should therefore proceed with distribution strictly in accordance with the waterfall mechanism under Section 53 of the Code, while ensuring adequate safeguards to protect the interests of workmen and employees who are claiming priority in IA 3426 of 2025 and IA 4627 of 2025 which are pending for orders. Accordingly, the liquidator is directed to distribute the proceeds of liquidation, unless there is a restraint on distribution of proceeds from Hon'ble NCLAT or Supreme Court on such distribution." xv. On 04.02.2025, adjudicating authority decided the I.A.3426/2025 & I.A.4627/2025. In paragraphs 20 & 21, following order was passed by the adjudicating authority: "20. In view of the above, we pass the following orders: a. the liquidator is liable to pay the provident fund and gratuity dues to the workmen and employees as are payable to them in terms of provisions of Employees' Provident F....
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.... in terms of Section 36(4)(a)(iii) of the IBC is not in accordance with the law and deserves to be set aside. It is submitted that exclusion under Section 36(4)(a)(iii) is a contingent upon the existence of the segregated provident fund and gratuity fund, which in the present case, admittedly did not exist. Thus, in absence of fund, the claims/dues of the workmen can only be satisfied in terms of waterfall mechanism under Section 53 of the IBC. Section 36 of the IBC deals entirely with inclusion or exclusion of assets of the corporate debtor as they exist on liquidation commencement date for formation of the liquidation estate for the purposes of distribution. The exclusion envisaged is of the assets that are already existing as on LCD and are belonging to third-party, but are in possession of the corporate debtor. The creation of an asset for the purposes of formation of the liquidation estate is not envisaged and a possession of asset must be seen as on liquidation commencement date only. Common threat across subclauses (i), (ii), (iv) & (v) of Section 36(4)(a) is clear that an asset or a fund which exist on the liquidation commencement date and which belonged to third-party stak....
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....) No. 111/7/HDB/2017], is clearly distinguishable and not applicable in the facts of the present case. 6. Learned counsel for the financial creditor submitted that other judgements relied by adjudicating authority in other cases of this Tribunal and Hon'ble Supreme Court are clearly distinguishable. The submission that appellant are estopped from raising the submissions that the workmen and employees are not entitled for provident fund and gratuity, since it has contended before the Supreme Court which decided the Civil Appeal on 07.11.2024 that SRA was obliged to pay due to the workman and employees. It is clarified that issue at the time of passing of the judgement by Hon'ble Supreme Court was of non-implementation of the resolution plan and SRA failed to comply with several condition precedents. 7. Learned counsel for the financial creditor also supported the impugned order insofar as it has rejected the prayer of the workmen refusing to exclude the period of 1656 days for computation of 24 months look back period under Section 53(1)(b)(i) of the IBC. It is submitted that IBC does not contemplate the alteration of the look back period or the liquidation commencement date f....
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....full provident fund and gratuity in absence of separately maintained fund has already been laid down by this Tribunal in several cases. The judgement of this Tribunal in 'Jet Aircraft Maintenance Engineers Welfare Association' (supra) (hereinafter referred to as "JMEVA") fully covers the issues which view has been consistently followed by this Tribunal in subsequent judgement as relied by the respondent. The SBI is estopped from raising the plea that workmen and employees are not entitled for full provident fund and gratuity in view of its own submission before the Hon'ble Supreme Court in its judgement dated 07.11.2024, that SRA failed to make the payment of provident fund and gratuity dues to the workmen and employees. SBI having relied on failure to pay provident fund and gratuity by SRA to workmen and employees and having obtained a liquidation order on said premises it is not open for the SBI to contend that workmen and employees are not entitled for provident fund and gratuity dues. It is submitted that judgement of this Tribunal holding that in the liquidation proceeding, the workmen and employees are entitled for full provident fund and gratuity has been affirmed by the Hon....
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....workmen are not praying for any change of the liquidation commencement date, which shall remain as 26.11.2024, whereas, for computing 24 months period backward to liquidation commencement date, the period beyond maximum 330 days need to be excluded. Period more than 330 days was only on account of various litigations, which period need to be excluded for giving a purposeful and meaningful interpretation of 24 months period as occurring in Section 53(1)(b) of the IBC. Workmen are the nerve centre of any company who must be given a priority which was opined by the Joint Parliamentary Committee Report. In event, the prayer of exclusion is rejected, the claim in the liquidation of workmen and employee shall become NIL, which is not in accord with the very purpose and object of the IBC/liquidation. When the same dues of workmen employees are admitted in CIRP process, making the same dues NIL on liquidation commencement date is neither reasonable nor in accordance with the scheme of the IBC. Adjudicating authority committed error in refusing the prayer of the workmen for excluding the period of 1656 days from the CIRP period. With respect to Rs.350 crore which has been appropriate by SBI....
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.... No.3426 of 2025 and IA No.4627 of 2025 filed by the workmen. The above two IAs were filed by the workmen of the Corporate Debtor after appointment of the liquidator of the Corporate Debtor by order dated 26.11.2024 passed by the Adjudicating Authority in consequence to the order of the Hon'ble Supreme Court dated 07.11.2024. IA No.3426 of 2025 was filed by one Manoj Kumar Das and other 295 workmen on 10.07.2025. In IA No.3426 of 2025, the Applicants, after giving details of sequence of the events including the order passed by this Tribunal dated 21.10.2022 directing Successful Resolution Applicant (SRA) to make payment to the workmen of the provident fund and gratuity, has made following prayers in the application:- "i. Take the present application on record and into consideration; and ii. Direct the exclusion of Applicants' statutory dues (Provident Fund and Gratuity) from the liquidation estate, in terms of Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016; and iii. Direct that the Recovery Certificate issued by the Deputy Labour Commissioner for salary dues (January-March 2019) be honoured and kept out of the liquidation estate; an....
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....sions of the code; c. the exclusion of time for determination of liquidation commencement date for the purpose of section 53(1)(b) cannot be allowed by this Tribunal in terms of its inherent powers; d. The forfeited amount of Rs. 350 crores has been distributed by SBI. It is clarified that the applicant had sought usage of said sum, hence, we refrain from adjudicating whether such appropriation was within the provisions of IBC. 21. In terms of above, IA 3426 of 2025 in CP (IB) No. 2205 of 2019 is partly allowed and IA 4627 of 2025 is allowed. Both the applications are disposed of accordingly." 16. As noted above, the State Bank of India on behalf of the Financial Creditor has filed Company Appeal (AT) (Insolvency) No.419-420 of 2026 challenging the order dated 04.02.2026 whereas Company Appeal (AT) (Insolvency) No.551 of 2026 has been filed by workmen challenging the order insofar as other prayers in IA No.3426 of 2025 were refused. 17. The principle contention raised by the Financial Creditor in challenging the order dated 04.02.2026 is that the direction for payment from provident fund, pension fund and gratuity fund can be issued to the liquidato....
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....resent appeal provides as follows:- "36. Liquidation estate. - (4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation: - (a) assets owned by a third party which are in possession of the corporate debtor, including - (i) assets held in trust for any third party; (ii) bailment contracts; (iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund; (iv) other contractual arrangements which do not stipulate transfer of title but only use of the assets; and (v) such other assets as may be notified by the Central Government in consultation with any financial sector regulator; (b) assets in security collateral held by financial services providers and are subject to netting and set-off in multi-lateral trading or clearing transactions; (c) personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter; (d) assets of any Indian or foreign subsidiary o....
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....the appropriate Government under any provision of this Act or under any of the conditions specified under section 17. shall, where the liability thereof has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), or under 5 [section 530 of the Companies Act, 1956 (1 of 1956)], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be. [Explanation.-In this sub-section and in section 17, "insurance fund" means any fund established by an employer under any scheme for providing benefits in the nature of life insurance to employees, whether linked to their deposits in provident fund or not, without payment by the employees of any separate contribution or premium in that behalf.] [(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer 8 [whether in respect of the employee's contribution (deducted from the wages of t....
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.... the following sums due from the company to its workmen, namely : (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company" 23. Section 529A provided for 'overriding preferential payments' which were required to be paid in priority to all other debts. Section 529A is as follows:- "529A. OVERRIDING PREFERENTIAL PAYMENTS-(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company - (a) workmen's dues ; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions." 24. Explanation (b) to Section 529 (3)(b) defines 'workmen's dues' in following words:- "529. APPLICATION OF INSOLVENCY RULES I....
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....ment towards provident fund, pension fund and gratuity. 28. The entitlement of gratuity and provident fund has been held to be statutory right of the workman and employee. The Hon'ble Supreme Court in "Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663" while dealing with gratuity held that payment of gratuity is not a charity but a statutory right provided in favour of the employee. In paragraphs 15 and 16 of the judgment, following was laid down:- "15. In Balbir Kaur v. Steel Authority of India Ltd. [(2000) 6 SCC 493 : 2000 SCC (L&S) 767] this Court opined: (SCC p. 502, para 14) "As regards the provisions of the Payment of Gratuity Act, 1972 (as amended from time to time) it is no longer in the realm of charity but a statutory right provided in favour of the employee." 16. Interpreting Section 4(1) of the Act, it was held: (SCC p. 503, para 15) "We shall come back to the deposit of the provident fund but as regards the gratuity amount, be it noted that there is a mandate of the statute that gratuity is to be paid to the employee on his retirement or to his dependants in the event of his early death - the introduction of the Fami....
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....hat are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some public purpose, is it thwarted by such artificial division of retirement pre and post a certain date? We need seek answer to these and incidental questions so as to render just justice between parties to this petition. 20. The antiquated notion of pension being a bounty a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : 1971 Supp SCR 634] wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the a....
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....ue from provident fund, pension fund and gratuity fund is contingent upon existence of such fund on the liquidation commencement date. The legislative scheme as reflected from various statutory provisions indicate that statutory right of the workmen to receive dues from provident fund, pension fund and gratuity fund are an accepted right and in the earlier statutory regime as reflected, in priority under the Companies Act, 2013, the said dues were given a priority in payment from all other debt. Can the submission be accepted that under the IBC, the right of workmen and priority to receive dues from provident fund, pension fund and gratuity fund has been given go by and it only depend on existence of provident fund, gratuity fund and pension fund on the liquidation commencement date. The purpose of excluding all sums due to the workmen from provident fund, gratuity fund, pension fund is clear and categorical that the said dues of the workmen has to be discharged without undertaking any distribution under Section 53A by the liquidator. We, thus, are not persuaded to accept the submission of the Counsel for the Financial Creditor that the entitlement of workmen to receive all dues fr....
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....ident fund till the date of initiation of CIRP and statutory obligation of the Corporate Debtor was liable to be discharged by the Successful Resolution Applicant. From the Affidavit of Resolution Professional it is clear that Resolution Professional in the claim which has been admitted of the workmen for 24 months, the provident fund and gratuity amount was also included. The workmen have received payments with regard to provident fund and gratuity in part under the Resolution Plan subject to the liquidation value of the workmen. We, thus, are satisfied that workmen are entitled for issuing appropriate direction to Successful Resolution Applicant to make payment of the workmen of the provident fund and gratuity dues upto the date of insolvency commencement date less the amount already received under the Resolution Plan towards provident fund and gratuity. The Corporate Debtor having not deposited the statutory dues with the EPFO, the said statutory liability has to be discharged by the Successful Resolution Applicant." 33. We also need to notice Audited Financial Statements of the Corporate Debtor as on 31.03.2019 which is brought on record as Annexure A-4 of the Company Appeal....
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....2019. The Corporate Debtor's financial statements were duly reflecting liabilities towards gratuity, provident fund and other employee benefits. The entitlement of workmen and employees to receive gratuity and provident fund is thus, clearly reflected from the financial statements. To accept the submission of the counsel for the Financial Creditor that since only on liquidation commencement date, no funds were in existence with the Corporate Debtor as the employees and workmen shall lose their entitlement to receive benefits from provident fund, pension fund and gratuity fund is to negate the rights of workmen and employees against the statutory scheme. Learned Counsel for the workmen is right in his submission that the expression used in Section 36(4)(a)(iii) that all sums due to any workmen or employee from provident fund, gratuity fund and pension fund are due centric and not asset centric. Thus, the mere fact that on the liquidation commencement date in designated fund sums is not available, the workmen, employees shall lose their rights to receive the payment is clearly contrary to the entire legislative scheme under the IBC. Learned Counsel for the workmen is also right in th....
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....Section 36(4) provides that the assets which shall not include in the liquidation estate. Section 36(4)(a) is as follows:- "36(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation:- (a) assets owned by a third party which are in possession of the corporate debtor, including- (i) assets held in trust for any third party; (ii) bailment contracts; (ii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;" 44. Section 36(4) contains an injunction "the following 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 ....
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....er, as most of the subscribers under NPS regulated by PFRDA are from Government sector and the NPS Life (Scheme for Economically Weaker Section), where the share of the contribution is from the Government funds also, higher priority should be given to the dues to pension fund investments to the bankrupt entities. The Committee after in depth examination are of the view that provident fund, pension fund and the gratuity fund provide the social safety net to the workmen and employees and hence need to be secured in the event of liquidation of a company or bankruptcy of partnership firm. The Committee, therefore, feel that all sums due to any workman 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 emplo....
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....n 36(4)(a)(iii). Reliance on said provision cannot be disregarded when right of the workmen and employees have to be considered in the liquidation proceeding. Thus, that distinction sought to be maintained by the Learned Counsel for the Financial Creditor does not commend us. The submission of the Appellant that judgment of this Tribunal dated 21.10.2022 is not applicable cannot be accepted. This Tribunal in the CIRP process of the Corporate Debtor itself having upheld the entitlement of the workmen/employees to receive full amount of gratuity fund, provident fund and pension fund which order has also been affirmed by the Hon'ble Supreme Court vide judgment dated 31.01.2023 in Civil Appeal No.407 of 2023, it is not open for the Financial Creditor to submit that there is no entitlement of workmen, employees to received full provident fund, pension fund and gratuity fund. 41. Learned Counsel for the workmen has also relied on judgment of this Tribunal in "State Bank of India vs. Moser Baer Karamchari Union & Anr- Company Appeal (AT) (Insolvency) No.396 of 2019" which was judgment delivered by this Tribunal in the liquidation proceeding of the Corporate Debtor- Moser Baer. In the a....
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....ound to interfere with the impugned order dated 19th March, 2019. The appeal is accordingly, dismissed. No costs." 43. The State Bank of India filed an appeal against the said judgment before the Hon'ble Supreme Court being Civil Appeal No.258 of 2020- "State Bank of India vs. Moser Baer Karamachari Union and Anr.- 2023 SCC OnLine SC 140" which Civil Appeal was dismissed by the Hon'ble Supreme Court by judgment and order dated 07.02.2023. 44. Another judgment which dealing with Section 36(4)(a)(iii) need to be noticed is judgment of NCLT Hyderabad Bench which came in Appeal before this Tribunal as well as before the Hon'ble Supreme Court. All three judgments are relevant for the present controversy. NCLT Hyderabad in CP IB) No.111/7/HDB/2017 had allowed the application filed by ex-employee of the Corporate Debtor seeking a direction to the liquidator to treat the gratuity dues of the applicant on the highest priority by not treating it as part of the liquidation estate. Paragraph 1 of the order of the NCLT noticed the facts which are as follows:- "1. The Present Application is filed by the ex-employees of the Corporate Debtor seeking for direction to the liq....
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....ve been issued. The order of Adjudicating Authority was set aside. It was useful to notice paragraphs 17 to 23 of the judgment which is as follows:- "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 distribution of assets, relating to workmen's dues is confined to a period of 24 months, preceding the liquidation commencement date. This question has 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 Sect....
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....ed. The Hon'ble Supreme Court relied judgment of the same date in Civil Appeal No.2520 of 2020 which was Appeal filed by the State Bank of India challenging the order of this Tribunal has dismissed the Appeal. The order of the Hon'ble Supreme Court dated 07.02.2023 is as follows:- "CIVIL APPEAL No. 2520 OF 2020 By order of even date passed in Civil Appeal No.258 of 2020, we have dismissed the appeal, thereby affirming the judgment and order dated 19th August, 2019 passed by the National Company Law Appellate Tribunal ("NCLAT" for short) in Company Appeal No.396 of 2019. The order impugned in the present appeal passed by the learned NCLAT is in ignorance of its earlier order dated 19th August, 2019 which is affirmed by us in Civil Appeal No.258 of 2020. In that view of the matter, this appeal deserves to be allowed. The impugned order passed by the learned NCLAT is quashed and set aside, and the order passed by the National Company Law Tribunal is restored." 48. The judgment of this Tribunal in "Savan Godiwala" (supra) taking the view that gratuity funds are not available, no direction could be issued to liquidator to make provision for gratuit....
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....itor has placed much reliance on judgment of the Hon'ble Supreme Court in "Sunil Kumar Jain v. Sundaresh Bhatt, (2022) 7 SCC 540". It is submitted by the Financial Creditor that in the above judgment the Hon'ble Supreme Court has held that a payment to workmen and employees is to be made only 'if any available'. Learned Counsel for the workmen in reference to the judgment of the Hon'ble Supreme Court in Sunil Kumar Jain's case arose in the context of claim of the employees and workmen regarding their salary for the period involving CIRP process. Learned Counsel for the workmen has referred to the judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.605 of 2019- "Sunil Kumar Jain & Ors. Vs Mr. Sundaresh Bhatt & Ors." where this Tribunal noticed the following fact in paragraph 1 of the judgment:- "This Appeal has been preferred by the Appellant-workmen against part of the order dated 25th April, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahemdabad, whereby, no relief has been granted to the Appellants with regard to their claim relating to salary, which they claimed for the period involving 'Corporate Insolvency Re....
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....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) IBC. Section 36(4)(iii) IBC 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) IBC 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) IBC 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 workmen/employees concerned 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) IBC, they are not to be used for recovery in the liquidation." 54. The above proposition laid down in the Hon'ble Supreme Court in "Sunil Kumar Jain v. Sundaresh Bhatt, (2022) 7 SCC 540" clearly support the submi....
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....e order passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (hereinafter referred to as "the adjudicating authority") dated 25-4-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931] not granting any relief to them with regard to their claim relating to salary, which they claimed for the period involving "corporate insolvency resolution process" (hereinafter referred to as "CIRP") and the prior period, original applicants - workers/employees have preferred the present appeal. 2. That the corporate debtor was a private sector ship building yard with its manufacturing activities at Dahej Yard and Surat Yard in Gujarat and having its corporate office at Mumbai. That prior to the initiation of CIRP, the corporate debtor had 562 workmen and 93 employees at Dahej; 291 workmen and 99 employees at Surat and 101 employees at its Mumbai Head Office. The appellants herein are the 272 employees and workmen employed at Mumbai Head Office and Dahej Yard of the corporate debtor. None of the 201 employees and workmen at Surat Yard are the appellants herein. 3. Vide its order dated 1-8-2017 [ICICI Bank Ltd. v. ABG Shipyard Ltd., 2017 SCC OnLine ....
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....adjudicating authority by order dated 25-4-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931], after deciding various other applications including the application of the appellants being Company Application No. 348 of 2017 passed an order of liquidation of the corporate debtor and appointed Respondent 1 herein as liquidator of the corporate debtor. While passing the order of liquidation, the adjudicating authority also disposed of Company Application No. 348 of 2017 in view of the order passed in Company Application No. 78 of 2018 by which the adjudicating authority earlier directed to deposit Rs. 2.75 crores towards the dues of the appellants which as such was subject to the final outcome of Company Application No. 348 of 2017. Therefore, as such, the adjudicating authority while disposing of Company Application No. 348 of 2017 did not grant the relief claimed by the appellants - 272 workers/employees working at Dahej Yard and Mumbai Head Office for their claim relating to salary for the period involving CIRP and the prior period. 4. Feeling aggrieved and dissatisfied with the order passed by the adjudicating authority, not granting the relief to the ap....
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....and pension fund. Thus, the use of expression 'if any, available' in paragraph 25.2 wherein the facts of the said case cannot be read to mean that the Hon'ble Supreme Court has laid down that unless the provident fund, pension fund and gratuity fund is available on the date of commencement of the liquidation only then the workmen are entitled to receive amount towards provident fund, pension fund and gratuity fund. We, thus, are of the view that the judgment of the Hon'ble Supreme Court cannot come to any aid of the Appellant in the facts of the present case. Further, it is not comprehendible that when this Tribunal in the CIRP of the Corporate Debtor has already held vide its judgment dated 21.10.2022 which has been affirmed by the Hon'ble Supreme Court that workmen and employees are entitled for full payment of gratuity fund, provident fund and pension fund, they shall lose their rights to receive gratuity fund, provident fund and pension fund only due to the fact that liquidation has been ordered and no segregated funds for the aforesaid amount is available with the Corporate Debtor. 58. In view of the above discussions, we answer Question Nos.(I), (II) and (III) in following....
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....onsequence of artificially reflecting 'zero' dues for workmen in the final stakeholder list-solely due to the passage of time caused by prolonged litigation beyond the statutory CIRP limit. It is further submitted that such an outcome would defeat the very object of Section 53(1)(b), which is designed to safeguard the interests of workmen and ensure equitable treatment during liquidation. A copy of the workmen creditors' list, which reflects the current position, is annexed herewith and marked as Annexure A2." 60. The above application filed by the workmen was replied by the liquidator as well as the State Bank of India, the Financial Creditor. Liquidator in his reply to the application has only noticed the prayer of the applicants without making any comment. In paragraph 8 of the reply, following was pleaded by the liquidator:- "8. It is the case of the Applicants that since 1,656 days were lost in prolonged litigation involving implementation of the resolution plan approved by this Hon'ble Tribunal on June 22, 2021, the same must be excluded for the limited purpose of computing the 24-month lookback period under Section 53(1 )(b) of the Code." 61. The State Bank of....
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....on of assets. - (1) Notwithstanding 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 and within such period and in such manner as may be specified, namely: - (b) the following debts which shall rank equally between and among the following: (i) workmen's dues for the period of twenty-four months preceding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;" 63. It is submitted that Section 12 of the IBC as initially has enacted provided that the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process. Section 12(2) also contemplated extension beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of sixty-six per cent. of the voting shares. 2nd proviso ....
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....ith debts owed to a secured creditor. The cap of period of 24 months regarding workmen dues has its own object and purpose. When a liquidation commences against the Corporate Debtor for distribution of liquidation estate, waterfall mechanism is provided in Section 53 and dues of the workmen 24 months preceding the liquidation commencement date has been given priority which rank equally debt owed to a secured creditor and rest of the debt of workmen is to fall under Section 53(1)(f). The application was filed by the workmen seeking exclusion of period 1656 days which was after expiry of 330 days from the commencement of the CIRP. As noted above, CIRP continued for 1976 days. Exclusion was sought since due to various litigations including filing of different application before the Adjudicating Authority and filing of appeal in this Tribunal and appeal in the Hon'ble Supreme Court, CIRP prolonged for 1976 days. The present is a case where liquidation commencement date is 26.11.2024 on which date Adjudicating Authority passed an order of liquidation and appointed liquidator in consequence of the order of the Hon'ble Supreme Court dated 07.11.2024 as noted above. Learned Counsel for the....
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....cess, and the corporate debtor otherwise being put into liquidation. We must not forget that the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. [ Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.] A reasonable and balanced construction of this statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. This is not to say that the NCLT and NCLAT will be tardy in decision-making. This is only to say that in the event of the NCLT, or the NCLAT, or this Court taking time to decide an application beyond the period of 270 days, the time taken in legal proceedings to decide the matter cannot possibly be excluded, as ....
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.... below: "530. Preferential payments.- (1) In a winding up, there shall be paid in priority to all other debts- (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before that date;" 2. And sub-section (8)(c) of Section 530 says: "530.(8)(c) the expression 'the relevant date' means (i) in the case of a company ordered to be wound-up compulsorily, the date of appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding-up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company." The appellant-company was ordered to be wound up by an order of court made on June 26, 1967. The liquidator after obtaining directions of the court invited the creditors of the company to prove their de....
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....tting a restriction or cordoning off the amount for which priority is claimable and not in respect of each and every debt on account of taxes, rates and cesses etc. which may be outstanding at that time and payable. And further that such priority is in respect only of debts those of which become due and payable because the liability to those is rooted, founded and belonging to that period of twelve months prior to the relevant date and none other; both the conditions existing." 68. There can be no dispute to the proposition as laid down by the Hon'ble Supreme Court in the above case when statute i.e. Section 530(1) which came for consideration. Liability for payment for period of 12 months next before the relevant days, the said priority has to confined to the liability occurring during the said period and the Corporate Debtor cannot be saddled with any liability which was beyond 12 months period as contemplated in Section 531(a) of the Companies Act. The present is not a case where workmen are claiming any priority their workmen dues beyond 24 months as provided in Section 53(1)(b) of the IBC. The claim is that for computing the 24 months period of the dues of the workmen, the ....
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.... of inherent powers of the sub-ordinate courts was explained by Hon'ble Supreme Court in case of GLAS Trust Company LLC v. BYJU Raveendran and Ors., (2024) ibc:law.in 275 SC. wherein it was held that: "70. When a procedure has been prescribed for a particular purpose exhaustively, no power shall be exercised otherwise than in the manner prescribed by the said provisions. In such cases, the court must be circumspect in invoking its 'inherent powers' to deviate from the prescribed procedure. If such deviation is made, the court must justify why this was necessmy to "prevent the abuse of the process of the Court". 71. The need to be circumspect while invoking "inherent powers", when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. vs. Educomp Solutions Ltd. (Co C), 49 a two-judge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows: "Any claim seeking an exercise of the adjudicating authority's residuary powers under Section 60(5)(c) IBC, NCLT's inherent powers under Rule 11 of the NCLT Rules or even t....
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....v) as made in the application IA No.3426 of 2025 deserves to be allowed. We accordingly direct exclusion of 1656 days from the CIRP period. 24 months before liquidation commencement dated need to be computed accordingly. Liquidator to compute the workmen dues falling within 24 months period prior to liquidation commencement dated i.e. prior to 26.11.2024. Liquidator to take all consequential action. We answer Question No.(IV) in following words:- "Prayer made by the workmen in IA No.3426 of 2025 to exclude the period of 1656 days (time spent in litigation) need to be excluded from the CIRP period and the Adjudicating Authority committed error in not accepting the above prayer." Question No.(V) 72. One of the prayers made in the IA No.3426 of 2025 i.e. prayer (iii) was to the following effect:- "iii. Direct that the Recovery Certificate issued by the Deputy Labour Commissioner for salary dues (January-March 2019) be honoured and kept out of the liquidation estate;" 73. Prayer of the workmen was that Recovery Certificate issued by the Deputy Labour Commissioner dated 16.05.2019 be honoured and kept out of the liquidation estate. According to own case of the workm....
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....51 of 2026, workmen are entitled only for the relief (iv) in the IA No.3426 of 2025. Adjudicating Authority has not committed error in refusing prayer (iii) in IA No.3426 of 2025. Company Appeal (AT) (Insolvency) No.551 of 2026 thus deserves to be partly allowed only to the extent as indicated above. 76. Company Appeal (AT) (Insolvency) No.440 of 2026 had been filed by the workmen challenging the order dated 03.02.2026 passed in IA No.4757 of 2025 filed by the Financial Creditor by which order Adjudicating Authority directed liquidator to proceed with the distribution strictly under waterfall mechanism under Section 53. In paragraph 17 of the judgment, following has been directed:- "17. The interests of workmen, employees, and financial creditors must be balanced in a manner that neither prejudices pending claims nor paralyses the liquidation process. In this context, the Tribunal holds that the liquidation process cannot be brought to a standstill merely because issues of priority and exclusion are pending before it. The Liquidator should therefore proceed with distribution strictly in accordance with the waterfall mechanism under Section 53 of the Code, while ensuring....