2025 (5) TMI 165 - AT - IBC

Direction to liquidator to deposit an amount of Rs.50, 000/- from his own pocket for violating the orders regarding payment of employees salaries during liquidation proceedings - HELD THAT - When the Court had issued direction to the Liquidator to release payment to the employees by 04.10.2024 and thereafter again passed order on 29.10.2024 it was obligation of the Liquidator to make payment. The Liquidator is in possession of all relevant documents which reflect payments made by the Resolution Professional. The Adjudicating Authority has not committed any error in issuing direction to the Liquidator to deposit an amount of Rs.50, 000/-. The mere fact that the Appellant has brought the order in the notice of the Stakeholders Consultation Committee cannot absolve the obligation on part of the Liquidator of complying with the orders of the Court. Even if bank details of all employees were not received by the Liquidator at least details of 34 employees were submitted to the Liquidator and the Liquidator could have started making payment for at least those employees to show his bonafide - Thus no grounds have been made out to interfere with the order passed by the Adjudicating Authority. Conclusion - When the Court had issued direction to the Liquidator to release payment to the employees by 04.10.2024 and thereafter again passed order on 29.10.2024 it was obligation of the Liquidator to make payment. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 7 days in filing the appeal is liable to be condoned on grounds of bona fide circumstances and procedural challenges.

- Whether the Adjudicating Authority was justified in directing the Liquidator to deposit Rs. 50,000/- from his own pocket for non-compliance with the orders regarding payment of employees' salaries during liquidation proceedings.

- Whether the Liquidator fulfilled his obligation to make payments to employees as per the directions of the Adjudicating Authority, considering the correspondence and documents exchanged between the Liquidator and employees' representatives.

- Whether the Liquidator's act of informing the Stakeholders Consultation Committee about the order absolves him from the obligation of complying with the Court's directions.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

The legal framework governing condonation of delay requires the appellant to demonstrate sufficient cause for the delay, which is neither willful nor intentional but due to circumstances beyond control. The application pleaded that the delay arose from the time taken to review the order after receipt, extensive consultations to determine the appropriate course, and procedural challenges during the Christmas holiday season impacting administrative functions.

The Tribunal observed that the reasons provided constituted sufficient cause. The delay was not deliberate but circumstantial, involving bona fide efforts to finalize the appeal. The Tribunal's reasoning aligns with established principles that delay caused by genuine difficulties and procedural impediments, especially during holiday periods, can be condoned in the interest of justice and equity. Consequently, the Tribunal condoned the 7-day delay, allowing the appeal to proceed.

Justification of Adjudicating Authority's Direction to Liquidator to Deposit Rs. 50,000/-

The core legal principle is that the Liquidator, once appointed, is under a statutory obligation to comply with directions of the Adjudicating Authority, particularly regarding payment of employees' dues. The Adjudicating Authority had passed multiple orders directing the Liquidator to pay pending salaries by specified dates. The Liquidator's failure to comply led to the impugned order directing a personal deposit of Rs. 50,000/- as penalty for violation.

The Tribunal examined the chronology: employees were paid till December 2023 by the Resolution Professional; liquidation commenced on 01.05.2024; Liquidator appointed on 10.05.2024; orders directing payment issued on 23.09.2024 and 29.10.2024; and the impugned order on 21.11.2024. The Liquidator contended non-receipt of all salary payment details and late receipt of bank statements on the date of hearing.

However, the Tribunal noted that details of 34 employees and bank statements were indeed provided to the Liquidator, and thus, he was in possession of sufficient information to initiate payments. The Tribunal emphasized that the Liquidator's obligation to comply with Court orders is independent of procedural delays in receiving complete data. The reasoning reflects the principle that possession of relevant documents triggers the duty to act promptly to fulfill statutory obligations.

Assessment of Liquidator's Compliance and Correspondence with Stakeholders Consultation Committee

The Liquidator argued that all issues were brought before the Stakeholders Consultation Committee, evidenced by an email dated 25.09.2024, implying that this sufficed as compliance or at least demonstrated bona fide efforts.

The Tribunal rejected this contention, holding that mere communication to the Committee does not absolve the Liquidator from direct compliance with the Adjudicating Authority's orders. The statutory duty to pay employees' salaries as per Court directions cannot be delegated or deferred by internal consultations. The Tribunal underscored that even partial payment to the 34 employees, whose details were available, should have been undertaken to exhibit bona fide compliance.

This analysis underscores the legal principle that internal stakeholder consultations do not substitute for compliance with judicial directions, especially when employees' rights are involved.

Conclusion on the Appeal

The Tribunal concluded that the Adjudicating Authority did not err in directing the Liquidator to deposit Rs. 50,000/- as penalty for non-compliance. The Liquidator's failure to act despite having requisite information and Court orders warranted the penalty. The appeal was dismissed accordingly.

3. SIGNIFICANT HOLDINGS

"We find sufficient cause to condone the delay. 7 days' delay in filing the appeal is condoned."

"When the Court had issued direction to the Liquidator to release payment to the employees by 04.10.2024 and thereafter, again passed order on 29.10.2024, it was obligation of the Liquidator to make payment."

"The Liquidator is in possession of all relevant documents which reflect payments made by the Resolution Professional. We, thus, are of the view that the Adjudicating Authority has not committed any error in issuing direction to the Liquidator to deposit an amount of Rs.50,000/-."

"The mere fact that the Appellant has brought the order in the notice of the Stakeholders Consultation Committee, cannot absolve the obligation on part of the Liquidator of complying with the orders of the Court."

"Even if, bank details of all employees were not received by the Liquidator, at least details of 34 employees were submitted to the Liquidator and the Liquidator could have started making payment for at least those employees to show his bonafide."

Core principles established include the strict enforcement of the Liquidator's duty to comply with Court orders regarding employee payments during liquidation, the non-derogable nature of such obligations despite procedural or administrative challenges, and the limited scope of internal stakeholder consultations in discharging judicial mandates.

Final determinations: The delay in filing the appeal was condoned; the penalty imposed on the Liquidator was justified; the appeal was dismissed for lack of merit.

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