TMI Blog2023 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The Adjudicating Authority has ample jurisdiction only to interfere with the Resolution Plan in the event that the Plan violates, or does not adhere to any of the provisions of Section 30(2) of the Code. It is categorically mentioned by the Resolution Professional that the Secured Financial Creditors and workmen were treated equally under the Plan with the allocation of 35.13 % of the admitted claim amounts and therefore the claims of workmen were fully considered. Having regard to the ratio of the Judgement in Jet Aircraft Maintenance Engineers Welfare Association [ 2022 (11) TMI 332 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI ] of this Tribunal, upheld by the Hon ble Apex Court, this Tribunal is of the earnest view that PF and Gratuity is to be paid in full as per the provisions of EPF and NP Act, 1952 and payment of Gratuity Act, 1972. Since admittedly the amounts paid are only 35.13% having treated them as Secured Creditors, it is opined that indeed there was a violation of the provisions of Section 30(2) of the Code, with respect to the payment of PF and Gratuity only. Undervaluation - scope and performance of SRA in taking over the unit are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Resolution Applicant M/s KINFRA annexed to the Application is hereby approved except the Reliefs and concessions sought under Chapter XIII. The Resolution Application attached with this order shall become effective from this date and shall form part of this order. lt shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force is due, guarantors and other stakeholders involved in the Resolution Plan . ii. The approval of the Resolution Plan shall not be construed as waiver of any statutory obligations of the Corporate Debtor and shall be dealt by the appropriate Authorities in accordance with law. Any waiver sought in the Resolution Plan , shall be subject to approval by the Authorities concerned. iii. The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC), concerned for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so granted a lease of 3035.15 acres of land to HNL for captive plantation for the requirement of raw material for the project. When the plant became operational, as on 01.02.2018, the man power of HNL was 442 permanent employees, 508 Contractual, 27 attendant trainees, 32 tenure employees and 11 contractual appointments respectively. Due to other factors, HNL suffered cash loss since 2014 and was unable to repay debts. RBL Bank Limited filed an Application under Section 7 of the Code which was admitted by the Tribunal vide Order dated 28.11.2019 in TIBA/3/KOB/2019. The CoC in its meeting held on 27.02.2020 appointed the Applicant -Mr. Kumar Rajan as the RP, which was approved by the Adjudicating Authority vide Order dated 10.03.2020. On 04.12.2019, the IRP had made public announcement and the Committee of Creditors was reconstituted based on the claims received. 4. Submissions of Learned Counsel- Mr. K.R. Jinan, Advocate appearing on behalf of Appellants :- It is submitted that the CoC in their meeting held on 24.12.2020, after due deliberation, approved the Resolution Plan submitted by the Resolution Applicant with 92.72 % voting share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n applicant to release the entire provident funds and interest, penal damages as provided u/s/7Q and 14B of EPF and MP Act, 1952, immediately It is submitted that the Provident Fund , Gratuity Fund and the Interest is to be allocated to the Appellants in full without any deduction. In the case of Anil Kumar N and 33 Ors. , the Appellant was paid a total of Rs. 3,08,64,360/- and in the case of Raju M P 9 Ors. , the Appellant was paid a total of Rs. 80,35,430/- and it is submitted by Learned Counsel Mr. K R Jinan that it is not known whether these amounts included partial claims of Gratuity Fund , Pension Fund and interest and the Appellants are not informed about the break up. Section 53(1)(c) specified wages and unpaid dues owed to the employees other than workman for the period of 12 months preceding liquidation commencement date, these dues are to be allocated at par with the percentage of allocation of funds to the secured creditors. In the case in hand, the Secured Financial Creditors were allocated 45% of the total principal loan amount. On the other hand, the workmen wages, up to 24 months and employees wages upto 12 months had been allocated at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of Rs. 617.3439 Crores out of which the RP had admitted the claim of Rs. 518.5540 Crores. Pursuant to inviting Expression of Interest (EOI), the RP had received two Resolution Plans , one from KINFRA and another from SUN Paper Mills Limited ( SUN ) proposing amounts of Rs.133.29Crs./- and Rs.73.87Crs./-, respectively. Thereafter KINFRA had increased the amount to Rs.145.60Crs./- and SUN to Rs.90.77Crs./- and the Plan submitted by KINFRA was approved by the CoC on 24.12.2020 with 92.72% voting share. The plan also proposed to infuse Rs. 55 Crore towards capital addition for repair and maintenance and further 70.89 Crore for working capital requirement after restart of the operation. The total investment estimated by KINFRA was Rs. 271.50 Crores. It is submitted that the Resolution Plan is in accordance with law and there is no non-compliance of any of the provisions of the Code. The PF Dues and Gratuity Claims of all employees were also paid at 35.13 % of the admitted dues at par with Secured Financial Creditors and workman. Other claims of employees, government dues, suppliers and unsecured creditors were provided at 16.31 % of the admitted claim. It is submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the Corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the Corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, the NCLAT judgment must also be set aside on this count. 86 .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 sub-section (2) of Section 30 of the I B Code. Only thereafter, the Adjudicating Authority can grant its approval to the plan. It is at this stage, that the plan becomes binding on Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan . The legislative intent behind this is, to freeze all the claims so that the resolution app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of eligible applicants before the commencement of CIRP that both the Financial Creditors and Operational Creditors are treated equally and have been provided 35.12% of their respective outstanding claims; that the Appellant had at various stages raised a recurring argument that the valuation of the CD s assets was not done correctly by the RP in as much as the Liquidation Value of the company ought to have been 622 crores instead of 162 crores, which is incorrect. Learned Sr. Counsel submitted that the land allotted by the Appellant to be owned by HNL is in fact, not owned by HNL which has no title or right over the subject land. Further the employees/workmen of a company have no vested right in the property and gratuity fund does not form part of the Liquidation Estate . Learned Sr. Counsel placed reliance on the Judgement of this Tribunal in Savan Godiwala Vs. Apalla Siva Kumar 2020 SCC OnLine NCLAT 191 , in which the Tribunal discussed and quoted in detail the Judgement of State Bank of India Vs. Moser Baer Karamchari Union Anr 2019 SCC OnLine NCLAT 447, and observed as follows: 16. In terms of sub-section (4) (a) (iii) of Section 36, as all sums d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of distribution of assets under Section 53, we find no ground to interfere with the impugned order dated 19th March, 2019. Thus it is the settled position of law, that the provident fund, the pension fund and the gratuity fund, do not come within the purview of liquidation estate for the purpose of distribution of assets under Section 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 IB 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cannot avoid the liability to pay Gratuity to the employees, on the ground, that Corporate Debtor did not maintain separate funds, even if, there is no fund maintained, the Liquidator has to provide sufficient provision for payment of Gratuity to the Applicants according to their eligibility . (Emphasis Supplied) Keeping in view the aforenoted ratio, Learned Sr. Counsel Mr. Pandian vehemently argued that even in this case there is no provision of fund and that as PF and Gratuity do not form part of the Liquidation Estate , there arises no situation to interfere with the decision of the CoC and that of the RP. It is contended that no dues can be paid in full when there is no specific provision / fund for the same. It is submitted that the terms clear all existing liabilities of HNL cannot in any manner be interpreted to put an umbrella obligation upon the Respondent No. 4-SRA to cover all the liabilities of HNL, irrespective of their legality. It is only the legally valid existing liabilities of the HNL which the State of Kerala undertook to clear or ought to be paid. It is also contended that the liabilities claimed by the Appellant do not fall w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan would be unworkable. (Emphasis Supplied) It is submitted that paragraph 9 of the Impugned Order dated 29.01.2021 specifies that the liquidation value to the Operational Creditors would have been NIL and in the proposed Resolution Plan , they are receiving 35.13% of their claim amount. Therefore, the Resolution Plan has taken a step further to protect and promote the interest of the Operational Creditors who have come in Appeal here. Learned Sr. Counsel relies on Judgement of this Tribunal in the matter of Regional Provident Fund Commissioner, Employees Provident Fund Organisation Vs. Vandana Garg Comp. App. (AT) (CH) (Ins.) No. 50/2021, in respect of his contention that once the Resolution Plan is approved, if the Provident Fund is not made part of the plan, the right to claim that amount under fund, is extinguished. It is submitted that the subsequent Judgement of this Tribunal in Sikander Singh Jamuwal Ors. Vs. Vinay Talwar, RP Comp. App. (AT) Ins. No. 354/2019, this Judgement of Vandana Garg (Supra) was not cited. Learned Sr. Counsel submitted that this Judgement wherein it was observed that the PF Dues ought to be included, is distinguishabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PF , Gratuity and Workmen/Employees dues have to be paid in full. 9. It is the case of the RP that in the order of priority under Section 53(i) of the Code, the admitted claim of secured financial creditors is Rs.209.09 Crores which is much more than the liquidation value of Rs.162.70 crores and therefore the Liquidation Value payable to Operational Creditors including the employees under Section 53(1) is NIL and that the Resolution Plan provides for 16.31% of the entire admitted claims of the employees and provides for 35.13% of the admitted claims of employees/workmen towards gratuity. For better understanding of the same, the claims of employees/workmen dues in the plan detailed below : Creditor Names Amount of Claim Submitted Amount of Claim for Resolution Plan Percentage of payment to amount admitted Amount proposed to be paid Operational Creditors Workmen 9,031.82 3,435.35 35.13% 1,209.27 Operational Creditors- Workmen Gratuity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor. 13. Section 36(4) provides that the Assets which shall not include in the Liquidation Estate . Section 36(4)(a) reads as hereunder: 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; (iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund; 14. Section 36(4) provides that the following shall not be included in the Liquidation Estate Assets and shall not be used for recovery in the Liquidation . In the instant case, clause (iii) of sub-section 4(a) is relevant which is all sums due to any Workmen/Employee from the Provident Fund , Pension Fund or the Gratuity Fund . 15. Hence, sums due to any Workmen from the above funds are excluded from the Liquidation Estate . Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 16 which now has acquired statutory flavour, having been adapted and continued by statutory rules, operates contrary to the provisions of the PF Act and the Gratuity Act, it must fail as invalid. We uphold the contention of the petitioner. 18. The principle laid down in the aforenoted Judgement is that Social Justice is the conscience of our Constitution and the State is the Promoter of Economic Justice and the founding faith which sustains the Constitution and is bound by the provisions engrafted in the statutes governing Gratuity and Provident Fund . The root of Gratuity and the foundation of Provident Fund are different but each one is a salutary benefaction statutorily guaranteed independently on the other and hence are having these overriding provisions engrafted in the statutes. The Public Sector, being a modal employer with a social conscience is bound by these welfare and beneficial provisions. 19. At the outset, we address to the submissions of Learned Sr. Counsel Mr. Arvindh Pandian that Savan Godiwala Vs. Apalla Siva Kumar 2020 SCC OnLine NCLAT 191 and Regional Provident Fund Commissioner, Employees Provident Fund Organisation Vs. Vandana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .08.2017 against the Corporate Debtor. An order of liquidation was passed. An application was filed by the workmen and employees for claim of salary for the period involving CIRP and the prior period, which was rejected. Before the Hon ble Supreme Court submission was made that employees and workmen were entitled to wages/salary during the CIRP period and were also entitled for their dues of provident fund, gratuity and pension fund. The said submission has been noted in Para 13 of the judgment:- 13. Learned counsel appearing on behalf of the Appellants has taken us to the relevant provisions of the IB Code in support of her submission that the workmen/employees 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 provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds. 66. The conclusions and directions of Hon ble Supreme Court are contained in Para 54(ii) in reference to provident fund, gratuity fund and pension fund. The Hon ble Supreme Court has directed that the share of workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 407 of 2023 the question whether there was fund maintained by the Corporate Debtor or not pales into insignificance. 23. This Tribunal in the matter of Assam Tea Employees PF (Supra) had occasion to deal with similar issue of whether the claim of Provident Fund can be treated as Secured Debt and if the claimant is entitled to receive amount as a Secured Creditor . This Tribunal placed reliance on Question XI, Paragraphs 117 to 119 of the Jet Aircraft Maintenance Engineers Welfare Association (Supra) dated 21.10.2022 and observed as follows: 8. The answer to the Question No. XI is in paragraphs 117, 118 and 119 of Judgement dated 21st October, 2022, which is to the following effect: QUESTION - XI 117. In the appeal filed by the Regional Provident Fund Commissioner, it has been pleaded that the claim was filed by the Appellant for an amount of Rs.24,40,65,594/- towards damages under Section 14B of Employees' Provident Funds Miscellaneous 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. Ors. (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner Others (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost. The present case is not of liquidation but where the Resolution Plan has been approved and therefore under the provisions of 1952 Act, the Corporate Debtor is statutorily obliged to deposit the PF of the workmen/employees with the EPFO. 26. It is the contention of the Learned Counsel for the Respondent that the Commercial Wisdom of the CoC is not justiciable and the same has been laid down in K. Sashidhar Vs. Indian Overseas Bank 2019 SCC OnLine SC 257 and Maharashtra Seamless Limited Vs. Padmanabhan Venkatesh and Anr. and in the matter of Kalpraj Dharmshi Anr. Vs. Kotak Investment Advisors Limited Anr. . At this juncture, we find it relevant to reproduce paragraph 147 of the above Judgement which is as hereunder: 147. It has been held, that in an enquiry under Section 31, the limited enquiry that the Adjudicating Authority is permitted is, as to whether the Resolution Plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the Corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
