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TMI Blog2024 (10) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the I.A. filed by the Resolution Professional for approval of the Resolution Plan submitted by Finquest Financial Services Private Ltd. (Respondent No.3 herein). The Appellant claiming to be Registered Labour Union of the Employees of Shree Gopal Paper Mill, aggrieved by the approval of plan has come up in this appeal. Brief facts of the case necessary to be noticed for deciding the appeal are: (i)By order dated 17.01.2020 CIRP against the Corporate Debtor - Ballarpur Industries Ltd. commenced on an application filed under Section 7 of the I&B Code. The Respondent No.1 was appointed as the Resolution Professional. (ii)In pursuance of publication inviting filing of claim, the management of the Corporate Debtor filed a claim on behalf of the workmen for an amount of Rs.40 Crore. The Resolution Professional admitted the claim of workmen for 24 months before CIRP commencement date for amount of Rs.6.61 Crore and for employees 12 months before CIRP commencement date as Rs.0.93 Crore. (iii)In pursuance of request for Resolution Plan, Resolution Plan was submitted by Respondent No.3 dated 07.02.2022 updated as on 17.03.2022. On certain queries made by the Financial Creditors a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Professional has added only two months' salary for May and June, 2020 as CIRP cost although salary slip was issued from June 2020 till November, 2020 to the employees. 4.Learned counsel for the Resolution Professional replying to the submissions of the learned counsel for the Appellant submits that there is no dispute that workers are entitled for full payment of Provident Fund and Gratuity. Learned counsel for the Resolution Professional submits that Appellant has not filed any claim before the CIRP and the claim which was filed was verified and final list of creditors was published as per which the workmen wages for 24 months prior to insolvency commencement date amount to Rs.6.71 Crores and employees' wages for the period of 12 months preceding the insolvency commencement date amount to Rs.0.93 Crores. It is submitted that on 03.02.2021, the Resolution Professional received claim of Rs.10.20 Crore from Karam Chand Thapar & Bros. Ltd. Provident Fund Trust. It is further submitted that another claim was filed by EPFO Karnal which was subsequent to approval of the Resolution Plan by the CoC, which claim was filed only on 16.03.2023, which was after the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2022 was confined to CIRP cost and did not contemplate payment of Provident Fund and Gratuity Dues. It is submitted that payment of Gratuity and Employees Provident Fund not being contemplated by Resolution Plan, the liability has to be discharged by the Successful Resolution Applicant and the amount which is earmarked for the payment to the Financial Creditors cannot be subjected to any reduction due to any payment of Provident Fund and Gratuity. 6.Learned Counsel for the Successful Resolution Applicant refuting the submissions of Respondent No.2 submits that the Resolution Plan read with Clarificatory Note clearly deals with Provident Fund and Gratuity Dues. It is submitted that Clarification Note dated 22.03.2022, Para 1 sub-clause (vii) has clearly provided that due to operation of law or by any order of any Court or Tribunal or for any other reason if any additional amount is payable to any workman or employees, whether admitted claim or not, crystallized or uncrystalized, known or unknown, present or future, the same shall be paid out of the total financial outlay in order of priority. It is submitted that the Clarificatory Note which was issued by the Successful Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pprox.) Gratuity Dues 8,84 (approx.) 9.The issue which has arisen in the present appeal is regarding the liability of payment of Provident Fund dues whether has to be borne by the Successful Resolution Applicant or it has to be deducted from the financial outlay under the Resolution Plan. Thus, whether it is the Successful Resolution Applicant which has to bear the burden of Provident Fund dues and Gratuity Dues or it has to be discharged from the financial outlay in the Resolution Plan, is the question to be answered in this appeal. 10.For answering the issue which has arisen in the appeal, we have to first notice certain clauses of the Resolution Plan. The copy of the Resolution Plan has been brought on the record by Additional Affidavit filed on behalf of the CoC. Clause 4 of the Resolution Plan deals with 'Financial proposal'. Clause 4.3.1 deals with total financial outlay proposed in the plan, which is Rs.700 Crores. Clause 4.5 of the Resolution Plan deals with Employee/Workmen claim. Clause 4.5.1 and Clause 4.5.2 of the plan is as follows: "4.5.1 As per the Information Memorandum and the information provided in the Virtual Data Room, the total Employee and Workmen d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs 1.22 crores (Rupees One Crores Twenty Two Lakhs Only) will be infused by the Resolution Applicant/ its Affiliates/ the Financial Investor as equity and a further sum of Rs 7.78 crores (Rupees Seven Crores Seventy Eight Lakhs Only) will be infused by way of debt by the Resolution Applicant/ its Affiliates/ the Financial Investor. It is clarified that if the Workmen Liquidation Dues exceeds Rs. 9 crores (Rupees Nine Crores Only), any incremental amount, if required to be paid towards mandatory Workmen Liquidation Dues shall be paid in accordance with the opening paragraph of Clause 4.5.2. (iii)Towards the Employees dues, against admitted claims of Rs.11.66 crores (Rupees Eleven Crores and Sixty Six Lakhs Only), a sum of Rs 0.49 crores (Rupees Forty Nine Lakhs Only) will be paid by the Resolution Applicant upfront on a pro rata basis. (iv)With respect to the remaining Workmen dues (other than as set out in (ii) and (iii) above), the estimated Liquidation Value of the same is NIL and all such workmen shall be deemed to have relinquished any further claim for any dues." 11.Clause 4.5.2 mentioned that the Resolution Plan provides for payment of workmen liquidation dues t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount proposed for settlement of assenting Financial Creditors claim will be reduced on proportionate basis. vii.It is further clarified that, if, due to operation of law or by any order of any court or tribunal or for any other reason if any additional amount is payable to any workmen or employees, whether admitted claim or not, crystallised or uncrystallised, known or unknown, present or future, the same shall be paid out of the Total Financial Outlay, and such amount shall be in following order of priority: a.Firstly, from the Surplus in excess of Rs. 9.37 Crore. b.Secondly from the funds earmarked for settlement of Financial Creditors claim; accordingly, the amount proposed for settlement of Financial Creditors claim will be reduced on proportionate basis viii.In an event where Surplus, is further available (after meeting 100% of the CIRP Costs and the payments referred to herein above in para 1.vii) then such undistributed Surplus, shall be distributed pro rata to the assenting Financial Creditors in the form of NCDs and CRPS in the proportion of the payout allocated to them under the Resolution Plan. ix.The Resolution Applicant shall fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is further clarified that, if, due to operation of law or by any order of any court or tribunal or for any other reason if any additional amount is payable to any workmen or employees, whether admitted claim or not, crystallised or uncrystallised, known or unknown, present or future, the same shall be paid out of the Total Financial Outlay, and such amount shall be in following order of priority: a.Firstly, from the Surplus in excess of Rs.9.37 Crore. b.Secondly from the funds earmarked for settlement of Financial Creditors claim; accordingly, the amount proposed for settlement of Financial Creditors claim will be reduced on proportionate basis." 16.The above clarification mentioned that if, due to operation of law or by any order of any court or tribunal or for any other reason if any additional amount is payable to any workmen or employees, whether admitted claim or not, crystallised or uncrystallised, known or unknown, present or future, the same shall be paid out of the Total Financial Outlay, and the priority is given in Sub-clause (a) and (b). In view of the above, the purport of Clause 1(vii) is extensive and the SRA's intent was that if due to any reason by operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of all contents of the Resolution Plan after considering all aspects of the matter have approved the Resolution Plan. Agenda Item 1 being approved by 88% vote share, approval was for Resolution Plan and Clarificatory Note which was specifically mentioned therein. 19.Learned counsel for the CoC also sought to contend that Clarificatory Note should be read against the SRA, the document in form of Resolution Plan having been drafted by the SRA, in case of any ambiguity. There is no ambiguity in the Resolution Plan and the Clarificatory Note. The Clarificatory Note is clear and covers any kind of additional payment. In this context, the learned counsel for the CoC has also referred to doctrine of Contra Proferentum. We may refer to judgment of Hon'ble Supreme Court in "(2020) 16 SCC 489, The Silppi Constructions Contractors vs Union of India & Ors." where the Hon'ble Supreme Court has laid down that author of the document is the best person to interpret the document. In Para 20 of the judgment following was laid down: "20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is true that one of the questions framed i.e. Question No. II was "Whether the workmen and employees are entitled to receive the payment of provident fund, gratuity and other retirement benefits in full since they are not part of the liquidation estate under Section 36(4)(b)(iii) of the Code?". The said question was answered in Para 71 of the judgment, which is as follows: "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." 23.In the Jet Airways case, this Court held that workmen are entitled for payment of Provident Fund and Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Note. 26.Now we come to one more submission advanced by learned counsel for the Appellant that Appellants were called to work by the Resolution Professional and they have worked from May to November, 2020 and they have not been paid salary for the aforesaid period. Learned counsel for the Resolution Professional in his reply has admitted that certain employees were called to work and against the work in the month of May and June, 2020 salary has been included in the CIRP cost. In Para 19 of the reply of the Resolution Professional following has been stated: "19. It is submitted that due to non-availability of funds, the plant operations at Shree Gopal Unit could not be resumed. Consequently, from July 2021 onwards only a limited number of essential employees were required by the RP. At this stage, it is pertinent to mention that the wages for the month of May 2021 to June 2021 have duly been included in the CIRP cost by the RP." 27.It has been further stated that entitlement of salary from June to November, 2020 has never been accepted nor the employees actually worked. With regard to salary slips of five employees filed with the appeal, learned counsel for the Resolution Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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