2021 (12) TMI 1055 - Tri - Insolvency and Bankruptcy

Scope of Liquidation estate - appellant were workmen/ employees of Excel Glasses Limited under Section 42 of Insolvency Bankruptcy Code, 2016 - HELD THAT - On verification of records it is found that the submission of the Respondent that he has not been provided with any order from the appropriate authority in connection with payment of gratuity etc. Since the Appellants have not produced any order of the Labour Court or such authorities the Liquidator on his own cannot decide on disputed liability of them. He can only act on the strength of crystalized claims. 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 claims. Section 36(2) of the I B 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 property of the Corporate Debtor, which is not the part of the Liquidation Estate. The claim of wages cannot be sanctioned unless the statutorily constituted forums either under the Industrial Dispute Act, Payment of Wages Act and Bonus Act have rendered its decision. However, no such decision or award is available in favour of the workmen entitling them to claim these amounts - Appeal dismissed.

Summary

Issues:
Appeal against liquidator's decision on claims of workmen/employees of Excel Glasses Limited under the Insolvency & Bankruptcy Code, 2016.

Analysis:

Issue 1: Liquidator's Decision on Claims
The appellants, former workmen/employees of Excel Glasses Limited, filed appeals against the liquidator's decision on their claims. The liquidator partially admitted gratuity claims but rejected other components. The appellants argued that their total claims were not fully considered by the liquidator. The liquidator contended that claims were admitted based on audited records and actuarial valuer's report. The Tribunal noted that without specific orders from labor authorities, the liquidator couldn't decide disputed liabilities beyond the admitted claims.

Issue 2: Settlement Agreement and Lock-out Validity
The Tribunal reviewed a Settlement Agreement from 2015 between Excel Glasses and Trade Unions, stating the lock-out was legally valid. This agreement was considered in the context of the current claims and liquidation process.

Issue 3: Distribution of Assets and Liquidation Estate
The Tribunal discussed the distribution of assets under Section 53 of the Insolvency & Bankruptcy Code, highlighting that provident fund, pension fund, and gratuity fund are not part of the liquidation estate. The liquidator is bound to hold the liquidation estate for creditors' benefit. Claims from these funds are not included in the liquidation assets, as per Section 36(4)(a)(iii) of the Code.

Issue 4: Proof of Employment and Statutory Forums
Some appellants failed to provide adequate proof of employment with Excel Glasses Limited. The Tribunal emphasized that benefits could only be granted based on documented evidence unless proven otherwise. It was noted that claims for wages should be sanctioned only if statutory forums like Industrial Dispute Act, Payment of Wages Act, or Bonus Act have issued decisions in favor of the workmen. Since no such decisions were presented, the appeals were dismissed.

In conclusion, the Tribunal dismissed the appeals of the appellants, upholding the liquidator's decision on the claims of workmen/employees of Excel Glasses Limited. The judgment emphasized the importance of documented evidence, statutory decisions, and adherence to the provisions of the Insolvency & Bankruptcy Code in resolving such disputes.