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2022 (3) TMI 1108 - Tri - Insolvency and BankruptcySeeking to declare the acts of the Resolution Professional (RP) in not paying the salaries of the Applicants for the period 15.05.2020 to November, 2020 - seeking direction to RP to pay the total amount due to the Applicants towards the salaries for their services rendered - HELD THAT - It is an admitted fact that the present Applicants are not signatories to the no work no pay agreement. It is also not disputed that the amount that is due towards salaries is ₹ 76,56,448/-. The Counsel for the Applicant points out the judgment in CP (IB) No. 187/7/AMR/2019 wherein, it is observed that as per the Successful Resolution Plan INR 4,47,28,219 is proposed to be earmarked for payment of the Insolvency Resolution Process cost. Any increase in CIRP costs up to INR 6,00,00,000/- shall be borne by the Resolution Applicant in addition to any payments undertaken to be made under Plan. In case there is an increase in CIRP cost on account of workmen and employees and in case the total CIRP costs becomes more than ₹ 6,00,00,000/- then, the incremental amount beyond ₹ 6,00,00,000/- shall be adjusted from the workmen and employee settlement amount, except the fixed amount of INR 1,22,23,019 to be paid to the workmen. In case there is an increase in CIRP cost on any account other than the workmen and employees such that total CIRP cost becomes more than INR 6,00,00,000 then the incremental amount up to INR 2,00,00,000 shall be adjusted from the amount payable to all the creditors in the same proportion as proposed by the Resolution Applicant in the financial proposal for the Creditors. On the basis of the approved Resolution Plan and the provision made for the CIRP costs the Counsel contends that the RP has to pay the salaries of the Applicants which amounts ₹ 76,56,448/- and that it would not be an extra burden, since the same is provided for under the CIRP costs. He submits that even if the claim amount is paid it would not go beyond INR 6,00,00,000/- since, the estimated CIRP costs at that time were INR 4,47,28,219 only. Even if the CIRP costs go beyond INR 6,00,00,000/- a provision is made under the resolution plan. Hence, since the claim amount pertains to the workmen's salaries who have not signed on no work no pay agreement and who continued to be on the roles and since provision is made for their salaries in the CIRP costs. Petition allowed.
Issues:
- Non-payment of salaries by Resolution Professional (RP) from 15.05.2020 to November 2020. - Dispute over the payment of salaries to the Applicants. - RP's justification for non-payment due to financial constraints. - Interpretation of the Resolution Plan regarding CIRP costs and payment obligations. Analysis: - The Applicants filed an application under Section 60(5) of the IBC seeking to declare the RP's acts of not paying their salaries as illegal and to direct the RP to pay the total due amount of &8377; 76,56,448 for services rendered during the mentioned period. - RP faced difficulties due to the lockdown and lack of communication from the erstwhile management regarding the status of employees. The plant was closed for 2 years, requiring substantial repairs. RP made efforts to address irregularities, including discussions with employees on a no work-no pay agreement. - RP informed the CoC about the situation, limited services availed, and the need to compute payments for employees. CoC approved salary/wage payments and discussed retrenchment costs for employees not available. RP stated inability to bear additional costs due to plant closure since December 2018. - The Counsel for the Applicants cited a judgment regarding CIRP costs and payment obligations under the Resolution Plan. The Counsel argued that the RP should pay the due salaries as it falls within the CIRP costs provision and would not exceed the allocated amount. The Petition was allowed based on the provision made for workmen's salaries in the CIRP costs. This detailed analysis covers the issues of non-payment of salaries, the RP's justifications, and the interpretation of the Resolution Plan regarding payment obligations, providing a comprehensive understanding of the judgment.
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