2022 (5) TMI 493 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - dues pertaining to LTC and Leave Encashment - existence of debt and default or not - HELD THAT - It is not the case of the Appellant that the amounts claimed are due towards any emoluments/salary for the services rendered by him to the Corporate Debtor , while he was in service. Though service benefits like LTC accrue, on account of the service rendered during the period of employment, the scope and objective of the Code is simply not just for recovery of dues but Resolution of the Companies meant for maximisation of the value of assets , to promote entrepreneurship, availability of credit and balance all interest of the stakeholders. Employees and workmen do constitute a major part of the stakeholders. The term employee in general parlance refers to a person, who is hired by the employer to perform a particular job and is entitled to a specific wage or salary. Section 3(36) of the Code states that the term workmen shall have the same meaning as provided under Section 2(s) of the Industrial Disputes Act, 1947. For the purpose of the Code, the term workmen dues has to be interpreted in terms of explanation to Section 326 of the Companies Act, 2013. As per the definition incorporated therein, the dues would cover wages and salary, accrued holiday remuneration, workmen compensation, and all sums due from Provident Fund, Pension, Gratuity Fund or any other fund for the welfare of the workmen, maintained by the employer. The Claims of the workmen/employees may be classified as service claims which arise during the terms of employment, in lieu of service rendered by the employee, salary, wages, bonus, dues etc., and welfare claims which arise after cessation of employment, like Gratuity , Leave Encashment , Superannuation Dues, Workmen Compensation for closure of the entity which all depend on the tenure of the employment. Subsequent to the Company going into the Insolvency, all such claims may be submitted in Form D under Regulation 9 of the (Insolvency and Bankruptcy) CIRP Regulations, 2016. But seeking to initiate CIRP on the ground that LTC and EL Encashment has not been paid, which fall within the ambit of service benefits/welfare benefits cannot be said to be the intent and objective of the Code. The Principal Gratuity amount was paid to the Appellant on 17/02/2022 and deciding the question of interest is not within the domain of IBC. Hence, this Tribunal is of the considered view that there is no illegality or infirmity in the well-considered Order of the Adjudicating Authority - Appeal dismissed.

Summary

Issues Involved:
Appeal against dismissal of Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for recovery of service benefits including Gratuity, EL Encashment, and LTC as 'Operational Debt'.

Detailed Analysis:

1. Aggrieved Appeal Against Impugned Order:
- The Appellant filed an appeal against the dismissal of the Application under Section 9 of the Insolvency and Bankruptcy Code, seeking recovery of service benefits like Gratuity, EL Encashment, and LTC from the Respondent Company.

2. Contention Regarding Service Benefits:
- The Appellant, a former employee, claimed that Gratuity, EL Encashment, and LTC were 'due and payable' by the Respondent Company after his superannuation.

3. Failure to Clear Operational Debt:
- Despite serving a Demand Notice under Section 8 of the Code, the Respondent Company failed to clear the 'Operational Debt', leading the Appellant to file for initiation of Corporate Insolvency Resolution Process under Section 9 of the Code.

4. Operational Debt Definition:
- The Appellant argued that Gratuity, LTC, and EL Encashment constitute 'salary' and fall under the definition of 'Operational Debt' as per Section 5(21) of the Code.

5. Jurisdictional Dispute Regarding Gratuity:
- The Respondent contended that Gratuity disputes fall under the Payment of Gratuity Act, 1972, and should be decided by the Regional Labour Commissioner, not within the jurisdiction of the Tribunal.

6. Application of Legal Precedent:
- The Appellant cited the case of 'M/s. Innoventive Industries Ltd. Vs. ICICI & Anr.' to support the argument that LTC and Leave Encashment constitute debt and default, aligning with the Supreme Court's interpretation.

7. Previous Similar Petition Mentioned:
- The Adjudicating Authority noted a previous petition by another individual for retiral benefits/dues, indicating a similar situation involving the Respondent Company.

8. Interpretation of Operational Debt:
- Section 5(21) of the Code defines Operational Debt, including claims related to employment, goods, or services. The Tribunal emphasized the distinction between service claims and welfare claims for employees/workmen.

9. Employee and Workmen Dues Interpretation:
- The Tribunal analyzed the definitions of 'employee' and 'workmen' under the Code and Companies Act, highlighting the classification of service claims and welfare claims for employees/workmen.

10. Decision and Dismissal of Appeal:
- The Tribunal concluded that the Principal Gratuity amount was paid to the Appellant, and the question of interest did not fall under the purview of the Insolvency and Bankruptcy Code. Thus, the appeal was dismissed with no costs imposed.

This detailed analysis covers the various legal arguments, interpretations of relevant provisions, jurisdictional disputes, and the final decision rendered by the National Company Law Appellate Tribunal on the issues involved in the judgment.