2024 (10) TMI 632 - AT - IBC

Approval of the Resolution Plan - Resolution Plan does not provide for payment of Provident Fund and Gratuity - plan not in compliance with Section 30(2) of the I B Code - 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? - HELD THAT - Clause 1 (vii) of the Clarificatory Note clearly contemplate payment of Provident Fund and Gratuity dues which have to be paid as per priority as contemplated in Clause 1 (vii). Thus, the payment of Provident Fund and Gratuity has to be paid as per the Resolution Plan read with Clarificatory Note Clause 1 (vii) and the submission of counsel for the CoC not accepted, that amount of Provident Fund and Gratuity dues has to be borne by the Successful Resolution Applicant independent of Resolution Plan read with Clarificatory Note. It is noticed the amount of Provident Fund and Gratuity as admitted by the Resolution Professional i.e. Provident Fund dues Rs.11.49 Crores and Gratuity dues Rs. 8.84 Crores. The said amount has to be paid as per the Resolution Plan read with the Clarificatory Note. The 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 Professional submitted that the said salary slips were issued on the request of the employees and is not proof of that they had worked. It is submitted that it is the Resolution Professional who has to take decision regarding allowing employees to work during CIRP period. It submitted by the Resolution Professional that certain employees were called to commence the work but the work did not proceed and in the CIRP cost the Resolution Professional has included the certain part of payment of salary to the workmen and claim of the Appellant for payment of salary from July to November, 2020 cannot be accepted or included in the CIRP cost. The Resolution Professional is the best judge to compute the CIRP cost and pay wages to the workmen during the CIRP period. Thus, the Resolution Plan having already included payment of salary to some extent in the CIRP cost, we see no reason to issue any direction for payment of salary as claimed by the Appellant from month of July to November, 2020. The approval of Resolution Plan by order dated 31.03.2023 is upheld subject to declaration that workmen and employees are entitled for payment of full Provident Fund and Gratuity - The Resolution Plan read with Clarificatory Note Clause 1 (vii) contemplate payment of Provident Fund dues and Gratuity dues which was computed by the Resolution Professional as Provident Fund dues of Rs.11.49 Crores Gratuity dues of Rs.8.84 Crores, totaling to Rs.20.33 Crores (for Shree Gopal Unit), which is to be paid as per the priority mentioned in Clause 1 (vii) of the Clarificatory Note. Appeal disposed off.

Issues Involved:
1. Compliance of the Resolution Plan with Section 30(2) of the I&B Code concerning Provident Fund and Gratuity.
2. Liability for payment of Provident Fund and Gratuity dues.
3. Entitlement of workmen and employees for salary from May to November 2020.
4. Interpretation and applicability of the Clarificatory Note in the Resolution Plan.
5. Application of the doctrine of Contra Proferentum.

Detailed Analysis:

1. Compliance of the Resolution Plan with Section 30(2) of the I&B Code:
The primary contention raised by the appellant, a registered labor union, was that the approved Resolution Plan did not provide for the payment of Provident Fund and Gratuity, which is a statutory requirement under Section 30(2) of the Insolvency and Bankruptcy Code (I&B Code). The appellant argued that the workmen were entitled to full payment of Provident Fund and Gratuity up to the commencement date of insolvency, and the plan's failure to account for these dues rendered it non-compliant with statutory provisions. The tribunal acknowledged this issue and examined whether the plan adequately addressed these statutory dues.

2. Liability for Payment of Provident Fund and Gratuity Dues:
The tribunal considered whether the liability for Provident Fund and Gratuity dues should be borne by the Successful Resolution Applicant (SRA) or deducted from the financial outlay under the Resolution Plan. The tribunal referred to the Clarificatory Note issued by the SRA, which stated that any additional amounts payable to workmen or employees due to operation of law or court orders would be covered by the total financial outlay. The tribunal concluded that the Clarificatory Note, particularly Clause 1(vii), was comprehensive enough to include Provident Fund and Gratuity dues, thus requiring these to be paid from the total financial outlay rather than being an independent liability of the SRA.

3. Entitlement of Workmen and Employees for Salary from May to November 2020:
The appellant claimed that workmen were entitled to salaries from May to November 2020, as they were asked to work during this period. The Resolution Professional (RP) acknowledged that some employees were called to work and salaries for May and June 2020 were included in the CIRP cost. However, the RP contested the claim for the subsequent months, stating that no work was actually performed and that salary slips were issued at the employees' request, not as proof of work. The tribunal deferred to the RP's judgment on CIRP costs and declined to issue directions for additional salary payments for the contested period.

4. Interpretation and Applicability of the Clarificatory Note:
The tribunal examined the Clarificatory Note, which was deemed an integral part of the Resolution Plan. Clause 1(vii) of the note was pivotal, as it provided for the payment of any additional amounts to workmen or employees due to legal obligations or court orders from the total financial outlay. The tribunal emphasized that the Clarificatory Note had overriding authority over the Resolution Plan in case of any inconsistencies, thereby affirming the inclusion of Provident Fund and Gratuity dues within its scope.

5. Application of the Doctrine of Contra Proferentum:
The CoC's counsel argued that any ambiguities in the Resolution Plan should be interpreted against the drafter, i.e., the SRA, under the doctrine of Contra Proferentum. However, the tribunal found no ambiguity in the Clarificatory Note's provisions. Citing precedents, the tribunal reiterated that the author of the document is best suited to interpret it, and since the Clarificatory Note was clear and unambiguous, the doctrine was not applicable in this case.

Conclusion:
The tribunal upheld the approval of the Resolution Plan, subject to the condition that workmen and employees are entitled to full payment of Provident Fund and Gratuity dues as per the Clarificatory Note. The tribunal directed that these dues, amounting to Rs. 20.33 Crores, be paid in accordance with the priority outlined in the Clarificatory Note. The appeal was disposed of with no additional relief granted to the appellants, and parties were instructed to bear their own costs.

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