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2024 (12) TMI 847 - AT - IBCEntitlement of members to retention allowance - whether the members of the Appellant Association, which is a registered body in the name of M/s. Lanco Infratech Employees Welfare Association, who are 212 in number, are entitled to be paid with the retention allowance or not? - HELD THAT - On analysing the judgment of Sunil Kumar Jain and Others Vs. Sundaresh Bhatt and Others 2022 (4) TMI 888 - SUPREME COURT from the perspective of Section 53 of the IBC code, it was rendered in those circumstances where, the issue that came up for consideration before the Hon ble Apex Court, was pertaining to the claim of the workmen employees towards their wages, salary, during CIRP proceedings. It was not a case which was dealing with, any of the aspect of payment of the retention allowance which is a subject altogether, alien to the one which was under consideration in the matter of Sunil Kumar Jain and others (supra). Hence, the observation made in Para 19, where the determination was being made for the entitlement of salary and wages for the workers who worked during the CIRP proceedings, was based upon a case with a marked distinction, than to the one at hand, where the Appellant claims for the retention allowance which is yet to be established as part of wages and salary. After having scrutinized the Impugned order of, the Ld. Adjudicating Authority, after considering the rival contentions, and particularly the stand taken by the Appellant, based upon the endorsement of 18.05.2017, pertaining to the denial of payment of the retention allowance amounting to Rs. 2,80,36,076/- it is determined to be non-payable as, no service conditions were placed on record, based upon the terms of the appointment, that the retention allowance did ever form as to be part of an emolument, which was ever made payable to the members of the Appellant association, based upon the service contract entered into with them. The payment slip placed on record and the endorsement of the then Managing Director on which the Ld. Counsel for the Appellant has relied heavily, will not establish the case for making the retention allowance as part of salary in itself in the absence of there being any supporting documents, about its legal enforceability. Accordingly, the Appellant and its members would not be entitled for, the payment of the retention allowance , for the period of claim since not being part of the salary and since not being a fact established by the Appellant before the Ld. NCLT. The logic which has been assigned by the Ld. NCLT, while rendering the Impugned Order dated 11.03.2024, does not suffer from any apparent error as such, which could call for any interference, in so far as the aspect and entitlement of, the retention allowance is concerned. But having said so, as far as the amount pertaining to the determination of salary for the month of June 2017 is concerned, that will be considered to be paid as per the decision dated 11.03.2024, subject to the condition that it has not already been paid or it is subjected to a challenge before any superior forum. The Impugned Order dated 11.03.2024, does not suffer from any apparent error as such, which could call for interference in the exercise of our Appellate jurisdiction - The appeal lacks merit and the same is dismissed .
Issues:
Entitlement of members to retention allowance Analysis: The judgment involves the consideration of whether the members of the Appellant Association, a registered body, are entitled to a retention allowance. The members claimed payment for the retention allowance along with their June 2017 salary, asserting their rights as Operational Creditors. The main issue was the entitlement and payment of the retention allowance, distinct from the salary, which had already been paid to the members. The challenge in the company appeal was against the Impugned Order of 11.03.2024, where the National Company Law Tribunal (NCLT) Hyderabad bench rejected the claim for the retention allowance. The rejection was based on the ground that an internal note approving the retention allowance by the Corporate Debtor's officials could not serve as the basis for payment, as the allowance did not constitute part of the salary. The Appellant contended that any emolument to be paid to employees must have a legal basis, such as being part of the salary under applicable rules or policies. The Tribunal noted that the Appellant failed to establish through evidence that the retention allowance was part of the monthly emolument, as required for it to be considered part of the salary. The Appellant's claim relied on an endorsement by the Managing Director of the Corporate Debtor regarding the retention allowance. However, the Tribunal found that the endorsement was merely a proposal and did not establish a legal entitlement to the allowance. Additionally, the endorsement indicated specific conditions for the payment of the retention allowance, limiting its applicability to a certain period and specific roles within the company. The Appellant cited legal judgments to support their claim, but the Tribunal found these references to be unrelated to the specific issue of the retention allowance in this case. The Tribunal emphasized that the Appellant failed to provide evidence or legal basis to establish the retention allowance as part of the salary, leading to the dismissal of the appeal. Ultimately, the Tribunal dismissed the Company Appeal, upholding the Impugned Order's decision to reject the retention allowance claim. However, it acknowledged the payment of the June 2017 salary, subject to verification of payment status, and found no grounds for interference in the decision regarding the retention allowance. In conclusion, the judgment clarifies the distinction between salary and retention allowance, emphasizing the need for legal basis and evidence to establish entitlement to additional emoluments. The Appellant's failure to prove the retention allowance as part of the salary led to the dismissal of the appeal.
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