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2022 (3) TMI 601 - AT - Insolvency and BankruptcyValidity of approved Resolution Plan - it is alleged that the Resolution Plan fails to consider the payment of provident fund dues as computed by the Assistant Provident Fund Commissioner - further allegation is that Resolution Plan approved by the Adjudicating Authority is on 02nd April, 2019. The amount so computed is ₹ 1,35,06,391/- whereas the provisions has been made for ₹ 78 lacs only - Financial Creditors are being paid 21.6% whereas Operational creditors are being paid 12.67% - HELD THAT - Since no provisions of Section 31 (1), Section 30(2), Section 36(4)(a) (iii) Section 238 of the I B Code, 2016, is in conflict with any of the provisions of the I B Code, the applicability of even Section 238 of the I B Code does not arise. PF dues are not the assets of the CD as amply made clear by the provisions of Section 36(4)(a)(iii) of the I B Code, 2016. The Respondent No.2/Successful Resolution Applicant are directed to release full provident fund dues in terms of the provisions of the Employees Provident Funds and Miscellaneous Provident Fund Act, 1952 immediately by releasing the balance amount of (₹ 1,35,06,391 full dues (minus) considered in the Resolution Plan ₹ 78,00,000). The impugned order dated 02nd April, 2019 approving the Resolution Plan stands modified - appeal disposed off.
Issues Involved:
1. Withdrawal of appeal by some appellants. 2. Non-payment of outstanding dues and discriminatory treatment of employees. 3. Approval and content of the Resolution Plan. 4. Disparity in payment between financial and operational creditors. 5. Eligibility of the Resolution Applicant. 6. Compliance with statutory provisions regarding Provident Fund dues. 7. Commercial wisdom of the Committee of Creditors (CoC). 8. Judicial review of the Resolution Plan. Detailed Analysis: 1. Withdrawal of Appeal by Some Appellants: The present appeal was initially filed by five appellants under Section 61 of the Insolvency and Bankruptcy Code, 2016. However, on October 19, 2020, the counsel for the appellants stated that appellants No. 1, 3, 4, and 5 had reached a settlement with the respondents and withdrew their appeal. Consequently, the appeal was dismissed as withdrawn for these appellants, and the appeal continued solely for appellant No. 2. 2. Non-payment of Outstanding Dues and Discriminatory Treatment of Employees: The appellant, an ex-employee of Respondent No. 3, claimed outstanding dues of ?12,49,702. The appellant argued that the Resolution Plan did not consider the full Provident Fund dues and was discriminatory towards employees. The appellant highlighted that financial creditors received 21.6% of their claims, while operational creditors, including employees, received only 12.67%. Additionally, the appellant contended that the gratuity amount was not paid as required under the Payment of Gratuity Act, 1952. 3. Approval and Content of the Resolution Plan: The Corporate Debtor (CD) was undergoing Corporate Insolvency Resolution Process (CIRP) initiated on October 26, 2017. The Resolution Plan proposed by the Resolution Applicant included a total amount of ?12.99 crore towards settlement of past dues and liabilities, with ?9 crore allocated to secured financial creditors and ?50 lakh to unsecured financial creditors. Employees and workmen were allocated ?1.03 crore against their claim of ?8.17 crore. The plan also included ?5 crore for the working capital requirement of the company. 4. Disparity in Payment Between Financial and Operational Creditors: The appellant argued that the Resolution Plan was discriminatory as it provided a higher percentage of payment to financial creditors (21.6%) compared to operational creditors (12.67%). The appellant alleged that this disparity violated the principles of fairness and equity enshrined under Article 14 of the Constitution of India. 5. Eligibility of the Resolution Applicant: The Resolution Applicant, engaged in the dairy industry, was also a financial creditor of the CD. The appellant questioned the eligibility of the Resolution Applicant, arguing that the applicant lacked expertise in the technical and specialized field of the CD. The appellant also alleged that the Resolution Applicant was a related party and disqualified under Section 29A of the Code. 6. Compliance with Statutory Provisions Regarding Provident Fund Dues: The appellant highlighted that the Resolution Plan did not fully account for the Provident Fund dues as determined by the Assistant Provident Fund Commissioner. The plan provisioned ?78 lakh against the assessed dues of ?1,35,06,391. The Tribunal observed that the Resolution Plan failed to comply with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, which mandates full payment of Provident Fund dues. 7. Commercial Wisdom of the Committee of Creditors (CoC): The respondents argued that the payments approved by the CoC were a commercial decision and non-justiciable. They cited the Supreme Court's judgment in K. Shashidhar vs. Indian Overseas Bank, which emphasized that the commercial wisdom of the CoC is non-justiciable. The Tribunal acknowledged that the aspect of parity in payment between financial and operational creditors falls under the commercial wisdom of the CoC. 8. Judicial Review of the Resolution Plan: The Tribunal noted that while the Adjudicating Authority cannot interfere with the commercial decisions of the CoC, it can review whether the Resolution Plan complies with the provisions of the law. The Tribunal referred to Section 30(2)(e) of the Code, which requires the Resolution Plan to comply with all applicable laws. The Tribunal directed the Resolution Applicant to release the full Provident Fund dues in compliance with the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Conclusion: The Tribunal partially allowed the appeal, directing the Resolution Applicant to release the balance Provident Fund amount of ?57,06,391 (?1,35,06,391 - ?78,00,000) in compliance with the statutory provisions. The impugned order dated April 2, 2019, was modified to this extent. The appeal was disposed of with these observations and directions, with no order as to costs.
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