9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 888 - SC - Insolvency and BankruptcyWages/salaries of the workmen/employees during the CIRP period - amount due and payable to the respective workmen/employees towards Pension Fund, Gratuity Fund and Provident Fund - waterfall mechanism - HELD THAT - Under the IB Code, the workmen dues have been duly protected and the provident fund, gratuity and pension fund have been excluded from the liquidation estate assets (Section 36(4) of the IB Code). Furthermore, as per Section 53 of the IB Code, the workmen dues are given the top priority in the waterfall mechanism. The statutory provisions under the IB Code and the legislative history, the claims of the workmen/employees towards wages/salaries prior to CIRP and during the CIRP are required to be considered - It cannot be disputed that as per Section 5(13) of the IB Code, insolvency resolution process costs shall include any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern. It is also true that Section 20 of the IB Code mandates that the interim resolution professional/resolution professional is to manage the operations of the corporate debtor as a going concern and in case during the CIRP the corporate debtor was a going concern, the wages/salaries of such workmen/employees who actually worked, shall be included in the CIRP costs and in case of liquidation of the corporate debtor, dues towards the wages and salaries of such workmen/employees who actually worked when the corporate debtor was a going concern during the CIRP, being a part of the CIRP costs are entitled to have the first priority and they have to be paid in full first as per Section 53(1)(a) of the IB Code. While considering the claims of the concerned workmen/employees towards the wages/salaries payable during CIRP, first of all it has to be established and proved that during CIRP, the corporate debtor was a going concern and that the concerned workmen/employees actually worked while the corporate debtor was a going concern during the CIRP. The wages and salaries of all other workmen/employees of the Corporate Debtor during the CIRP who actually have not worked and/or performed their duties when the Corporate Debtor was a going concern, shall not be included automatically in the CIRP costs. Only with respect to those workmen/employees who actually worked during CIRP when the Corporate Debtor was a going concern, their wages/salaries are to be included in the CIRP costs and they shall have the first priority over all other dues as per Section 53(1)(a) of the IB Code. In the present case, the RP/Liquidator has seriously disputed that during the CIRP, the Corporate Debtor was a going concern. It is seriously disputed that the respective appellants workmen/employees employed at Dahej Yard and Mumbai Head Office actually worked during the CIRP. It is true that while submitting the claims towards CIRP costs, the RP has not submitted the claims towards the wages/salaries of the appellants, however, still the claims submitted/to be submitted by the appellants will have to be adjudicated upon and considered by the Liquidator and the Liquidator has to adjudicate and consider, (i) whether the Corporate Debtor was a going concern during the CIRP; (ii) how many workmen/employees actually worked during the CIRP while the Corporate Debtor was a going concern - If on adjudication of the claims made by the respective workmen/employees, if it is established and proved that during CIRP, the Corporate Debtor was a going concern and the concerned workmen/employees actually worked during the CIRP when the Corporate Debtor was a going concern, the wages and salaries of such workmen/employees to be included in the CIRP costs as defined under Section 5(13) of the IB Code and they will have to be paid such wages/salaries as per Section 53(1)(a) of the IB Code as part of the CIRP costs in full before making any payment as per priorities mentioned in Section 53(1) of the IB code. Dues of the workmen/employees towards Provident Fund, Gratuity Fund and Pension Fund - HELD THAT - Section 36(4)(iii) of the IB Code specifically excludes all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund , from the ambit of liquidation estate assets . Therefore, Section 53(1) of the IB Code shall not be applicable to such dues, which are to be treated outside the liquidation process and liquidation estate assets under the IB Code. Thus, Section 36(4) of the IB Code has clearly given outright protection to workmen s dues under provident fund, gratuity fund and pension fund which are not to be treated as liquidation estate assets and the Liquidator shall have no claim over such dues - the concerned workmen/employees shall be entitled to provident fund, gratuity fund and pension fund from such funds which are specifically kept out of liquidation estate assets and as per Section 36(4) of the IB Code, they are not to be used for recovery in the liquidation. There are disputed questions, whether in fact the IRP/RP managed the operations of the corporate debtor as a going concern during the CIRP and there is a serious dispute whether Dahej Yard was operational during the CIRP or not and there is a serious dispute that the concerned workmen/employees of the Dahej Yard and the concerned employees of the Mumbai Head Office actually worked during the CIRP or not and therefore it is directed that let the appellants submit their claims before the Liquidator and establish and prove that during CIRP, IRP/RP managed the operations of the corporate debtor as a going concern and that they actually worked during the CIRP and the Liquidator is directed to adjudicate such claims in accordance with law and on its own merits - If it is found that in fact the IRP/RP managed the operations of the corporate debtor as a going concern during the CIRP and the concerned workmen/employees actually worked during CIRP, their wages and salaries be considered and included in CIRP costs and they will have to be paid as per Section 53(1)(a) of the IB Code in full before distributing the amount in the priorities as mentioned in Section 53 of the IB Code. The present appeal is partly allowed.
Issues Involved:
1. Entitlement of workmen/employees to wages/salaries during the Corporate Insolvency Resolution Process (CIRP). 2. Classification of wages/salaries during CIRP as Insolvency Resolution Process Costs (CIRP Costs). 3. Payment of provident fund, gratuity, and pension fund dues to workmen/employees. 4. Adjudication of claims by the Liquidator. Detailed Analysis: 1. Entitlement of Workmen/Employees to Wages/Salaries During CIRP: The appellants, workmen/employees of the Corporate Debtor, claimed wages/salaries for the period involving CIRP and the prior period. The Corporate Debtor was managed as a going concern during CIRP, and the employees were on the payrolls. The appellants argued that the RP did not terminate their employment and instructed them to report to him, thereby entitling them to wages/salaries during CIRP. The Liquidator contended that only a few employees assisted the RP during CIRP, and the remaining did not perform any services, thus not qualifying for CIRP costs. 2. Classification of Wages/Salaries During CIRP as CIRP Costs: Section 5(13) of the IB Code defines "insolvency resolution process costs" to include costs incurred by the RP in running the business of the corporate debtor as a going concern. The judgment emphasized that only wages/salaries of those workmen/employees who actually worked during CIRP when the corporate debtor was a going concern should be included in CIRP costs. The rest of the claims should be governed by Sections 53(1)(b) and 53(1)(c) of the IB Code. The judgment clarified that the dues towards wages/salaries of workmen/employees who did not work during CIRP should not be included in CIRP costs. 3. Payment of Provident Fund, Gratuity, and Pension Fund Dues: Section 36(4) of the IB Code excludes all sums due to any workman or employee from the provident fund, the pension fund, and the gratuity fund from the liquidation estate assets. These funds are to be kept outside the liquidation process, and the Liquidator has no claim over them. The judgment held that the concerned workmen/employees should be paid from these funds, which are specifically kept out of liquidation estate assets. 4. Adjudication of Claims by the Liquidator: The judgment directed the appellants to submit their claims before the Liquidator and establish that the IRP/RP managed the operations of the corporate debtor as a going concern during CIRP and that they actually worked during this period. The Liquidator is to adjudicate these claims independently and, if established, include the wages/salaries in CIRP costs to be paid as per Section 53(1)(a) of the IB Code. The Liquidator is directed to complete this exercise within twelve weeks and keep aside the amount directed earlier for workmen/employee dues. Conclusion: The Supreme Court partially allowed the appeal, directing the Liquidator to adjudicate the claims of the workmen/employees and, if proven that they worked during CIRP, to include their wages/salaries in CIRP costs and pay them accordingly. The provident fund, gratuity, and pension fund dues are to be paid from funds kept out of the liquidation estate.
|
