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TMI Blog2020 (8) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... he corporate debtor, which is not the part of the Liquidation Estate. On perusal of the statutory provision of Section 5 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. It is apparent that the establishment, to which the said Scheme of Employees Provident Fund applies, has to create a fund in accordance with the provision of the Act and the Scheme. Section 5(1-a) provides that the Fund shall vest in, and be administered by the Central Board constituted under Section 5(a). The question of distribution of the Gratuity Fund in order of priority, provided under Section 53(1) of the Code does not arise. However, the Adjudicating Authority has given direction to the Liquidator that, the Liquidator cannot avoid the liability to pay Gratuity to the employees, on the ground, that Corporate Debtor did not maintain separate funds, even if, there is no fund maintained, the Liquidator has to provide sufficient provision for payment of Gratuity to the Applicants according to their eligibility - this Appellate Tribunal is of the considered opinion that the Adjudicating Authority erred in directing the Liquidator to make provision for payment of Gratuity to work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P period, was uploaded by the Resolution Professional on the website of the Corporate Debtor . 4. After that, on August 27, 2018, the Adjudicating Authority passed an order for Liquidation of the Corporate Debtor under Section 33 of the Code. 5. In compliance of the said order, the public announcement was issued by the Liquidator under Regulation 12 of the Code, and the Applicants submitted their claims to the Liquidator in prescribed Form E of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The dues of the Applicants have been verified and accepted by the Liquidator. 6. The Corporate Debtor has failed to maintain a Gratuity fund or obtain insurance for the fulfilment of its liability towards payment of the gratuity to its employees, under the Payment of Gratuity Act, 1972. The applicant contends that Section 4(1) of the Payment of Gratuity Act, 1972 mandates payment of gratuity by the employer to an employee in consideration of his continuous service for the employer. In the absence of the creation of gratuity fund by the Corporate Debtor , the gratuity dues payable to the employee shall be treated as an asset of the employee ly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the case of Liquidator that some of the employees, who are Applicants herein, have left the employment. The Liquidator is to verify and fix the eligibility of Applicants for payment of gratuity. So when gratuity is outside the Liquidation Estate, then Liquidator has to make arrangements for payment to the Applicants according to their eligibility. The Liquidator cannot avoid the liability to pay gratuity to the employees on the ground that Corporate Debtor did not maintain separate funds, even if, there is no fund maintained, the Liquidator has to provide sufficient provision for payment of gratuity to the Applicants according to their eligibility. However, Liquidator has made it clear that payment of gratuity is not treated as Liquidation Estate. Therefore, the only direction which can be given to the Liquidator is to make necessary arrangements for payments of gratuity to the Applicants, according to their eligibility, and it should be given priority. With these observations, the Application is disposed of. 13. The direction of the Adjudicating Authority that the Liquidator cannot avoid the liability to pay gratuity to the employees, even if the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.] Explanation.-For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement. (2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as soon as may be after framing of the Pension Scheme, a Pension Fund into which there shall be paid, from time to time, in respect of every employee who is a member of the Pension Scheme,- (a) such sums from the employer's contribution under Section 6, not exceeding eight and one-third per cent of the basic wages, dearness allowance and retaining allowance, if any, of the concerned employees, as may be specified in the Pension Scheme; (b) such sums as are payable by the employers of exempted establishments under sub-section (6) of Section 17; (c) the net assets of the Employees' Family Pension Fund as on the date of the establishment of the Pension Fund; (d) such sums as the Central Government may, after due appropriation by Parliament by law in this behalf, specify. (3) On the establishment of the Pension Fund, the Family Pension Scheme (hereinafter referred to as the ceased scheme) shall cease to operate and all assets of the ceased scheme shall vest in and shall stand transferred to, and all liabilities under the ceased scheme shall be enforceable against, the Pension Fund and the beneficiaries under the ceased scheme shall be entitled to dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding but not limited to encumbered assets; (c) tangible assets, whether movable or immovable; (d) intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights; (e) assets subject to the determination of ownership by the court or authority; (f) any assets or their value recovered through proceedings for avoidance of transactions in accordance with this Chapter; (g) any asset of the corporate debtor in respect of which a secured creditor has relinquished security interest; (h) any other property belonging to or vested in the corporate debtor at the insolvency commencement date; and (i) all proceeds of liquidation as and when they are realised. (4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation- (a) assets owned by a third party which are in possession of the corporate debtor, including- (i) assets held in trust for any third party; (ii) bailment contracts; (iii) all sums due to any workman or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) (i) which relates to distribution of assets, workmen's dues is confined to a period of twenty-four months preceding the liquidation commencement date. 21. While applying Section 53 of the l B Code , Section 326 of the Companies Act, 2013 is relevant for the limited purpose of understanding workmen's dues which can be more than provident fund, pension fund and the gratuity fund kept aside and protected under Section 36(4) (iii). 22. On the other hand, the workmen's dues as mentioned in Section 326(1) (a) is not confined to a period like twenty-four months preceding the liquidation commencement date and, therefore, the Appellant for the purpose of determining the workmen's dues as mentioned in Section 53(1) (b), cannot derive any advantage of Explanation (iv) of Section 326 of the Companies Act, 2013. 23. This apart, as the provisions of the l B Code have overriding effect in case of consistency in any other law for the time being enforced, we hold that Section 53(1) (b) read with Section 36(4) will have overriding effect on Section 326(1) (a), including the Explanation (iv) mentioned below Section 326 of the Companies Act, 2013. 24. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyment after he has rendered continuous service for not less than five years (a) On his superannuation, (b) On his retirement or resignation, (c) On his death or disablement due to accident or disease. In this case, we are not concerned with determination about the entitlement of Gratuity by the employees of the Corporate Debtor . Payment of Gratuity to employees depends on their entitlement of Gratuity, subject to the fulfilment of the conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard. Based on the judgment of this Appellate Tribunal in case of the State Bank of India Vs. Moser Baer Karamchari Union and Another, 2019 SCC Online NCLAT 447, it is clear that in terms of sub-Section (4)(a)(iii) of Section 36 all sums due to any workman or employees from the Provident Fund, Pension Fund and the Gratuity Fund, do not form part of the liquidation estate/liquidation assets of the Corporate Debtor . Therefore, the question of distribution of Provident Fund or the Pension Fund or the Gratuity Fund in order to priority, and within such period as prescribed under Section 53(1), does not arise. It is further ..... 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