9911796707
TMI Blog2022 (11) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Code - demerger of entire workforce except of 50 employees as Asset Protection Team to AGSL - violation of Section 30(2) of the Code - entitlement to workmen/employees to receive CIRP cost subsequent to insolvency commencement date - computation of payment to secured financial creditors under Section 53(1)(b) - allocation of fixed amount to the Operational Creditors (other than workmen/employees) - claim of Regional Provident Fund Commissioner, secured debt or not - charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law. What is the extent and the limitation of the judicial review by the Adjudicating Authority and the Appellate Tribunal in context of a Resolution Plan approved by the CoC with requisite majority? - HELD THAT:- It is settled that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in exercise of jurisdiction of judicial review by Adjudicating Authority or by this Appellate Tribunal except in cases where Resolution Plan violates mandatory requirement as provided under Sub-section (2) of Section 30 of the Code. Whether the workmen and employees are entitled to receive the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as contained in paragraph 6.4.2 (c) for payment of liquidation value, allocation of Rs.52 crores only was in clear violation of Section 30, sub-section (2), sub-clause (b), but in view of the undertaking by the Resolution Applicant, we do not find any necessity of interfering with the Resolution Plan except issuing a direction for payment of Rs.113 crores, which is a minimum liquidation value of workmen dues. Whether the Resolution Plan as approved by the Adjudicating Authority violates provisions of Section 30(2)(e) of the Code since it contravenes provisions of Industrial Disputes Act, 1947 it having not provided for retrenchment compensation to the workmen/employees who were so entitled under Section 25-F and 25-FF of the Industrial Disputes Act, 1947 and other legislations? - Whether the demerger of entire workforce except of 50 employees as Asset Protection Team to AGSL is illegal and contrary to the provision of Section 25-FF of Industrial Disputes Act, thus, violates Section 30(2) of the Code? - HELD THAT:- The non-compliance of provisions of Employees' Provident Funds Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972. It is an admitted cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the aforesaid claim of salary and wages of the workmen and employees after insolvency commencement date. Whether the Resolution Plan being contingent and conditional ought not to have been approved in view of the law laid down by the Hon ble Supreme Court in Ebix Singapore Pvt. Ltd. Vs. CoC of Educomp Solutions Ltd. Anr. [ 2021 (9) TMI 672 - SUPREME COURT ]? - HELD THAT:- The Report of the Insolvency Law Committee (February 2020) has opined that priority under Section 53(1)(b)(ii) should be only to the extent of the security interest of the Secured Creditor, but in the earlier part of the Report, it was opined that provision does not necessitate any further amendment. When no amendments have been made in the statute, i.e., Section 53(1)(b)(ii), the provisions cannot be interpreted in any manner except the plain and literal reading of the provisions. The Report of Insolvency Committee (February 2020) can at best be reason for making any further amendment in the statute, but till amendment is made, the provision of the statute has to be read as it exists as on the date - there are no substance in the submission of the learned Counsel that payment to the Secured Financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code - We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity. Whether the claim of Department of State Tax which was submitted within time created a charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law and the State Tax Department has the security interest and is a secured creditor? - HELD THAT:- The first charge on the property which is envisaged by Section 82 is except as provided under Insolvency and Bankruptcy Code, 2016. Thus, Section 82 of the Maharashtra GST Act, 2017 shall not give any precedence to the charge of claim of the Appellant - The provisions of Section 82 of the Maharashtra GST Act, 2017, clearly contains an exception with regard to I B Code, hence, on the strength of dues under Maharashtra GST Act, 2017, no charge can be claimed on the assets of the Corporate Debtor. The view that Department of Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Professional For Jet Airways (India) Ltd. Anr.; Concor Air Ltd. Vs Ashish Chhawchharia Anr.; Regional P.F. Commissioner Versus Ashish Chhawchharia Resolution Professional for Jet Airways (India) Ltd. Anr. Justice Ashok Bhushan, Chairperson And Barun Mitra Member (Technical) For the Appellant : Mr. Vikas Mehta, Mr. Mayan Prasad, Ms. Nitika Grover, Mr. Apoorv Khator Ms. Anshula Grover, Advocates. For the Respondent : Mr. Malhar Zatakia, Mr. Dhiraj Kumar Totala, Ms. Aditi Bhansali, Ms. Tanya Chib and Mr. Parimal Kashyap, Advocates for RP (AZB Partners) Mr. Raghav Chadha, Advocate. Mr. Krishnan Venugopal, Sr. Advocate with Mr. Raunak Dhillon, Ms. Isha Malik, Ms. Niharika Shukla, Advocates for R-2/ CoC. Mr. Krishnendu Datta, Sr. Advocate, with Mr. Rajat Sinha, Mr. Burjis, Shabir, Ms. Srishty Kaul, Advocates for SRA. JUDGMENT ASHOK BHUSHAN, J. All these Appeals have been filed against the same order dated 22.06.2021 Passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court No.I approving the Resolution Plan submitted by Jalan Fritesch Consortium with respect to the Corporate Debtor Jet Airways (India) Limited . Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Resolution Professional has admitted the claim worth Rs.1,539,783,525/- as reflected in the 7th List of Creditors. The List of Creditors was revised and in the 9th List of Creditors, admitted claim was Rs.1,697,034,005/-. The Appeal has been filed on behalf of 109 workers, whose admitted claims were Rs.37,13,79,866/-. 5. A Notice dated 27th May, 2020 was issued by the Resolution Professional requiring all employees of Jet Airways (India) Limited, who have exited without completing formalities to submit their resignation and complete their formalities. Resolution Professional filed an Application being I.A. No.1263/MB/2020 praying for a declaration that the dues arising after the insolvency commencement date of the workmen and employees of the Corporate Debtor, who are not part of the Asset Preservation Team are not covered under insolvency resolution process costs under the Code . The Adjudicating Authority did not decide the issue at that point of time and IA was permitted to be withdrawn. Liberty was granted to RP to raise the matter again. The Appellant had also filed an Application before the Adjudicating Authority praying for copy of the Resolution Plan and the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d until approval date, shall also stand demerged from the Corporate Debtor to AGSL. The Appellant aggrieved by the Resolution Plan has filed this Appeal. Company Appeal (AT) (Insolvency) No. 643 of 2021 6. This Appeal has been filed by aggrieved workmen of Jet Airways (India) Limited, which is an Association of workmen of the Corporate Debtor numbering more than 270 workmen. The Members of the Association are aircraft maintenance engineers and have been working for several years on the rolls of the Corporate Debtor. The Successful Resolution Applicant has arbitrarily provided only a sum of Rs.52 crores to employees and workmen. The Resolution Professional did not account the salaries and other benefits due to employees and workmen, which estimated approximately Rs.715 crores as on September 2020 as CIRP cost. The employees and workmen are entitled to their full provident fund, gratuity, leave encashment etc., which have not been provided to employees and workmen. The Appellant has also referred to the Audited Financial Statement for 2019-20, which contained the provisions for employees benefits. The Audited Financial Statement mentions that as many as 13530 workmen and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal has been filed by 43 Appellants, who were Engineers employees of the Corporate Debtor. The Appellants by the appeal challenges the order dated 22nd June, 2021 and pray for a direction to pay the Appellants gratuity and provident fund dues upto beginning of CIRP or respective date of resignation, whichever is earlier. The gratuity and provident fund dues are claimed for the employees from different dates prior to initiation of CIRP and from the date of initiation of CIRP, i.e., 20.06.2019. It is stated that admitted claim of workmen and employees is Rs.1254 crores. The case of the Appellants is that gratuity and provident fund are required to be paid in full before making any other payment whatsoever under the Resolution Plan as these payments are outside the Waterfall Mechanism under Section 53 of the Code. The employees are illegally deprived of their statutory dues. The gratuity and provident fund dues are excluded from the Liquidation Estate of the Waterfall Mechanism, so as to enable the employees to realize their savings as well as the matching contribution, which comes from the employer. They are the assets of the workers lying in the possession of the Corporate Debtor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Plan is in breach of Section 25N and Section 25FF of the Industrial Disputes Act, 1947. The question of gratuity being covered under Section 36(4) of the Code, there is no question of inconsistency and a valid Resolution Plan is required to comply with the provisions of the Payment of Gratuity Act, 1972. Company Appeal (AT) (Insolvency) No. 792 of 2021 10. This Appeal has been filed by Department of State Tax, challenging the order dated 22nd June, 2021. The Appellant s case is that the Corporate Debtor is liable to pay GST from the period July 2017 to March 2020, which is Rs.80,60,39,949/-. Out of the above GST dues, the Resolution Professional has admitted claim of Rs.56,85,78,421/-, vide List of Creditors published on the official website of Corporate Debtor. The Resolution Professional has admitted the interest upto the date of commencement of CIRP and rejected the post CIRP GST and interest and penalty. The Appellant was not party to I.A. No.2081 of 2020. The Adjudicating Authority has accepted the Resolution Plan, which presumed the claim of the Appellant to be NIL. The Resolution Plan mentions that the net worth of the Corporate Debtor would be insufficient t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted claim with the IRP on 26.09.2019 in Form-B in respect of EPF dues of Rs.24,40,65,594/-, which was rejected by IRP on 27.09.2019. The Appellant issued a letter to IRP for status of claim and also sent reminder, but no reply has been received from IRP. The Plan was approved on 22.06.2021 wherein no provision has been made for EPFO dues. 13. We have heard learned Counsel for the Appellant(s), learned Counsel appearing for Resolution Professional, learned Counsel for the Committee of Creditors and the learned Counsel appearing for Successful Resolution Applicant. 14. The submissions, which have been advanced on behalf of the Appellant(s) can be divided into two groups. The first group of submission are on behalf of employees and workmen of the Jet Airways (India) Limited and the second group of submissions are on behalf of Appellant(s) who are Operational Creditors (other than employees and workmen). The submissions on behalf of employees and workmen have been led by Shri Vikas Mehta, learned Counsel. We may first notice the submissions, which have been advanced on behalf of the employees and workmen. 15. The learned Counsel for the Appellant(s) submits that provident fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crue to an employee and thus, is in the nature of property. The Resolution Plan cannot contravene provisions of any law for the time being in force. The Resolution Plan contravenes provisions of Section 30, sub-section (2)(e) of the Code. 16. The learned Counsel for the Appellant(s) submitted that this Tribunal can exercise its jurisdiction of judicial review in setting aside the Resolution Plan or remitting the Plan to CoC, since the Plan contravenes statutory and mandatory provisions of Section 30, sub-section (2) and (4). The learned Counsel for the Appellant(s) in support of his submission stated that the Adjudicating Authority and this Tribunal could exercise jurisdiction to interfere with the Resolution Plan, when the Plan contravenes the mandatory provisions of the Code, i.e., Section 30, sub-section (2)(b) and (e). The learned Counsel for the Appellant has referred to judgment of the Hon ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank (2019) 12 SCC 150 and the judgment of the Hon ble Supreme Court in (2020) 8 SCC 531 Committee of Creditors Essar vs. Satish Kumar Gupta. To support his submission in respect of Section 36, sub-section (4)(a)(iii), learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be applied for denying the payment to workmen and employees subsequent to 20.06.2019, since the workmen and employee were in the rolls of the Corporate Debtor and were not allocated any duties by the Resolution Professional. The dues of Rs.715 crores have been completely wiped out, which dues must have also increased upto the date of approval of Resolution Plan. It is further submitted that Section 53, sub-section (1), treats dues of Secured Creditor to rank equally with dues of 24 months of the workmen s dues. The Resolution Professional while computing the entitlement of the workmen has treated the entire financial debt of the secured creditors, whereas the financial debt only to the extent of value of security interest ought to have been considered. The interest of secured creditor is restricted to the value of their security under Section 53(1)(b)(ii). In view of treating the entire financial debt of the secured creditor under Section 53(1)(b)(ii), the calculation of 24 months of dues of workmen have substantially reduced. The Resolution Professional further has not disclosed the value of secured interest of the secured creditor in the present case. The entire claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrenchment of workmen and employees in the guise of demerger and transfer to AGSL. The contingent Resolution Plan is barred as per judgment of Hon ble Supreme Court in Ebix Singapore vs. Committee of Creditors of Educomp Solutions Limited and Anr. (2021) SCC OnLine SC 707. 20. Ms. Ronita Bhattacharya Bector also contended that the Resolution Plan violates Section 30(2)(b) and Section 30(2)(e). It is submitted that demerger of AGSL and absorption of workers and employees of Jet airways, does not amount to a transfer falling within the scope of the proviso to Section 25FF of Industrial Dispute Act, 1947. The consent of a worker is required in order for him to accept a transfer and agree to waiving his retrenchment compensation under Section 25FF of the Industrial Disputes Act, 1947. The burden of proving the applicability of proviso of Section 25FF lies with the Resolution Professional and Resolution Applicant. The liabilities to pay gratuity, pension and retrenchment compensation and leave encashment etc. cannot be passed on to AGSL. The learned Counsel further submitted that legislative scheme always has been to give priority to payment of provident fund, gratuity and other ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stwhile Management. When such funds are absent, no amounts are exclusively payable to workmen/ employees. Dues of all workmen and employees with effect from 20.06.2019 are not CIRP dues. The Corporate Debtor has ceased its airline operations since April 2019 and it was not a going concern. In order to preserve the assets of Corporate Debtor, certain existing employees were retained in Asset Protection Team (total 50). As regards, the workmen and employees, who were not part of APT, no dues are payable for the CIRP period. The wages of workmen and employees accrued during CIRP period amounting to Rs.715 crores cannot be considered as CIRP costs as the Corporate Debtor was not a going concern and during the CIRP, the workmen and employees did not work during the said period. The salaries and dues of workmen and employees arising prior to insolvency commencement date has been duly admitted by the Resolution Professional. The Resolution Plan has been in accordance with the Section 30, sub-section (2). Form-H was issued by Resolution Professional after being fully satisfied that Plan complies with the requirement as provided in Section 30. The Plan also provided for effective implementa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be paid out of amounts reserved for the assenting financial creditors on a pro rata basis, subject to a maximum amount of Rs.475 Crores. Replying to the submission of learned counsel for the Appellant on Section 36(4)(a)(iii) of the Code, it is submitted that the provision provides exclusion of all sums due to workmen or employees from the provident funds and gratuity funds etc., which constitutes as their assets from the estate of the Corporate Debtor. The said provision uses the term assets and does not by definition cover a liability that is owed to the workmen by the Corporate Debtor. Jet Airways was not maintaining any provident fund and gratuity fund of its own. The provision of Section 36(4)(a)(iii) can come in play in liquidation proceeding and in cases where the fund is being maintained by the Corporate Debtor, whereas in the facts of the present case, there was no fund being maintained by the Corporate Debtor for these statutory dues and same were being directly deposited with the Employees Provident Fund Organization. Accepting the submission of Appellants that preference to be given to the dues that become payable under Employees Provident Fund and Miscellaneous P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he secured financial creditors, and not to limit it to security interest. The legislative intent behind giving priority for such creditors is to promote relinquishment, so as to promote overall value maximization of value of the Corporate Debtor s estate during liquidation. Insofar as submission that the Resolution Plan is contingent, is also not correct. Condition precedent referred under Clause 7.6.1 of the Resolution Plan relate to obtaining the statutory approvals, which are imperative to be fulfilled, in order to ensure successful revival of the Corporate Debtor. The judgment of Hon ble Supreme Court in Ebix Singapore (Supra) is clearly distinguishable in the facts of the present case. The scheme of demerger is also valid under the Code. The Resolution Plan does envisage a business plan for AGSL by providing for inter alia the Corporate Debtor to transfer of identified related assets book valued at approx. Rs.10 Crores as well as the ground support equipment, after it has received the necessary approvals, to enable AGSL, to start operations. The Adjudicating Authority as well as this Appellate Tribunal does not have the jurisdiction to review or reverse the commercial wisdom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the employees and workmen would have voted in its favour, which ultimately was not approved. Dues of all workmen and employees after initiation of CIRP are not CIRP cost. Only 50 workmen and employees who were retained are entitled to receive salary and other benefits as CIRP cost. The submission of the Appellant that the plan and the scheme of demerger according to which all workers and employees except 50 employees are being transferred to AGSL, amounts to retrenchment as per Section 25F of the ID Act, hence, the Appellants were entitled for retrenchment compensation, is not correct. It is submitted that there was no termination of the employment of the workmen/employees, hence, no question of retrenchment compensation arises. The Resolution Plan falls squarely within the four corners of the proviso to Section 25FF. Since, the service of the workmen has not been interrupted by the transfer and other conditions were fulfilled, the scheme of demerger under the Resolution Plan is neither contrary to law nor against the contours of IBC. The submission of the Appellant that the workmen and employees were entitled to provident fund and gratuity fund in full by virtue of Section 36(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d employees). As noted above, Department of State Tax has filed Company Appeal (AT) (Ins.) No. 792 of 2021. Company Appeal (AT) (Ins.) No. 361 of 2022 has been filed by Concor Air Ltd. and Company Appeal (AT) (Ins.) No. 987 of 2022 has been filed by Regional Provident Fund Commissioner and other Operational Creditors. Learned counsel for the Appellants in support of the above appeals contend that Operational Creditors have filed their claims which are reflected in the List of Creditors maintained by the Resolution Professional. It is submitted that Resolution Plan is in violation of Section 30(2)(b). 27. Learned counsel appearing for the Appellant in the appeal filed by Department of State Tax contends that the name of Department appears in the list of creditors maintained by the Resolution Professional but note has been made that claim are under dispute which are pending before various authorities and appeals. It is contended that charge has been created in favour of State Tax Department by operation of law for the adjudicated amount of Tax payable by the Corporate Debtor. State Tax Department has security interest and it is a secured creditor. The Adjudicating Authority commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Creditors by allocating an amount of Rs.15,000/-. 31. Replying to the submission made on behalf of learned counsel appearing in Company Appeal (AT) (Ins.) No. 361 of 2022 Concor Air Ltd., it is submitted that claim as Operational Creditor of the Concor Air Ltd. was admitted by the Resolution Professional for an amount of Rs.82,61,378/-. It is submitted that the decision regarding feasibility and viability of the Resolution Plan vests with the Committee of Creditors which takes into consideration all aspects of the plan including distribution of funds to various claimant of the Corporate Debtor. The Committee of Creditor has approved the plan with 99.22% majority and all the Operational Creditors have been allocated similar fixed amount, hence, there is no error in the Resolution Plan which may warrant any interference. The plan does not violates Section 30(2)(b). 32. We have considered submissions of learned counsel for the parties and perused the record. 33. From the submissions of learned counsel for the parties and the materials on record following questions arise for consideration in these appeals: QUESTIONS I. What is the extent and the limitation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Creditors (other than workmen/employees) in the resolution plan can be held to be fair and equitable and deserves no interference by this Appellate Tribunal? XI. Whether the claim of Regional Provident Fund Commissioner verified to the extent of Rs.24,40,65,594/- arising out of an order dated 17.10.2018 passed under Section 14B of Employees' Provident Funds Miscellaneous Provisions Act 1952 can be treated as secured debt and the Appellant was entitled to receive the amount as secured creditors? XII. Whether the claim of Department of State Tax which was submitted within time created a charge in favour of the Department on the assets of the Corporate Debtor by virtue of operation of law and the State Tax Department has the security interest and is a secured creditor? XIII. Reliefs, if any, to which the appellants are entitled? QUESTION - I 34. Section 31 of the Code provides for approval of Resolution Plan. Section 31(1) provides as follows: 31(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d processes within the timelines prescribed by the I B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the adjudicating authority. That is made nonjusticiable. x x x 55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan as approved by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority dissenting financial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority under Section 31 of the I B Code dealing with approval of the resolution plan. 39. Next judgment which need to be noticed is judgment of Hon ble Supreme Court in Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta Ors., (2020) 8 SCC 531 . Justice Nariman referred to and relied on the judgment in K. Sashidhar s case (supra). In Para 65, 72 and 73 following has been laid down: - 65. As has already been seen hereinabove, it is the Adjudicating Authority which first admits an application by a financial or operational creditor, or by the corporate debtor itself under Section 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code, and as expounded upon by our judgments in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation . We, in the present case, are concerned with clause (iii) of sub-section 4(a) which is all sums due to any workman/employee from the provident fund, pension fund or the gratuity fund . 45. A plain reading of the above provision indicate that what is excluded from the liquidation estate are sums due to any workman or employee from the provident fund, pension fund and gratuity fund. Thus, sums due to any workman from the above funds are excluded from the liquidation estate. Legislative intent is clear that any sums due to any workman from aforesaid fund are excluded and cannot be used for recovery in the liquidation. The object is that sums due to any workman and employee from the aforesaid funds should not be used for recovery in liquidation for dues of other creditors since those dues are exclusive to workmen and employees. 46. Learned counsel for the Appellant has relied on Report of the Bankruptcy Law Reforms Committee, November, 2015 . He has referred to Para 5.5.5. The Committee opined that assets held by the entity in trust, such as employee pension must be kep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee from the provident fund, the pension fund and the gratuity fund should not be included in the liquidation estate assets and estate of the bankrupt. In view of the above the Committee decide that the Clause 36(4)(a)(iii) may be substituted by the following: all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund Similarly, the following new sub-Clause 155(2)(d) may be added after Clause 155(2)(c). all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund. Clause 155(2)(c) may accordingly be renumbered 155(2)(d). 48. Learned counsel for both the parties have referred to and relied on various judgment of this Tribunal as well as the Hon ble Supreme Court in the above context which need to be noticed by us. The first judgment which has been relied by the Appellant is judgment of this Tribunal in Company Appeal (AT) (Ins.) No.396 of 2019, State Bank of India vs. Moser Baer Karamchari Union Anr. . In the above case, order of liquidation was passed by the Adjudicating Authority in which proceeding an application was filed by Moser Baer Karamchari U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the aforesaid funds i.e., the provident fund, the pension fund and the gratuity fund do not come within the meaning of liquidation estate for the purpose of distribution of assets under Section 53, we find no ground to interfere with the impugned order dated 19th March, 2019. 49. In the above case, this Tribunal approved the decision of the Adjudicating Authority by which the Adjudicating Authority directed that the provident fund, pension fund and gratuity fund do not come within the meaning of liquidation estate which has been specifically noticed in Para 25 of the judgment, as extracted above. 50. Next judgment which we need to notice is judgment of Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. Ors., Company Appeal (AT) (Ins.) No. 354 of 2019 Other Appeals . Above was a case where Resolution Plan was approved by the Adjudicating Authority. One of the Appeal was filed by the Regional Provident Fund Commissioner. It was submitted in the Appeal that Successful Resolution Applicant was supposed to pay the total provident fund amount but only part of the amount has been allowed by the Resolution Professional. Section 36(4)(a)(iii) was reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER We find no merit in this appeal. The Civil Appeal is, accordingly, dismissed. 52. In the above case, it is clear that the case of the Regional Provident Fund Commissioner was that the total provident fund amount has not been included in the Resolution Plan whereas the Successful Resolution Applicant has contended that Principal Amount of provident fund has been taken in consideration, whereas the order of levying of interest by the PF Authority post Corporate Insolvency Resolution process has not been included. This Tribunal held that no provision of the Employees Provident Funds and Miscellaneous Provision Act, 1952 is in conflict with the provisions of I B Code and direction was issued to pay the full amount of provident fund by the Successful Resolution Applicant. 53. Learned counsel for the Respondents have placed reliance on two other judgments of this tribunal rendered by two member bench i.e. judgment of this Tribunal in Company Appeal (AT) (Ins.) No. 1229 of 2019, Mr Savan Godiwala, the liquidator of Lanco Infratech Limited vs. Apalla Siva Kumar . In which case, the Adjudicating Authority has directed the Liquidator to pay gratuity to the employees. An a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard. 17. 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 held in the above case that 53(1)(b)(i) of the I B Code, regarding distribution of assets, relating to workmen s dues is confined to a period of 24 months, preceding the liquidation commencement date. This question as already been decided that Gratuity Fund does not form the part of the liquidation asset. 18. Therefore, the question of distribution of the Gratuity Fund in order of priority, provided under Section 53(1) of the Code doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich can be drawn is that Pension Fund, Gratuity Fund and Provident Fund can't be utilised, attached or distributed by the Liquidator, to satisfy the claim of other creditors. Sec 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate. In a case, where no fund is created by a company, in violation of the Statutory provision of the Sec 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s admitted by Resolution Professional and reflected in the Resolution Plan. In appeal enhanced claim of Rs.2,84,69,497/- was sought to be raised which was not accepted by this Appellate Tribunal. Further the Judgment of this Tribunal in above case is based on Judgment of Savan Godiwala which is pending consideration before Hon ble Supreme Court. 57. Learned counsel for the Appellant has relied on Judgment of this Tribunal in Sikander Singh Jamuwal vs. Vinay Talwar Ors., Company Appeal (AT) (Ins.) No. 483 of 2019 , decided on 11.03.2022. In the above case, an appeal was filed by ex-employee of Respondent No.3, Corporate Debtor, challenging the order dated 02.04.2019 passed by the Adjudicating Authority approving the resolution plan. Grievance of the Appellant was that they have not been made the full payment of provident fund due to the Corporate Debtor. Other grounds for challenge were also raised. This Tribunal while considering the appeal considered provisions of Section 36(4) and Section 53 of the Code. This Tribunal placed reliance on the judgment of Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. (Supra) and issued following directions in Para 13(f): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Ltd. vs. Rainbow Papers Ltd. (Supra). The judgment of State Bank of India vs. Moser Baer Karamchari Union was a case relating to liquidation proceeding, in which proceeding, relying on Section 36(4)(a)(iii) the Adjudicating Authority has directed the Liquidator to make the payment of provident fund, pension fund and gratuity fund. The basis of judgment of this Tribunal in State Bank of India s Case was that the I B Code will have overriding effect and the Section 53(1) (b) read with Section 36(4) will have overriding effect on Section 326(1) (a), including the Explanation mentioned below Section 326 of the Companies Act, 2013. Explanation to Section 326 of the Companies Act, 2013 is as follows:- Explanation.-For the purposes of this section, and section 327- (a) workmen'', in relation to a company, means the employees of the company, being workmen within the meaning of clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947); (b) workmen's dues'', in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:- (i) all wages or salary including wages payable for tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question which has arisen before us is with regard to payment of provident fund and gratuity which is due to an applicant. 62. Three Member Bench judgment in both State Bank of India vs Moser Baer Karamchari Union and Another (Supra) and Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. (Supra) where this Tribunal has categorically held that provident fund has to be paid to workmen and employees in full and that cannot be made subject to distribution under waterfall mechanism of Section 53(1). Hon ble Supreme Court has dismissed the appeal against the judgment of the Tribunal in Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. , as noted above. 63. Learned counsel for the Respondent has relied on two two members judgments delivered by this Tribunal in Sawan Godiwala vs. Apalla Siva Kumar and Regional Provident Fund Commissioner, Employees Provident Fund Organisation vs. Vandana Garg (Supra) where direction issued by the Adjudicating Authority for payment of provident fund was interfered with by this Appellate Tribunal. The judgment of Sawan Godiwala only refers to the judgment of State Bank of India vs Moser Baer Karamchari Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable towards provident fund, gratuity and pension. Learned counsel appearing on behalf of the appellants has taken us to Section 3(36); Section 5(13); Section 5(14); Section 5(23); Section 17, Section 18; Section 19; Section 20; Section 25; Section 33(7); Section 36(4) and Section 53 of the IB Code. 65. Hon ble Supreme Court has noticed all provisions of I B Code including Section 36(4) and Section 53. While considering the claim of dues of employees and workmen towards provident fund, pension fund and gratuity following was laid down by Hon ble Supreme Court in Para 53 and 54:- 53. Now so far as the dues of the workmen/employees on account of provident fund, gratuity and pension are concerned, they shall be governed by Section 36(4) of the IB Code. 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be paid to the employees and workmen out of such provident fund, gratuity fund and pension fund, if any, available. Thus, it is clear that if any provident fund, gratuity fund and pension fund is available with the Corporate Debtor, the share of employees and workmen has to be paid from the said fund which has to be kept out of the liquidation process. Thus, if the claim of workmen/employees regarding payment of provident fund, gratuity fund and pension fund can be satisfied from the fund maintained by the Corporate Debtor that has to be kept out of the liquidation and cannot be utilized for distribution amongst other stakeholders. 68. The judgment of Hon ble Supreme Court as relied by learned counsel for the Respondent also in Para 53 clearly held that Section 53(1) of the Code shall not be applicable to such sums, which are to be treated outside the liquidation process and liquidation estate assets under the Code. Direction issued by Hon ble Supreme Court in Para 54(i) was with regard to wages and salary of the workmen/employees of the Corporate Debtor during the CIRP period and under direction (ii) at Para 54, Hon ble Supreme Court directed in reference to Section 36(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to indicate that the Corporate Debtor has any rules /provisions for payment of pension, hence, no direction with regard to pension need to be issued. 71. In view of the aforesaid discussion, we arrive at following conclusions: (i) The workmen and employees are entitled for payment of full amount of provident fund and gratuity till the date of commencement of the insolvency which amount is to be paid by the Successful Resolution Applicant consequent to approval of the Resolution Plan in addition to the 24 months workmen dues as the workmen is entitled to under Section 53(1)(b) of the Code. It is made clear that in addition to part amount of provident fund and gratuity as proposed in Resolution Plan to workmen, Successful Resolution Applicant is obliged to make payment of balance unpaid amount of provident fund and gratuity to workmen and employees. 72. Our answer to Question II and III is as follows: (i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii). (ii) The workmen are entitled to receive their dues from the Corporate Debtor for period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of provident funds, gratuity funds or a pension fund and belonging to be maintained by Corporate Debtor, are assets on which employees and workmen have right although assets are in possession and control of the Corporate Debtor. The above mentioned assets, thus, are not to be taken control by IRP, after initiation of CIRP. Hence, the said funds, i.e., provident fund, pension fund and gratuity fund maintained by the Corporate Debtor, have to be utilized fully for payment of provident fund, pension fund and gratuity fund of the workmen and employees and thus, these assets cannot be included in the Information Memorandum as the assets of the Corporate Debtor, while inviting the Resolution Plan. 77. Now we look into the facts of the present case. The Resolution Professional has filed an additional affidavit dated 25.07.2022 as directed by this Tribunal vide its order dated 22.07.2022. In paragraph 11.1 while dealing with provident fund, following has been stated: 11.1 I say that the amounts deposited by the erstwhile management of the Corporate Debtor into Employee Provident Fund Organisation ( EPFO ) do not form part of the estate of the Corporate Debtor and accordingly, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the Resolution Professional. The Resolution Professional in paragraph 8.3 of the additional affidavit dated 25.07.2022 has given details of workmen dues (for the period of 24 months) ICD as well as employees dues (for the period of 12 months) ICD in paragraph 8.3 is as follows: 8.3 It is pertinent to note that under Section 30(2)(b) read with Section 53 of the Code: (i) workmen's dues for the period of twenty-four months preceding the ICD rank pari passu with the dues of the financial creditors terms of Section 53(1)(b); and (ii) employees' dues for the period of twelve months preceding the ICD are to be calculated in terms of Section 53(1)(c). I say that the dues of the workmen (for the period of twenty-four months) and employees (for the period of twelve months) under Section 53 of the Code are as follows: Details of dues of workmen (24 Months) and employees (12 Months) In INR Cr. Category Salary Provident Fund Leaves Gratuity Total Workmen 411.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead to violation of Section 30(2)(e), hence, to save the plan the above payments have to be made. QUESTION IV 81. As noted above, law is well settled, i.e., Resolution Plan, which requires approval by Adjudicating Authority must comply the requirement as provided in Section 30, sub-section (2) of the Code. Section 30, subsection (2) provides as follows: 30. Submission of resolution plan. - (1) A resolution applicant may submit a resolution plan 2[along with an affidavit stating that he is eligible under section 29A] to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; [(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12, along with a compliance certificate in Form H of the Schedule and evidence of receipt of performance security required under sub-regulation (4-A) of regulation 36-B). 84. After approval of the Resolution Plan by the Committee of Creditors, a compliance certificate in Form-H is required to be filed before the Adjudicating Authority. After approval of the Resolution Plan, Resolution Professional has filed Form-H along with his application for approval of Resolution Plan, which has been brought on record by the Resolution Professional along with additional compilation filed on 06.07.2022. FormH mentions the liquidation value as Rs.2555,21,40,000/-. Form-H in Clause-7 refers to Annexure-A. Note-3 deals with breakup of payments to workmen and employees. It is relevant to extract Note-3, which is to the following effect: Sl. No. Particulars Amount (INR Lakhs) Remarks 1 Total amount proposed by Resolution Professional 52,00 Please refer S. No.11 in the table in Annexure A for details 2 Add: Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be paid and shall be given priority in payment over Financial Creditors as is already reflected in the Implementation Schedule in Clause 7.7 below. The entire payment to the Employees/ Workmen dues including dues of Authorized Representatives of Employees/ Workmen is being made in priority within 175 (one hundred seventy five) days from the Effective Date. 87. The Resolution Plan clearly contains an undertaking of the Resolution Applicant that liquidation value due to Operational Creditors, i.e., employees and workmen shall be paid. When liquidation value has been estimated by Resolution Professional in Form-H as Rs.113 crores for workmen and employees, we fail to see the reason for allocating only Rs.52 crores towards dues of workmen. Hence, the workmen are entitled to at least Rs.113 crores, which is their minimum liquidation value estimated by Resolution Professional. The above fact clearly mandates direction to be issued to Resolution Applicant to pay at least Rs.113 crores towards workmen dues as per their entitlement under Section 30, sub-section (2) (b) read with Section 53(1) of the Code. 88. We, thus, arrive at a conclusion that had there not been an undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched: Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if-- (a) the service of the workman has not been interrupted by such transfer; (b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and (c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer. 91. We may also first notice certain clauses of Resolution Plan. The Scheme of demerger is contained in Clause 6.4.2 (i), which is as follows: 6.4.2 (i) Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment by Corporate Debtor to AGSL will be at nominal consideration in compliance with Applicable Laws. (vii) The Corporate Debtor will offer 76% of its shareholding in AGSL to the employees Trust and retain the remaining 24% shareholding. If the Trust fails to exercise or refuses to accept such offer within 30 (thirty) days from the Approval Date or challenges the implementation of this Resolution Plan, then the Corporate Debtor will retain 100% shareholding in AGSL and deal with AGSL in such manner as deemed appropriate by it, without any interference of any other person. (viii) The Corporate Debtor shall not be required to make any separate application before the Adjudicating Authority under the provisions of the IBC for the demerger as stated herein and the approval of this Resolution Plan by the Adjudicating Authority along with the Scheme shall be treated as if the necessary approvals required to have been obtained under the CA 2013, including the consent of shareholders or creditors of the Corporate Debtor and AGSL and application for demerger to Adjudication Authority or any other person/ appropriate authority, as required under CA 2013 (including Chapter XV of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum value due and payable to such employees and workmen (under Section 30(2) of the IBC); and (ii) the CIRP costs admitted by the Resolution Professional, subject to a maximum of Rs. 475 Crores. 92. The learned Counsel for the Resolution Applicant referring to Demerger Scheme submits that case of retrenchment can be made out only when there is termination by the employer. The learned Counsel for Successful Resolution Applicant relied on Clause 8 of Scheme of Arrangement between Jet Airways and AGSL, which Scheme was filed as part of the Resolution Plan. Clause 8.1 of the Scheme provides: 8.1 On the Scheme coming into effect, the Demerged Employees will become workmen and employees of Resulting Company with effect from the Appointed Date on terms to be notified by the Resulting Company. The Resulting Company shall make best efforts to retain the Demerged Employees, subject to assessment and due diligence on the basis of their competencies and abilities to perform their functional obligations. It is clarified that no employee or workman of Demerged Undertaking will be laid off in contravention to the law or of the contracts already entered into between the Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that non-compliance of provisions of Employees' Provident Funds Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972. It is an admitted case that Corporate Debtor was covered by 1952 Act and Employees Provident Fund Scheme and it was statutory obligation of the Corporate Debtor to deposit provident fund contribution to EPFO. Resolution Professional in its affidavit dated 25.07.2022 has stated that no contribution was deposited after February, 2019, thus depositing of the provident fund contribution till 20.06.2019 was statutory obligation of Corporate Debtor and making no provision in plan for unpaid provident fund dues may lead to breach of Section 30(2)(e). Further, the payment of Gratuity Act, 1972 also cast a statutory obligation on Corporate Debtor to make payment of Gratuity for those workmen and employee for which it became due till insolvency commencement date. 95. The Successful Resolution Applicant in plan has not made provision of full payment of provident fund dues which were due till insolvency commencement date. Ends of justice be served in directing the Successful Resolution Applicant to move payment of full provident fund dues which were u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticed that the Scheme, which was contemplated was to retain only 50 workmen, forming part of Asset Protection Team and rest of the workmen and employees were demerged to another subsidiary, i.e., AGSL. Insolvency Resolution Process Costs defined in Section 5(13) in following words: (13) insolvency resolution process costs means (a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board; 100. As per above definition any costs incurred by the Resolution Professional for running the business of the Corporate Debtor as a going concern is CIRP Costs. The Resolution Professional has not utilized services of workmen and employees apart from 50 employees and workmen during the CIRP period. The issue, which has been raised is fully covered by the Hon ble Supreme Court ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security interest has to be taken into consideration. Section 53(1)(a) and (b) is as follows: 53. Distribution of assets. - (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period as may be specified, namely: - (a) the insolvency resolution process costs and the liquidation costs paid in full; (b) the following debts which shall rank equally between and among the following: (i) workmen s dues for the period of twentyfour months preceding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52; 103. Section 53(1)(b)(ii) uses the expression debts owned to a secured creditor . The plain meaning of the expression is that debt owned to secured creditor has to be taken into consideration. The submission of the Appellant(s), if accepted, shall be adding words to Section 53(1)(b)(ii), i.e., by adding word value of secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity for distribution of plan amount as per voting share found approval by this Tribunal in Paragraph 4 and 5 of the Judgement. This Tribunal laid down as under: 4. The objection was raised by the Appellant Bank and it wanted that distribution should be done as per the Option-3. The CoC by majority having taken decision to distribute the amount as per Option-1 by 97.61% vote, we see no reason to take a different view from one which has been taken by the Adjudicating Authority. The Adjudicating Authority in paragraph 40 has made following observations:- 40. Both these contentions of learned counsel for the applicant are not tenable because the distribution of the amount was made by the Committee of Creditors resting on total dues of voting share of individual creditors which is neither whimsical nor arbitrary in any manner. Although the applicant gave a dissenting vote for approval of the Plan, based on the reason that distribution of resolution fund was discriminatory against it and despite the plea that it was entitled to the equal share in regard to the distribution of the resolution fund on the value of the assets of the corporate debtor as security. However, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in subclauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of subclause (b) which refers to dissentient financial creditors. Ms Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, preamendment, secured financial creditors may cram down unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which with respect to debt owed to secured creditor, in the event secured creditor relinquishes the security in the manner set out in Section 52. The Committee in its report nowhere even suggested that secured financial creditor is entitled to distribution as per value of security. The conclusion of the committee is that the priority under Section 53(1)(b)(ii) shall be only to the extent of security interest of the secured creditor. The secured creditor cannot claim priority under Section 53(1)(b)(ii) of the whole debt where only part of the debt is secured, the above report of the Committee in no manner helps the appellant to support the submission which is canvassed before us. 106. The Report of the Insolvency Law Committee (February 2020) has opined that priority under Section 53(1)(b)(ii) should be only to the extent of the security interest of the Secured Creditor, but in the earlier part of the Report, it was opined that provision does not necessitate any further amendment. When no amendments have been made in the statute, i.e., Section 53(1)(b)(ii), the provisions cannot be interpreted in any manner except the plain and literal reading of the provisions. The Report of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by this Tribunal. Hon ble Supreme Court held that approval by the Adjudicating Authority under Section 31(1) of the Code has effect of making the Resolution Plan binding on all the stakeholders. It has been held that the Resolution Plan become binding between the CoC and Successful Resolution Professional after it is approved by the CoC. In Para 166 and 172 following has been laid down: 166. The binding nature, as between the CoC and the successful Resolution Applicant, of the Resolution Plan submitted for approval by the Adjudicating Authority is further evidenced from the fact that the CoC issues a LOI to a successful Resolution Applicant stating that it has been selected as the successful Resolution Applicant and its Plan would be submitted to the Adjudicating Authority for its approval. The successful Resolution Applicant is typically required to accept the LOI unconditionally and submit a PBG. Sequentially, the issuance of an LOI is followed by its unconditional acceptance by the successful Resolution Applicant. 172. Based on the plain terms of the statute, the Adjudicating Authority lacks the authority to allow the withdrawal or modification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Monitoring Committee. We, thus, are of the view that the judgment of Hon ble Supreme Court in Ebix Singapore does not help the Appellant to support his contention that the Resolution Plan is liable to be rejected due to condition precedents. QUESTION - X 110. Allocation of the amount to the Operational Creditors including the employees has been challenged by the Appellant. The submission is that the allocation of amount to employees of the Corporate Debtor and other Operational Creditors (apart from workmen) is neither fair nor equitable, hence, clearly violates provisions of Section 30(2) and the plan deserves to be set aside on this ground alone. We have noticed above that the Adjudicating Authority has ample jurisdiction to interfere with the resolution plan which violates, does not comply with, any of the provisions of Section 30(2). The question to be answered is as to whether the resolution plan violates Section 30(2) on the ground that Operational Creditors including the employees except workmen have been allocated only an amount of Rs.15,000/- each. Resolution Professional in his Additional Affidavit dated 25.07.2022 has mentioned in tabular form the claim admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the resolution plan by the CoC can be interfered with by the adjudicating authority (NCLT), has been set out in Section 31(1) read with Section 30(2) and by the appellate tribunal (NCLAT) under Section 32 read with Section 61(3) of the I B Code. No corresponding provision has been envisaged by the legislature to empower the resolution professional, the adjudicating authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the commercial decision of the CoC muchless of the dissenting financial creditors for not supporting the proposed resolution plan. Whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. 113. This principle was again reiterated by the Hon ble Supreme Court in Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta Ors. (Supra). In Para 70, the Hon ble Supreme Court has held that minimum value that is required to be paid by the Operational Creditor is set up under Section 30(2)(b) apart from the minimum value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimated realizable value of the assets of the corporate debtor, if they were to be exchanged on the insolvency commencement date between a willing buyer and a willing seller in an arm s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion. However, it was felt that assessment and payment of the fair value upfront, may be difficult. The Committee also discussed the possibility of using 'resolution value' or 'bid value' as the floor to be guaranteed to operational creditors but neither of these were deemed suitable. 18.4 It was stated to the Committee that liquidation value has been provided as a floor and in practice, many operational creditors may get payments above this value. The Committee appreciated the need to protect interests of operational creditors and particularly Micro, Small and Medium Enterprises ( MSMEs ). In this regard, the Committee observed that in practice most of the operational creditors that are critical to the business of the corporate debtor are paid out as part of the resolution plan as they have the power to choke the corporate debtor by cutting off supplies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of the Code. The facts of the present case depicts that amount paid to the Operation Creditor except workmen is almost nil. This Tribunal while hearing an appeal against approval of Resolution Plan where Operational Creditors were paid negligible amount, after noticing the relevant provisions of the Code had made observations suggesting consideration for amendment in the I B Code so as to fulfil the objective of equitable and fair distribution. It is useful to extract the observations made by this Tribunal in Company Appeal (AT) (Ins.) No. 62 of 2022, Damodar Valley Corporation vs. Dimension Steel and Alloys Ors. , where in Para 31 following observations have been made: 31. The Operational Creditors normally had claims pertaining to supply made to the Corporate Debtor, which amounts normally as compared to the Financial Creditors' claim are less. Operational Creditors consist of various type of industries including MSMEs, public sector organization and small entities. Altogether denying their claim or receiving ineligible amount in the Resolution Plan causes hardship and misery to the Operational Creditors. Even the statutory dues, which by virtue of law as it exists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were not entitled to receive any amount. Similarly, other Operational Creditors whose liquidation value was nil were not entitled to receive any amount under Section 30(2)(b). This conclusion is subject to decision with regard to Operational Creditor, Provident Fund Commissioner whose claim we will consider hereinafter. QUESTION - XI 117. In the appeal filed by the Regional Provident Fund Commissioner, it has been pleaded that the claim was filed by the Appellant for an amount of Rs.24,40,65,594/- towards damages under Section 14B of Employees' Provident Funds Miscellaneous Provisions Act 1952, as per the order dated 17.10.2018. It is further mentioned that interest under Section 7Q was also levied of Rs.12,85,92,763/-, which amount was paid by the establishment. The amount which was claimed by the Appellant was fully admitted by the Resolution Professional. List of Creditors mentions the admitted amount of the Appellant. The Appellant has filed his claim in Form B, which Form B is at page 102 to 104 of the Appeal. The Appellant s claim was not in the nature of workmen dues. The claim was also with regard to damages imposed under Section 14B of the 1952 Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. Ors. (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner Others (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity. QUESTION - XII 120. The Department of State Tax has filed an appeal challenging the approval of resolution plan. The case of the Appellant is that the claim of the Department of State Tax was admitted by the Resolution Professional with a note under disputes which are pending before various authorities and/or under appeals and the liability of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aharashtra GST Act, 2017 shall not give any precedence to the charge of claim of the Appellant. In this context, we may refer to a recent judgment of Hon ble Supreme Court in Sundaresh Bhatt, Liquidator of ABG Shipyad vs. Central Board of Indirect Taxes and Customs, 2022 SCC Online SC 1101 . In the above case, before the Hon ble Supreme Court submission was raised relying on Section 142A of the Customs Act. Section 142A has been extracted in Para 31 of the judgment, which is to the following effect: 31. In order to complete the discussion on the Customs Act, it may be necessary to take note of Section 142A extracted below: 142A. Liability under Act to be first charge.- Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assesse or any other person under this Act, shall, save as otherwise provided in section 529A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993), and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be first charge on property. Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person. 126. The Hon ble Supreme Court held that Section 48 of the Gujarat Value Added Tax, 2003 is not contrary to Section 53 of the I B Code and the State was held to be secured creditor on the strength of the charge under Section 48. In Para 55, 56 57 of the judgment following has been laid down: 55. In our considered view, the NCLAT clearly erred in its observation that Section 53 of the IBC over-rides Section 48 of the GVAT Act. Section 53 of the IBC begins with a non-obstante clause which reads :- Not withstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority........... 56. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd employees were entitled for payment of unpaid provident fund dues till the insolvency commencement date, which was statutory obligation of the Corporate Debtor to deposit with the EPFO. The Resolution Professional in his additional affidavit dated 25.07.2022 has stated that last deposit of the provident fund was made in February 2019. Thus, all workmen are entitled for payment of their full unpaid provident dues till the insolvency commencement date, after adjusting the amount of provident fund received by them under the Resolution Plan. The payment of Rs.113 crores, as per the case of Resolution Professional also contains the payment towards provident fund dues. The payment of amount to the workmen regarding salary of 24 months as well as the provident fund, gratuity etc. were not paid in full. In view of provisions of Section 53(1)(b), we having held that payment of provident fund has to be in full, the workmen are entitled to receive unpaid provident fund dues in full minus the amount which they have already received under the Resolution Plan towards provident fund and gratuity dues. 130. Now coming to the employees of the Corporate Debtor, the liquidation value of the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other parts of the Resolution Plan have not been found to infirm in any manner, we do not find any case for interfering with the order approving the Resolution Plan. The ends of justice will be served in issuing direction to Successful Resolution Applicant to make payment of provident fund and gratuity to the workmen and the employees as directed above. 134. In result, the Appeal(s) are decided in following manner: (I) The Appeal(s) of workmen and employees being Company Appeal (AT) (Insolvency) Nos. 643 of 2021, 752 of 2021, 801 of 2021, 915 of 2021, 771 of 2022 are partly allowed with following directions: (a) Successful Resolution Applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the Resolution Plan to the workmen. (b) The workmen are also entitled for payment of their gratuity dues as on insolvency commencement date, after adjusting any amount towards gratuity paid under the Resolution Plan. It is made clear that entitlement of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
