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TMI Blog2024 (10) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the CoC not accepted, that amount of Provident Fund and Gratuity dues has to be borne by the Successful Resolution Applicant independent of Resolution Plan read with Clarificatory Note. It is noticed the amount of Provident Fund and Gratuity as admitted by the Resolution Professional i.e. Provident Fund dues Rs.11.49 Crores and Gratuity dues Rs. 8.84 Crores. The said amount has to be paid as per the Resolution Plan read with the Clarificatory Note. The entitlement of salary from June to November, 2020 has never been accepted nor the employees actually worked. With regard to salary slips of five employees filed with the appeal, learned counsel for the Resolution Professional submitted that the said salary slips were issued on the request of the employees and is not proof of that they had worked. It is submitted that it is the Resolution Professional who has to take decision regarding allowing employees to work during CIRP period. It submitted by the Resolution Professional that certain employees were called to commence the work but the work did not proceed and in the CIRP cost the Resolution Professional has included the certain part of payment of salary to the workmen and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Professional. (ii)In pursuance of publication inviting filing of claim, the management of the Corporate Debtor filed a claim on behalf of the workmen for an amount of Rs.40 Crore. The Resolution Professional admitted the claim of workmen for 24 months before CIRP commencement date for amount of Rs.6.61 Crore and for employees 12 months before CIRP commencement date as Rs.0.93 Crore. (iii)In pursuance of request for Resolution Plan, Resolution Plan was submitted by Respondent No.3 dated 07.02.2022 updated as on 17.03.2022. On certain queries made by the Financial Creditors a Clarificatory Note dated 22.03.2022 was also sent by the SRA to the Resolution Professional. (iv)The Resolution Professional placed the Resolution Plan along with Clarificatory Note before the CoC. In the Resolution Plan, with regard to dues of workmen an amount of Rs.9 Crore was proposed and with regard to employees an amount of Rs.0.49 Crore was proposed. The Resolution Plan along with the Clarificatory Note was considered in the 26th CoC meeting held on 22.03.2022 and 88% members of the CoC voted for approval of the Resolution Plan. (v)The Resolution Professional after approval of the plan by CoC filed I.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for 24 months prior to insolvency commencement date amount to Rs.6.71 Crores and employees wages for the period of 12 months preceding the insolvency commencement date amount to Rs.0.93 Crores. It is submitted that on 03.02.2021, the Resolution Professional received claim of Rs.10.20 Crore from Karam Chand Thapar Bros. Ltd. Provident Fund Trust. It is further submitted that another claim was filed by EPFO Karnal which was subsequent to approval of the Resolution Plan by the CoC, which claim was filed only on 16.03.2023, which was after the Adjudicating Authority reserved judgment on plan approval application on 10.03.2023. The Resolution Professional in its Affidavit, however, has admitted that total Provident Fund dues is Rs.11.49 Crores and Gratuity dues is Rs.8.84 Crores, totaling to Rs.20.33 Crores. It is submitted that the commercial wisdom of the CoC approving the Resolution Plan cannot be questions by the Appellant. Resolution Professional has duly assessed the Resolution Plans and placed the same before the CoC. It is submitted that the judgment of this Tribunal in Jet Airways was not delivered at the time when Resolution Plan was submitted, hence, the law was not crysta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with Provident Fund and Gratuity Dues. It is submitted that Clarification Note dated 22.03.2022, Para 1 sub-clause (vii) has clearly provided that due to operation of law or by any order of any Court or Tribunal or for any other reason if any additional amount is payable to any workman or employees, whether admitted claim or not, crystallized or uncrystalized, known or unknown, present or future, the same shall be paid out of the total financial outlay in order of priority. It is submitted that the Clarificatory Note which was issued by the Successful Resolution Applicant was approved by the Committee of Creditors in the 26th CoC meeting. The CoC who had approved the aforesaid clause contained in the Resolution Plan along with Clarificatory Note is bound to honour the same. Resolution Applicant has clearly contemplated if any additional amount is paid to the workmen or employee known or unknown under any order of Court or Tribunal, the same shall be paid out of total financial outlay and Clause 1(vii) of the Clarificatory Note contemplate the manner of payment. The CoC who has approved the said plan cannot now resile from its undertaking. The Resolution Plan approved by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Plan has been brought on the record by Additional Affidavit filed on behalf of the CoC. Clause 4 of the Resolution Plan deals with Financial proposal . Clause 4.3.1 deals with total financial outlay proposed in the plan, which is Rs.700 Crores. Clause 4.5 of the Resolution Plan deals with Employee/Workmen claim. Clause 4.5.1 and Clause 4.5.2 of the plan is as follows: 4.5.1 As per the Information Memorandum and the information provided in the Virtual Data Room, the total Employee and Workmen dues admitted by the Resolution Professional is about Rs.78.92 Crores (Rupees Seventy Eight Crores And Ninety Two Lakhs). The break-up for Employees and Workmen dues as provided by the Resolution Professional vide email dated July 17, 2021 is mentioned in the table below. (Rs. Crore) Sr. No. Location Employees 12 months before CIRP commencement date Workmen 24 months before CIRP commencement date 1 KPM 0.26 19.78 2 SGU Unit 0.93 6.16 Sub Total (A) 1.19 26.39 Employees dues more than 12 months before CIRP commencement date Workmen dues more than 24 months before CIRP commencement date 1 KPM 8.76 24.44 2 SGU Unit 1.71 16.43 Sub Total (B) 10.47 40.87 Total (A+B) 11.66 67.26 4.5.2 Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Forty Nine Lakhs Only) will be paid by the Resolution Applicant upfront on a pro rata basis. (iv)With respect to the remaining Workmen dues (other than as set out in (ii) and (iii) above), the estimated Liquidation Value of the same is NIL and all such workmen shall be deemed to have relinquished any further claim for any dues. 11.Clause 4.5.2 mentioned that the Resolution Plan provides for payment of workmen liquidation dues to the extent of Rs.9 Crores and payment of Rs.0.49 Crores to employees which shall both be on pro-rata basis based on the admitted claims of the employees and workmen. 12.Learned counsel for the Successful Resolution Applicant has relied on the Clarificatory Note dated 22.03.2022 which was issued by the Successful Resolution Applicant. Clause 1 of the Clarificatory Notes is as follows: 1. Clauses 4.3.1, 4.3.6, 4.4.2, 4.6.2.(b) (e) of the Resolution Plan are summarized below: i.The Total Financial Outlay envisaged in the Resolution Plan is Rs. 700 Crores. ii.The estimated unpaid CIRP Costs as informed by the Resolution Professional is about Rs. 64.82 Crores, as on February 28, 2022, which has been fully provided for in the Total Financial Outlay. iii.Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where Surplus, is further available (after meeting 100% of the CIRP Costs and the payments referred to herein above in para 1.vii) then such undistributed Surplus, shall be distributed pro rata to the assenting Financial Creditors in the form of NCDs and CRPS in the proportion of the payout allocated to them under the Resolution Plan. ix.The Resolution Applicant shall fund additionally upto Rs. 9.37 Crores over and above the Total Financial Outlay to meet the estimated unpaid CIRP Costs only. 13.Learned counsel for the Successful Resolution Applicant placed reliance on Clause 1 (vii), as extracted above.The Resolution Plan as updated on 17.03.2022 along with Clarificatory Note dated 22.03.2022 came to be considered in the 26th CoC meeting held on 22.03.2022. One more clause which is relevant in the Clarificatory Note to be noticed is Clause 6, which provides as follows: 6. This clarificatory note shall be deemed to be an integral part of the Resolution Plan. Kindly note that, in the event of any inconsistency between the terms of this clarificatory note and those of the Resolution Plan, the former shall prevail in relation to matters set out herein. 14.Before the CoC, Voting Agenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or employees, whether admitted claim or not, crystallised or uncrystallised, known or unknown, present or future, the same shall be paid out of the Total Financial Outlay, and the priority is given in Sub-clause (a) and (b). In view of the above, the purport of Clause 1(vii) is extensive and the SRA s intent was that if due to any reason by operation of law or by order of any Court or Tribunal any additional amount is to be paid to the workmen and employees, the same shall be paid out of the total financial outlay. We are of the view that the claim of Provident Fund and Gratuity which are liability to be paid as per law to the workmen are clearly covered by a very wide Clause 1(vii). Further, Clause 6 of the Clarificatory Note clearly mentions that the Clarificatory Note shall be deemed to be part of the Resolution Plan and in event there is any inconsistency between the terms of the Clarificatory Note and those of the Resolution Plan, the Clarificatory Note shall prevail. Thus, the intention of the Resolution Applicant was clear that what is contained in the Clarificatory Note has to be given overriding effect. 17.Learned counsel for the CoC contended that the Clarificatory Note w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Ors. where the Hon ble Supreme Court has laid down that author of the document is the best person to interpret the document. In Para 20 of the judgment following was laid down: 20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the state instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court s interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 23.In the Jet Airways case , this Court held that workmen are entitled for payment of Provident Fund and Gratuity dues and directed that the said amount to be paid by the SRA by virtue of Para 134. Subsequently, an application was filed by the Successful Resolution Applicant in Company Appeal (AT) (Ins.) No. 752 of 2021 seeking clarification of the judgment, which too was disposed of on 02.12.2022, where this Tribunal referring to Clause 6.4.2(e) of the Resolution Plan held that clause has only referred to liquidation value of the workmen and did not contemplate Provident Fund and Gratuity of the workmen. As in the present case, Clause 4.5, which we have noticed above which deals with employee and workmen and liquidation value clearly did not include Provident Fund and Gratuity. However, in the present case, the Clarificatory Note Clause 1 (vii) clearly contemplate inclusion of all additional payments to the workmen and employees consequent to any law, order of the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have duly been included in the CIRP cost by the RP. 27.It has been further stated that entitlement of salary from June to November, 2020 has never been accepted nor the employees actually worked. With regard to salary slips of five employees filed with the appeal, learned counsel for the Resolution Professional submitted that the said salary slips were issued on the request of the employees and is not proof of that they had worked. It is submitted that it is the Resolution Professional who has to take decision regarding allowing employees to work during CIRP period. It submitted by the Resolution Professional that certain employees were called to commence the work but the work did not proceed and in the CIRP cost the Resolution Professional has included the certain part of payment of salary to the workmen and claim of the Appellant for payment of salary from July to November, 2020 cannot be accepted or included in the CIRP cost. 28.When we look into the minutes of meeting of the CoC held on 22.03.2022, 26th CoC meeting, details of CIRP cost till 28th February, 2022 have been included. In Para 4 of the minutes following CIRP cost has been noticed: Other On-going expenditure from 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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