Windingup-Priority to Workman dues

The First and Second Charge Holders cannot be treated equally in cases of Company Liquidation – M/s Tata Iron & Steel Co. Ltd. Vs. M/s Jhalani Tools India Ltd. – Delhi High Court

In this case, Dena Bank’s instant application pertains to Consortium’s second charge on certain assets belonging to the company in liquidation i.e., Jhalani Tools India Limited (JTIL).
The Hon’ble High Court held that Dena Bank’s attempt to prioritize their claims above the claims of the workmen lacks a valid basis. They cannot contend that the Consortium’s second charge should be merged with their first charge. Therefore, to maintain the integrity of the statutory framework and ensure equitable treatment of all creditors, it is crucial to distinguish between first and second charge holders when applying the pari passu principle under Sections 529 and 529A of the Act.
Further, the Hon’ble Court referred judgment in ICICI Bank Ltd v. SIDCO Leathers Ltd & Ors. (2017) ibclaw.in 103 SC and held that it becomes evident that the first and second charge holders cannot be treated equally. Upholding the objection of the second charge holder would upset the priority of the first charge holder, which would go against the provisions of Section 48 of the TP Act.

The First and Second Charge Holders cannot be treated equally in cases of Company Liquidation – M/s Tata Iron & Steel Co. Ltd. Vs. M/s Jhalani Tools India Ltd. – Delhi High Court Read Post »

Wages/Salaries of the Workmen/Employees for the period during CIRP can only be included in the CIRP costs if it is established that the IRP/Resolution Professional managed the operations of the Corporate Debtor as a Going Concern during the CIRP and that the concerned workmen/employees actually worked during the CIRP – Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others – Supreme Court

The issue before Hon’ble Supreme Court is with respect to wages/salaries of the workmen/employees during the CIRP period and the amount due and payable to the respective workmen/employees towards Pension Fund, Gratuity Fund and Provident Fund. Hon’ble Supreme Court held that:

i) that the wages/salaries of the workmen/employees of the Corporate Debtor for the period during CIRP can be included in the CIRP costs provided it is established and proved that the Interim Resolution Professional/Resolution Professional managed the operations of the corporate debtor as a going concern during the CIRP and that the concerned workmen/employees of the corporate debtor actually worked during the CIRP and in such an eventuality, the wages/salaries of those workmen/employees who actually worked during the CIRP period when the resolution professional managed the operations of the corporate debtor as a going concern, shall be paid treating it and/or considering it as part of CIRP costs and the same shall be payable in full first as per Section 53(1)(a) of the IB Code;

ii) considering Section 36(4) of the IB code and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds.

Wages/Salaries of the Workmen/Employees for the period during CIRP can only be included in the CIRP costs if it is established that the IRP/Resolution Professional managed the operations of the Corporate Debtor as a Going Concern during the CIRP and that the concerned workmen/employees actually worked during the CIRP – Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others – Supreme Court Read Post »

Edelweiss Asset Reconstruction Company Ltd. Vs. The Official Liquidator, High Court, Bombay being the Liquidator of Ankur Drugs and Pharma Limited (In Liq.) – Bombay High Court

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Edelweiss Asset Reconstruction Company Ltd. Vs. The Official Liquidator, High Court, Bombay being the Liquidator of Ankur Drugs and Pharma Limited (In Liq.) – Bombay High Court Read Post »

Whether priority given to the dues payable by an employer under Section 11 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is subject to Section 529A of the Companies Act, 1956 in terms of which the workmen’s dues and debts due to secured creditors are required to be paid in priority to all other debts – Employees Provident Fund Commissioner Vs. O.L. of Esskay Pharmaceuticals Ltd. – Supreme Court

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Whether priority given to the dues payable by an employer under Section 11 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is subject to Section 529A of the Companies Act, 1956 in terms of which the workmen’s dues and debts due to secured creditors are required to be paid in priority to all other debts – Employees Provident Fund Commissioner Vs. O.L. of Esskay Pharmaceuticals Ltd. – Supreme Court Read Post »

A DRT acting under the RDDBFI Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after hearing him – Rajasthan Financial Corpn. & Anr. Vs. The Official Liquidator & Anr. – Supreme Court

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A DRT acting under the RDDBFI Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after hearing him – Rajasthan Financial Corpn. & Anr. Vs. The Official Liquidator & Anr. – Supreme Court Read Post »

Whether after a winding up order is passed under Section 446 (1) of the Company Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution, and priority under section 446 (2) and (3) read with sections 529, 529A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal? – Allahabad Bank Vs. Canara Bank & Another – Supreme Court

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Whether after a winding up order is passed under Section 446 (1) of the Company Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution, and priority under section 446 (2) and (3) read with sections 529, 529A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal? – Allahabad Bank Vs. Canara Bank & Another – Supreme Court Read Post »

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