Distribution-Workmen’s due

Whether workmen are entitled to the salary till insolvency commencement date in case of factory layoff/ Closed prior to commencement of CIRP? – Drish Shoes Workers Union Vs. Drish Shoes Ltd. through its RP – NCLAT New Delhi

/ 8 minutes of reading

The Hon’ble NCLAT held that non-computation of salary after lay off by the Resolution Professional cannot be faulted with since the Resolution Professional has no adjudicatory jurisdiction and the Adjudicating Authority has rightly observed that whether the Workers are entitled to claim their dues for the layoff period under provisions of Industrial Dispute Act is not in the domain of the Adjudicating Authority.

Whether workmen are entitled to the salary till insolvency commencement date in case of factory layoff/ Closed prior to commencement of CIRP? – Drish Shoes Workers Union Vs. Drish Shoes Ltd. through its RP – NCLAT New Delhi Read Post »

Can Workmen claim employment for the two years preceding the Liquidation Commencement Date when the Corporate Debtor’s factory was closed without complying with the Industrial Dispute Act, 1947? – Rakesh J Shah and Ors. Vs. Sanjay Kumar Agarwal and Ors. – NCLAT New Delhi

/ 18 minutes of reading

The corporate debtor ceased to work from June, 2010 and according to the case of the Appellants themselves, they worked in the factory till April 2012 only.
The Hon’ble NCLAT held that the NCLT while exercising its jurisdiction on the liquidation process of the corporate debtor is not entitled to enter into issue as to whether the closure of the factory from June 2010 was in violation of the Industrial Dispute Act, 1947.

Can Workmen claim employment for the two years preceding the Liquidation Commencement Date when the Corporate Debtor’s factory was closed without complying with the Industrial Dispute Act, 1947? – Rakesh J Shah and Ors. Vs. Sanjay Kumar Agarwal and Ors. – NCLAT New Delhi Read Post »

Related Parties cannot claim entitlement of any amount in Resolution Plan and cannot claim any discrimination with regard to payments to unrelated Unsecured Financial Creditors – Manav Investments and Trading Co. Ltd. Vs. Pratim Bayal and Ors. – NCLAT New Delhi

/ 16 minutes of reading

Hon’ble NCLAT refers M.K. Rajagopalan v. Dr. Periasamy Palani Gounder and Anr. (2023) ibclaw.in 60 SC and holds that
(i) Both the Appellants who have filed these Appeals are related parties. Related parties cannot claim entitlement of any amount in the plan and cannot claim any discrimination with regard to payments to unrelated unsecured Financial Creditors.
(ii) Insofar as the submission that distribution is not in accordance with vote share which violates Section 53 r/w Section 32 (b) of the IBC, the said submission need no consideration since the Appellant being related party is not entitled for any distribution and no stakeholder who is entitled for distribution is aggrieved by the decision of the Committee of Creditors regarding mode and manner of distribution.
(iii) With regard to discrimination in payments to the workers and employees, no workers and employees have any grievance nor any workers and employees is dissatisfied with the payments made under the plan to them nor have they come in Appeal.
(iv) Upheld decision of NCLT Kolkata Bench.

Related Parties cannot claim entitlement of any amount in Resolution Plan and cannot claim any discrimination with regard to payments to unrelated Unsecured Financial Creditors – Manav Investments and Trading Co. Ltd. Vs. Pratim Bayal and Ors. – NCLAT New Delhi Read Post »

Claim of workers employed through sub-contractor filed through sub-contractor as Operational Debt cannot be treated as workmen of Corporate Debtor | There is no difference in IBC between workers who are engaged by sub-contractor and workmen who are engaged directly by Corporate Debtor – Amit Kumar Pandey & Ors. v. Pardeep Kumar Sethi, RP (JMT Auto Ltd.) and Ors. – NCLAT New Delhi

/ 19 minutes of reading

Hon’ble NCLAT held that:
(i) Appellant who never submitted any claim before the Resolution Professional claiming to be workmen cannot be allowed to contend at this stage that they are workmen and they should be paid at par with the workmen of the Corporate Debtor for amount which was admitted in the CIRP by the Resolution Professional.
(ii) Section 53 itself provides different treatment in distribution of assets where workmen dues are dealt in Section 53(1)(b) and operational debt at much lower ladder.
(iii) A claim which was filed by operational creditor cannot be treated at par with claim of workmen.
(iv) When Resolution Plan differentiate between payment to the workmen as well as to the Operational Creditors, such distinction is in accordance with law and cannot be faulted.
(v) In the present Appeal, the claim which was filed through sub-contractor cannot be treated as workmen of the Corporate Debtor.
(vi) The submission which has been advanced by Counsel for the Appellant that due to the workers of sub-contractor being not aware of the CIRP could not file their claim cannot be considered at the stage when all claims have been collated and admitted and dealt with in the Resolution Plan.
The Appeal is dismissed.

Claim of workers employed through sub-contractor filed through sub-contractor as Operational Debt cannot be treated as workmen of Corporate Debtor | There is no difference in IBC between workers who are engaged by sub-contractor and workmen who are engaged directly by Corporate Debtor – Amit Kumar Pandey & Ors. v. Pardeep Kumar Sethi, RP (JMT Auto Ltd.) and Ors. – NCLAT New Delhi Read Post »

Distribution to Creditors in accordance with provisions of Section 30(2) of IBC is in the discretion of the COC and the scope of judicial review by NCLT and NCLAT is very little – Simbhaoli Sugars Ltd. Vs. Pramod Kumar Sharma RP of Uniworld Sugars Pvt. Ltd. & Ors. – NCLAT New Delhi

/ 8 minutes of reading

NCLAT held that it is now well settled that distribution to the creditors in accordance with provisions of Section 30(2) is in the discretion of the Committee of Creditors and with regard to distribution the scope of judicial review by the Adjudicating Authority and this Tribunal is very little. From the facts brought on the record it does appear that liquidation value of the Operational Creditors is nil. When payment of Rs.1.57 Crore has been proposed in the plan, we cannot say that there is violation of any provisions of law especially Section 30(2) of the Code.

Distribution to Creditors in accordance with provisions of Section 30(2) of IBC is in the discretion of the COC and the scope of judicial review by NCLT and NCLAT is very little – Simbhaoli Sugars Ltd. Vs. Pramod Kumar Sharma RP of Uniworld Sugars Pvt. Ltd. & Ors. – NCLAT New Delhi Read Post »

The dues of workmen/employees from Provident Fund do not come within the meaning of ‘Liquidation Estate’ for the purpose of distribution of assets u/s 53 of IBC and the damages levied by EPFO u/s 14B of the EPF & MP Act, 1952 which are dues of Government and will be paid in order of priority u/s 53 of IBC, 2016 – Shri Addanki Haresh Liquidator of Right Engineers and Equipments India Pvt. Ltd. Vs.  Recovery Officer, Employees Provident Fund Organisation – NCLT Bengaluru Bench

/ 5 minutes of reading

In this important judgment on treatment of claim/demand and penalty raised by EPFO, NCLT Bengaluru Bench held that:
(i) The demand/claim raised prior to the moratorium will not form part of liquidation estate and should be paid in priority; secondly, the claim/demand and penalty raised during moratorium period is not allowable under the provisions of the IBC; and the penal damages claimed under Section14B of EPF & MP Act, 1952 which is prior to the moratorium period will be treated under Section 53 of IBC, 2016.
(ii) The dues of workmen or employees from the provident fund do not come within the meaning of ‘liquidation estate’ for the purpose of distribution of assets under Section 53 of the Code. Accordingly, it is to be paid in priority over other dues.
(iii) The damages levied by EPFO under Section 14B of the EPF & MP Act 1952 which are dues of Government and will be paid in order of priority under Section 53 of IBC, 2016.

The dues of workmen/employees from Provident Fund do not come within the meaning of ‘Liquidation Estate’ for the purpose of distribution of assets u/s 53 of IBC and the damages levied by EPFO u/s 14B of the EPF & MP Act, 1952 which are dues of Government and will be paid in order of priority u/s 53 of IBC, 2016 – Shri Addanki Haresh Liquidator of Right Engineers and Equipments India Pvt. Ltd. Vs.  Recovery Officer, Employees Provident Fund Organisation – NCLT Bengaluru Bench Read Post »

Both Provident Fund and Gratuity Fund is to be paid in full as per the Provisions of EPF and NP Act, 1952 and Payment of Gratuity Act, 1972 – Central Board of Trustees Vs. Shri Kumar Rajan RP Hindustan Newsprint Ltd. – NCLAT Channai

/ 9 minutes of reading

NCLAT held that in the Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors. (2022) ibclaw.in 861 NCLAT judgment, a clear direction was given to the Successful Resolution Applicant to make payment of the admitted claims towards Provident Fund dues and the same was upheld by the Hon’ble Apex Court in Jalan Fritsch Consortium Vs. Regional Provident Fund Commissioner & Anr. (2023) ibclaw.in 12 SC. The Hon’ble Apex Court has laid down that the share of workmen dues shall be kept outside the Liquidation assets and the concerned workmen/Employees shall have to be paid the same, out of such Provident fund, Gratuity Fund, if any available. The words, ‘if any available’, cannot be read to mean that the workmen and empolyees are not entitled for Provident fund, Gratuity Fund, Pension fund, if not available with the Liquidator.

Both Provident Fund and Gratuity Fund is to be paid in full as per the Provisions of EPF and NP Act, 1952 and Payment of Gratuity Act, 1972 – Central Board of Trustees Vs. Shri Kumar Rajan RP Hindustan Newsprint Ltd. – NCLAT Channai Read Post »

Waterfall Mechanism in Insolvency & Bankruptcy Code, 2016 (IBC) vs. in Companies Act, 2013 – Moser Baer Karamchari Union Thr. President Mahesh Chand Sharma Vs. Union of India and Ors. – Supreme Court

/ 94 minutes of reading

Hon’ble Supreme Court held that (i) in principle, it cannot be doubted that the cases of revival or winding up of the company on the ground of insolvency and inability to pay debts are different from cases where companies are wound up under Section 271 of the Companies Act 2013. The two situations are not identical. The reasons and grounds for winding up under Section 271 of the Companies Act, 2013 are vastly different from the reasons and grounds for the revival and rehabilitation scheme as envisaged under the Code.
(ii) In view of the enactment of IBC and Section 53 of the IBC, it necessitated to amend the Act, 2013. As per Sub-Section (7) of Section 327, Sections 326 and 327 shall not be applicable in the event of liquidation under the IBC.
(iii) Entire unpaid dues are not covered by the proviso to sub-section (1) to Section 326 of the Companies Act, 2013.
(iv) The provisions under the IBC cannot be compared with that of the earlier regime, namely, the Companies Act, 1956/2013.
(v) The waterfall mechanism is based on a structured mathematical formula, and the hierarchy is created in terms of payment of debts in order of priority with several qualifications, striking down any one of the provisions or rearranging the hierarchy in the waterfall mechanism may lead to several trips and disrupt the working of the equilibrium as a whole and stasis, resulting in instability. Every change in the waterfall mechanism is bound to lead to cascading effects on the balance of rights and interests of the secured creditors, operational creditors and even the Central and State Governments.
Hon’ble Apex Court concluded that as sub-section (7) of Section 327 of the Act, 2013 provides that Sections 326 and 327 of the Act, 2013 shall not be applicable in the event of liquidation under the IBC, which has been necessitated in view of the enactment of IBC and it applies with respect to the liquidation of a company under the IBC, Section 327(7) of the Act, 2013 cannot be said to be arbitrary and/or violative of Article 21 of the Constitution of India. In case of the liquidation of a company under the IBC, the distribution of the assets shall have to be made as per Section 53 of the IBC subject to Section 36(4) of the IBC, in case of liquidation of company under IBC.

Waterfall Mechanism in Insolvency & Bankruptcy Code, 2016 (IBC) vs. in Companies Act, 2013 – Moser Baer Karamchari Union Thr. President Mahesh Chand Sharma Vs. Union of India and Ors. – Supreme Court Read Post »

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