Insolvency and Bankruptcy Code, 2016 – ss.5(13), 36(4), 53(1)(b) & (c) – Claim of the appellants-workmen/employees of Corporate Debtor, working at Dahej Yard and Mumbai, relating to wages/salary for the period involving Corporate Insolvency Resolution Process (CIRP) and the amount due and payable to the respective workmen/employees towards Pension Fund, Gratuity Fund and Provident Fund – Held: On a fair reading of s.5(13) of the IB code which defines “insolvency resolution process costs”, the dues towards the wages/salaries of only those workmen/employees who actually worked during the CIRP are to be included in the CIRP costs – Rest of the claims towards the wages/salaries of the workmen/employees shall be governed by ss.53(1)(b) & (c) of the IB Code – Further, considering s.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 – In the present case, there are disputed questions, whether in fact the IRP/RP managed the operations of the corporate debtor as a going concern during the CIRP and there is a serious dispute whether Dahej Yard was operational during the CIRP or not and the concerned workmen/employees of the Dahej Yard and the Mumbai Head Office actually worked during the CIRP or not – Appellants to submit their claims before the Liquidator and establish and prove that during CIRP, IRP/RP managed the operations of the corporate debtor as a going concern and that they actually worked during the CIRP – Liquidator to adjudicate such claims in accordance with law and on its own merits and on the basis of the evidence, independently. Insolvency and Bankruptcy Code, 2016 – ss. 3 (36), 5 (13) & (14), 17, 20, 25, 33 (7), 36 (4), 53(1)(a), (b) & (c) – Companies Act, 1956 – ss.59 A, 529A (1) (c), 530– Companies Act, 2013 – ss.326,
327 – Legislative History with respect to workmen/employee’s dues towards the wages/salaries including the amount due and payable towards provident fund, gratuity and pension fund – Discussed.
Insolvency and Bankruptcy Code, 2016 – ss.36(4), 53 – Held: Under the IB Code, the workmen dues have been duly protected and the provident fund, gratuity and pension fund have been excluded from the liquidation estate assets [s.36(4)] – Furthermore, as per s.53 of the IB Code, the workmen dues are given the top priority in the waterfall mechanism.
Insolvency and Bankruptcy Code, 2016 – ss.5(13), 20, 53(1)(a) – Held: It cannot be disputed that as per s.5(13), “insolvency resolution process costs” shall include any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern – It is also true that s.20 mandates that the interim resolution professional/resolution professional is to manage the operations of the corporate debtor as a going concern and in case during the CIRP the corporate debtor was a going concern, the wages/salaries of such workmen/employees who actually worked, shall be included in the CIRP costs and in case of liquidation of the corporate debtor, dues towards the wages and salaries of such workmen/employees who actually worked when the corporate debtor was a going concern during the CIRP, being a part of the CIRP costs are entitled to have the first priority and they have to be paid in full first as per s.53(1)(a)– Therefore, while considering the claims of the concerned workmen/employees towards the wages/salaries payable during CIRP, first of all it has to be established and proved that during CIRP, the corporate debtor was a going concern and that the concerned workmen/employees actually worked while the corporate debtor was a going concern during the CIRP – Plea of the appellants that as the RP is under mandate to manage the operations of the corporate debtor as a going concern u/s.20 and therefore it is to be presumed that the RP managed the operations of the Corporate Debtor as a going concern and thus, the workmen/employees are entitled to their wages and salaries during the CIRP, as their wages/salaries to be included in the CIRP costs, is not acceptable – However, the wages and salaries of the workmen/employees of pre-CIRP period will have to be governed as per the priorities mentioned in s.53(1). Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC
17 : [2019] 3 SCR 535; Gujarat Urja Vikas Nigam Limited v. Amit Gupta (2021) 7 SCC 209 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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