Skip to main content

NCLAT: Workmen Dues Of Pension, Gratuity, PF Not Included In Liquidation Assets

In Company Appeal (AT) (Insolvency) No. 396 of 2019, State Bank of India Vs Moser Baer Karamchari Union & Anr., appeal was filed against the order of the NCLT wherein it was decided that the ‘Provident Fund Dues’, ‘Pension Fund Dues’ and ‘Gratuity Fund Dues’ cannot be part of the Liquidation Assets as per Section 53 of the ‘I&B Code’.

'Liquidation estate' comprises of the assets over which the Corporate Debtor has ownership rights. The Liquidator of Moser Baer took a stand that according to the explanation of section 53 of IBC, "workmen's dues" shall have the same meaning as that assigned to it under section 326 of the Companies Act, 2013 and hence, gratuity is included in the "liquidation estate assets", thus making it as an asset of the Corporate Debtor.

The NCLT Bench was of the view that the term 'liquidation estate' has been defined under section 36 of the IBC and specifically excludes these dues from the purview of recovery made under liquidation.
While referring to a judgment passed by NCLT Mumbai, the Delhi bench held that even though gratuity, pension and provident fund dues are dues payable by the Corporate Debtor, but they are essentially assets of the workmen lying with the Corporate Debtor's company and thus, the provisions of IBC cannot be made applicable to them. The NCLT also clarified that in the event of any deficiency to the funds, the liquidator has to ensure that the amounts are available, even if the Corporate Debtor has not diverted the requisite amount.

The NCLAT observed that the main bone of contention was the difference between and subsequent reliance on the term 'workman's dues' as per Section 53 of the IB Code and Section 326 of the Companies Act 2013. The NCLAT held that the ‘workmen’s dues’ is mentioned in clause (b) (i) of Section 53(1), which are the dues for the period of twenty-four months preceding the liquidation commencement date and the Appellant cannot derive the meaning as assigned to it in Section 326 of the Companies Act, 2013.

The NCLAT decided that there is a difference between the distribution of assets and preference/ priority of workmen’s dues as mentioned under Section 53(1) (b) of the ‘I&B Code’ and Section 326(1) (a) of the Companies Act, 2013. It has also been noticed that Section 53(1) (b) (i) which relates to distribution of assets, workmen’s dues is confined to a period of twenty- four months preceding the liquidation commencement date. While applying Section 53 of the ‘I&B Code’, Section 326 of the Companies Act, 2013 is relevant for the limited purpose of understanding ‘workmen’s dues” which can be more than provident fund, pension fund and the gratuity fund kept aside and protected under Section 36(4) (iii). On the other hand, the workmen’s dues as mentioned in Section 326(1) (a) is not confined to a period like twenty-four months preceding the liquidation commencement date and, therefore, the Appellant for the purpose of determining the workmen’s dues as mentioned in Section 53(1) (b), cannot derive any advantage of Explanation (iv) of Section 326 of the Companies Act, 2013.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

When debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company

In SHITAL FIBERS LTD.  vs  INDIAN ACRYLICS LIMITED, as per the respondent, appellant had made a payment of Rs.61,83,218/­. However, there was an outstanding balance of Rs.8,92,723/­ as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the learned Company Judge observed, that since the appellant was an on­going concern, an opportunity should be granted to it to settle the accounts with the respondent by 31.12.2015. Only in case of failure of the settlement, the citation was directed to be published. On appeal, the Division Bench of the High Cou...
Post a Comment
Read more

Abusing in-laws a ground for divorce: SC

Abusing in-laws and not allowing them to reside in the matrimonial home by a woman amounts to cruelty to her spouse, ground enough for grant of divorce, the Supreme Court has ruled while allowing an NRI's plea for legal separation from his wife. A bench of Justices Vikaramajit Sen and A M Sapre said such incidents could not be termed as "wear and tear" of family life as held by Madras High Court which had said that a couple must be prepared to face such situations in matrimonial relationship. The NRI had filed a divorce petition alleging that his wife was abusive to his family members and did not allow his parents and siblings to stay in his house when they visited the US. Referring to an incident, the husband told the court that his wife had once locked him and his sister out of the house and abused them saying they belonged to a 'prostitute family'. She refused to allow her sister-in-law to enter the house and even lodged a police complaint against her hu...
4 comments
Read more