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

One Sided Clauses In Builder-Buyer Agreements Is An Unfair Trade Practice

In CIVIL APPEAL NO. 12238 OF 2018, Pioneer Urban Land & Infrastructure Ltd. vs Govindan Raghavan, an appeal was filed before the Supreme Court  by the builder against the order of the National Consumer Forum. The builder had relied upon various clauses of the Apartment Buyer’s Agreement to refute the claim of the respondent but was rejected by the commission which found the said clauses as wholly one-sided, unfair and unreasonable, and could not be relied upon. The Supreme Court on perusal of the Apartment Buyer’s Agreement found stark incongruities between the remedies available to both the parties. For example, Clause 6.4 (ii) of the Agreement entitles the Appellant – Builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Respondent – Flat Purchaser. Clause 6.4 (iii) of the Agreement entitles the Appellant – Builder to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 da...
Post a Comment
Read more

Inherited property of childless hindu woman devolve onto heirs of her parents

In Tarabai Dagdu Nitanware vs Narayan Keru Nitanware, quashing an order passed by a joint civil judge junior division, Pune, the Bombay High Court has held that under Section 15 of the Hindu Succession Act, any property inherited by a female Hindu from her father or mother, will devolve upon the heirs of her father/mother, if she dies without any children of her own, and not upon her husband. Justice Shalini Phansalkar Joshi was hearing a writ petition filed by relatives of one Sundarabai, who died issueless more than 45 years ago on June 18, 1962. Article referred:http://www.livelaw.in/property-inherited-female-hindu-parents-shall-devolve-upon-heirs-father-not-husband-dies-childless-bombay-hc-read-judgment/
Post a Comment
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more