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Baiju Pupala & Ors vs Committee Of Creditors Of Unity ...

National Company Law Appellate Tribunal26 February 2024Ashok Bhushan

Ratio decidendi

The rule this decision rests on

In a liquidation, a claim for salary for the CIRP period is to be classified under section 53(1)(c) of the Code, and not treated as CIRP costs under section 53(1)(a), where the claimants have not shown by evidence that they actually worked during that period; the mere admission of their employment and proof of salary payment does not by itself establish such work. Where a claim for CIRP-period salary is advanced by a composite application covering several employees without individual evidence of work performed by each, the liquidator does not err in accepting the claim only as a section 53(1)(c) claim, and the adjudicating authority does not err in rejecting the application seeking to have it treated under section 53(1)(a).

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

NATIONAL COMPANY LAW APPELLATE TRIBUNAL,PRINCIPAL BENCH, NEW DELHICompany Appeal (AT) (Insolvency) No. 158 of 2024& I.A. No. 497 of 2024In the matter of:

Baiju Pupala & Ors. ....Appellants Vs. CoC of Unity Infraprojects Ltd. & Anr. ...Respondents For Appellant Mr. Gaurav Mitra, Ms. Bandana Grover, Mr. Aditya Gauri, Mr. Amar Vivek, Mr. Ishan Roy Chowdhury, Advocates. For Respondents Mr. Divyanshu Rai, Mr. Vishal Sharma, Ms. Taruna, Advocates for R2

ORDER

(Hybrid Mode)

26.02.2024: Heard Learned Counsel for the Appellant and Counsel for

the Liquidator.

2. This Appeal has been filed by the Appellant against an order passed by

the Adjudicating Authority dated 21.11.2023 by which IA No.1887 of 2022

filed by Bajju Pupala and 21 Ors. has been dismissed. In the present case,

CIRP commenced vide order dated 20.06.2017 and thereafter liquidation order

was passed by the Adjudicating Authority on 08.04.2021. The Liquidator has

admitted the claim of the Appellants towards the payment of salary for 12

months prior to the commencement of the liquidation. Appellant filed an IA

No. 1887 of 2022 claiming that their dues of salary be treated as CIRP costs

which application has been rejected by the Adjudicating Authority.

Adjudicating Authority in the impugned order has observed that the

applicants have failed to bring on record any cogent evidence, except proof of 2

payment of salary of CIRP period to then during CIRP period in lieu of their

employment. The said finding of the Adjudicating Authority is returned in

paragraph 4.4, which is as follows:-

"4.4. We find that the Liquidator has not disputed their employment, but what question is whether the employees have actually worked during that period. We find that the applicant have failed to bring on record any cogent evidence, except proof of payment of salary of CIRP period to them during CIRP period in lieu of their employment which is not disputed, to demonstrate that they actually worked to keep the Corporate Debtor as going concern. Accordingly, we do not find merit in the prayer of the Applicants that their dues of salary for the period from 1.4.2020 to 31.3.2021 be treated as CIRP costs payable in terms of section 53(1)(a) of the Code, and not in terms of Section 53(1)(c) of the Code as proposed by the Liquidator."

3. Learned Counsel for the Appellants submits that there are ample

evidences available with the Appellants to show that they were working during

the CIRP period prior to commencement of the liquidation.

4. Learned Counsel for the Liquidator submits that the Appellants were

not working and the work of the Corporate Debtor was mainly outsourced to

carry out contracts given to the Corporate Debtor. It is submitted that one

Composite Application was filed without details of evidence of each employees

regarding their claims of working during the CIRP period, hence, Adjudicating

Authority has rightly rejected the application.

Company Appeal (AT) (Insolvency) No. 158 of 2024 & I.A. No. 497 of 2024 3

5. Learned Counsel for the Appellant contends that the Appellants have

ample evidence. He has referred to certain e-mails which were responded by

some of the employees which indicate that they are working which

submissions are refuted by Counsel for the Liquidator.

6. In facts of the present case when IA No.1887 of 2022 was filed by

compositely for all 22 employees and there was no material available to proof

that they were working, no error has been committed by the liquidator in

accepting their claims as under Section 53(1)(c). We, thus, do not find any

error in the order of the Adjudicating Authority rejecting the application.

However, in view of the submission of the Appellant that there is ample

evidence to proof their working. Liberty is given to the Appellants to submit

their evidence of working of each employees separately before the liquidator

and it shall open for the liquidator to take appropriate decision.

7. Subject to liberty as granted, this Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) Anjali/nn

Company Appeal (AT) (Insolvency) No. 158 of 2024 & I.A. No. 497 of 2024

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