Employees Of Indus Fila vs Spg Macrocosm Ltd

Employees of Indus Fila ...Appellant

Vs

SPG Macrocosm Ltd. and Ors. ....Respondents Present: For Appellant: Mr. L. Murlidhar Peshwa, Mr. Sabrish Subramanian, Mr. Y. William Vinoth Kumar, Mr. Ragunatha Sethupathy and Mr. Vishnu Unikrishnan, Advocates For Respondents: Ms. Vanika Gupta, Advocate for Respondent No. 1.

Ms. Madhooja Mulay, Advocate for Respondent No. 2.

ORDER

15.11.2019 Heard Advocate Mr. Murlidhar Peshwa along with Advocate

Mr. Sabarish Subramanian for the Appellant, Advocate Ms. Madhooja Mulay for

Respondent No. 2 - Resolution Profession and Advocate Ms. Vanika Gupta for

Respondent No. 1- successful Resolution Applicant.

2. This appeal has been filed by the Appellants claiming to be workers of the

Corporate Debtor - Indus Fila Ltd against the impugned order dated 10.05.2019

passed by the Adjudicating Authority (National Company Law Tribunal)

Bangaluru Bench, Bengaluru in IA. No. 54 of 2019 in CP(IB) No. 136/BB/2017

whereby it is claimed that the Tribunal dismissed the Application of the

Appellants and approved Resolution Plan. The Appellants claim that I.A. No. 54

of 2019 was filed claiming that they should be made party to the Company

Petition and given opportunity to be heard with regard to the proposal of

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 1 of 8 Resolution Plan and for directing supply of copies of the petition. The Appellants

claimed before the Adjudicating Authority that they are workers of the Corporate

Debtor who have been rendering their services and the request was made on

behalf of the Workers and Employees. The Appellants claimed that Corporate

Debtor had failed to make payment of wages of the workmen. Reference was

made to lock out of employees/workers and taking up of the issues in the

Industrial Tribunal. The Appellants claim that claims were made before the

Resolution Professional. The Appellants put up a claim that Rs. 17 lakhs towards

dues of 138 workmen was insufficient; the orders passed under payment of

Wages Act were required to be considered; Provident Fund of employees, Gratuity

have not been remitted to them since 2011-2013 and that the same should be

considered with the Resolution Plan. They also sought assurance regarding

continuance of employees in the Resolution Plan and also sought representation

in the monitoring agency.

3. The Adjudicating Authority heard both the sides and observed in

paragraph-4 of the impugned order as follows:

...

"4. After hearing the learned Counsel for Applicant, the

bench has directed the Resolution Professional to reconsider

the grievance of the workers with regard to the provident fund,

Pension fund, gratuity fund etc. Accordingly, the Authorised

representative of workers and employees submitted that

detailed calculations of the claims pertaining to Bonus,

Gratuity, Employees Provident Fund and Wages including

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 2 of 8 bifurcation of the amount due pertaining to the 24 months prior

to the Insolvency Commencement dated 19th March, 2019 with

regard to the 138 workmen and none out of the 5 employees."

It was even held by the Adjudicating Authority in paragraphs 6 & 7 as

under:

..

"6. Therefore, I am satisfied that the grievances of the

applicants were duly considered by the Resolution

professional and COC, in accordance with law. As per

provision of Code, CIRP would be conducted by IRP/RP with

COC at the helm of affairs of Corporate Debtor, subject to

overall superintending powers to be exercised by

Adjudicating Authorities. All the decisions of COC would be

taken as per law and those decisions would be binding on

Corporate Debtors, employee, all stake holders etc. as per

Section 31(1) of the Code. It is settled position of law that

even the Adjudicating Authority will have power only to

direct COC to reconsider the grievance of other parties, who

are not part of COC, if it finds that those grievances are

required to be re-considered again. Basically all

issues/claims arise out of CIRP would be decided basing on

liquidation value of Assets and Liabilities of Corporate

Debtor. Since the COC has already reconsidered the claims

of the applicant vide CoC Meeting dated 15th April, 2019, I

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 3 of 8 cannot entertain the instant application and it is not

maintainable and thus it is liable to be disposed of.

7. In the result, I.A. No. 54 of 2019 in C.P.(IB) No.

136/BB/2017 is hereby disposed of with an observation

that Resolution Applicant would sympathetically consider

the remaining grievances of Applicant, in accordance with

law, while resolution plan is under implementation. No

Order as to costs.'

..

4. Learned Counsel for the parties stated that on 10.05.2019, in addition to

the present order which is impugned, there was yet another separate order

passed by the Adjudicating Authority in CP(IB) No. 136/BB/2017 and I.A. No.

40 of 2019 whereby the Resolution Plan submitted by Respondent No. 1 was

approved.

5. Learned Counsel for Respondent No. 2- Resolution Professional submits

that Resolution Plan was approved by a separate order at the time of

implementation of Resolution Plan. It is further stated that subsequently due to

the developments, the Resolution Professional has already filed an application

under Sections 60(5), 43(3) and other provisions of Insolvency and Bankruptcy

Code, 2016 (in short 'IBC') and sought liquidation order as provided under

Section 43(3) of IBC which application is pending before the Adjudicating

Authority.

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 4 of 8

6. Learned Counsel for the Appellants is relying on judgment in the matter

of State Bank of India Vs. Moser Baer Karamchari Union & Anr.- Company

Appeal(AT)(Insolvency) No. 396 of 2019 dated 19th August, 2019 wherein in

paragraphs 23 to 25, this Tribunal has held as under:-

...

"23. This apart, as the provisions of the 'I&B Code' have

overriding effect in case of consistency (sic-inconsistency) in

any other law for the time being enforced, we hold that Section

53(1) (b) read with Section 36(4) will have overriding effect on

Section 326(1) (a), including the Explanation (iv) mentioned

below Section 326 of the Companies Act, 2013.

24. Once the liquidation estate/ assets of the 'Corporate

Debtor' under Section 36(1) read with Section 36 (3), do not

include all sum due to any workman and employees from the

provident fund, the pension fund and the gratuity fund, for the

purpose of distribution of assets under Section 53, the

provident fund, the pension fund and the gratuity fund cannot

be included.

25. The Adjudicating Authority having come to such finding

that the aforesaid funds i.e., the provident fund, the pension

fund and the gratuity fund do not come within the meaning of

'liquidation estate' for the purpose of distribution of assets

under Section 53, we find no ground to interfere with the

impugned order dated 19th March, 2019."

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 5 of 8

7. Section 36 of IBC deals with liquidation estate assets. While dealing with

the subject as to what shall comprise in liquidation estate, Section 36 sub-

section 4 points out as what is not to be included. Section 36(4) reads as follows:

..

"36. Liquidation Estate

...

(4) The following shall not be included in the liquidation

estate assets and shall not be used for recovery in the

liquidation:--

(a) assets owned by a third party which are in possession of

the corporate debtor, including--

(i) assets held in trust for any third party;

(ii) bailment contracts;

(iii) all sums due to any workman or employee from the

provident fund, the pension fund and the gratuity fund;

(iv) other contractual arrangements which do not stipulate

transfer of title but only use of the assets; and

(v) such other assets as may be notified by the Central

Government in consultation with any financial sector

regulator;

(b) assets in security collateral held by financial services

providers and are subject to netting and set-off in multi-

lateral trading or clearing transactions;

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 6 of 8

(c) personal assets of any shareholder or partner of a

corporate debtor as the case may be provided such assets

are not held on account of avoidance transactions that may

be avoided under this Chapter;

(d) assets of any Indian or foreign subsidiary of the

corporate debtor; or

(e) any other assets as may be specified by the Board,

including assets which could be subject to set-off on account

of mutual dealings between the corporate debtor and any

creditor."

It is clear amounts of provident fund, pension fund and gratuity funds

belong to employees and cannot for part of liquidation asset.

8. The present impugned order is partly in the nature of giving direction to

the Resolution Professional and Resolution Applicant to consider the aspects as

pointed out by the Adjudicating Authority in the impugned order and which

observations have been referred above. The order approving the Resolution Plan

is not in challenge before us. What was finally included or not included cannot

be looked into in the present appeal.

9. Request was made by learned Counsel for the Appellant if in the

Resolution Plant there could be assurance of continuation of service but nothing

is shown what provides for this.

10. Considering further developments which have taken place, including that

application for resorting to liquidation has already been filed, it would not be

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 7 of 8 proper for us to pass any specific order in this appeal. We have already pointed

out aspects as mentioned above which have been dealt with in State Bank of

India Vs. Moser Baer Karamchari Union & Anr..

11. When Resolution Plan is already approved, Appellants may raise issues if

Resolution Plan does not take care of dues of Employees/workers for which we

give liberty. It may be subject to limitation for Appellant. But then any other

employee also can raise issue if Resolution Plan is not as per law.

Appellants are given further liberty to raise issues with liquidator, in case

Liquidation Order gets passed.

Appeal is disposed with observations as above.

[Justice A.I.S. Cheema] Member (Judicial)

(Kanthi Narahari) Member(Technical)

Akc/Md

Company Appeal(AT)(Insolvency) No. 857 of 2019 Page 8 of 8