Technology Development Board vs Nicco Corporation Ltd (In Liquidation) ...

Technology Development Board .....Appellant

Vs.

Nicco Corporation Ltd. (In Liquidation) & Ors. ......Respondents

Present :

For Appellant: Mr. B.B. Sawhney, Sr. Advocate with Mr. Madhav Nanda, Mr. Lakshay Sawhney, Advocates

For Respondents: Mr. Anirudh Wadhwa, Advocate Ms. Nitu Poddar, PCS Mr. Keshav Gulati

19.11.2019 - The 'Nicco Corporation Ltd.' ('Corporate Debtor'), which is under

liquidation, therein C.A. (IB) No. 788/KB/2019 was filed by the 'Nicco and

Associates Companies Senior Management Superannuation Fund' a trust

incorporated and registered under the Indian Trust Act, 1882. It was intimated

that the said appeal represented the ex-employees of the 'Corporate Debtor' who Company Appeal (AT) (Insolvency)No. 1292 of 2019 1 have served for more than 30 years in the service of the 'Corporate Debtor'.

The 'Interim Resolution Professional' appointed in this matter constituted the

'Committee of Creditors' and in the 6th meeting of the 'Committee of Creditors'

held on 6th October, 2017, the 'Resolution Plan' for revival of the 'Corporate

Debtor' was put to vote, which resulted in around 88.38% of the members of the

'Committee of Creditors' voting against the 'Resolution Plan' and consequently

the 'Resolution Plan' failed and order of liquidation was passed.

2. It was submitted that the employees of the 'Corporate Debtor' were

discharged from the employment of the 'Corporate Debtor' and the present

application has been moved by all ex-employees of the 'Corporate Debtor' who

have served for a period of more than 10 years or more and whose

superannuation funds are held in Trust by the Corporate Debtor and however,

the same has not been released.

3. The application was filed by 393 employees of the Corporate Debtor (in

liquidation) claiming payment of a shortfall amount of Rs. 5,70,12,800/- and the

interest thereon on account of gratuity.

4. The Adjudicating Authority ('National Company Law Tribunal') Kolkata

Bench, Kolkata taking into consideration the fact that there was no dispute

about the unpaid Gratuity to the employees which are assets to the company

held that the said Gratuity cannot be held to be a liquidation estate.

Company Appeal (AT) (Insolvency)No. 1292 of 2019 2

5. In view of such observation, the liquidator has been directed by impugned

order dated 4th October, 2019 to make payment of the admitted shortfall in the

principal amount due to the employees on account of Gratuity being the sum of

Rs. 5,70,12,800/- by transferring the said amount to the existing Gratuity Fund

Account of the Trust in the account maintained with the HDFC Bank, Branch at

2/6 Sarat Bose Road, Kolkata.

6. The Adjudicating Authority further observed that while providing such

payment all the claims of the workmen / employees shall stand fully settled with

respect to Gratuity, Superannuation and Provident Fund and prima facie all the

proceedings pending before the Authority has been disposed of.

7. The Appellant - 'Technology Development Board' who claimed to be

'Secured Financial Creditor' has challenged the impugned order dated 4th

October, 2019 on the ground that the assets of the 'Corporate Debtor' cannot be

diverted except in the manner as provided u/s 53 of the I&B Code.

8. Learned Counsel also relied on an order passed by this Appellate Tribunal

in the matter of 'Somesh Bagchi & Ors. V. Nicco Corporation, through liquidator

in Company Appeal (AT) No. 209 of 2018'.

9. In the said case the appeal was preferred by 'Somesh Bagchi and 20

others' retired employees of 'Nicco Corporation Limited' ('Corporate Debtor') with

grievance that the liquidator is deviating the gratuity in terms of section 33 of

the I&B Code. The decision of this Appellate Tribunal dated 18.7.2018 noticed

the reply submitted by the liquidator with following observations:-

Company Appeal (AT) (Insolvency)No. 1292 of 2019 3 "3. Notice was issued on the question as to

whether the gratuity amount lying in the 'Gratuity Trust

Fund' can be treated to be asset of the Corporate Debtor.

Mr. Vinod Kothari, Liquidator appeared in person and

took plea that 'Gratuity Trust Fund' of the employees has

not been treated as asset of the Corporate Debtor nor any

amount has been disbursed from the said fund to any

Creditor of the Corporate Debtor. A reply affidavit has

been filed by the Liquidator with following statement: -

"2. That the amount of Rs. 27,94,19,639 crores

(Twenty Seven Crores Ninety Four Lakhs Nineteen

Thousand Six Hundred and Thirty Nine Rupees Only)

lying in the No-lien account with Allahabad Bank as on

the liquidation commencement date did not include the

amount lying to the credit of the gratuity fund;

3. That no amount lying in the gratuity fund was

used for making the interim distribution made by the

Liquidator vide his decision dated 22.12.2018;

4. That as per the information received from the ex-

Managing Director of the Corporate Debtor, the following

are the present trustees of the Gratuity Fund:

Company Appeal (AT) (Insolvency)No. 1292 of 2019 4 a. Mr. Kartick Kr. Chatterjee, Chairman

b. Mr. Shiv Siddhant Narayan Kaul, Member

c. Mr. Sibaji Datta, Member

d. Mr. Subrata Bhattacharjee, Member

5. That further, as per the information received

from the ex-Human Resource Head, vide an email

dated 06.07.2018, of the Corporate Debtor, attached

herewith and marked as Annexure-I, Rs. 22634566

(Two Crores Twenty-Six Lakhs Thirty-Four

Thousand Five Hundred and Sixty-Six Rupees Only)

is lying in the gratuity fund as on 30.06.2018,

bifurcation of which is as below:

a. Rs. 2,05,51,304 in HDFC as on 30.06.2018

b. Rs. 20,83,262 in LIC as on 06.07.2018."

4. We appreciate the stand taken by the

Liquidator, who has clearly stated that the gratuity

amount of the employees/workmen lying in the

'gratuity Trust Fund' has not been treated as asset

of the Corporate Debtor. The details relating to the

Fund have been shown but we find that there is a

shortage of Rs. 5.70 Crore in the said Fund. How

such shortage in Gratuity Trust Fund has occurred

Company Appeal (AT) (Insolvency)No. 1292 of 2019 5 and who is to make good of such amount and the

competent authority, who is to ensure that the

amount is paid to the ex-

employees/workmen/officers of the Corporate

Debtor to the extent they are entitled as per their

share and law, could not be decided by the

Adjudicating Authority or this Appellate Tribunal in

the Company Petition or in this appeal.

5. Any decision of the Adjudicating Authority

relating to the 'Gratuity Trust Fund' or observation

made in the impugned order dated 08th March, 2018

should be treated as mere observation not binding on

the Competent Authority or any Court of Law. In view

of the fact that the 'Gratuity Trust Fund' has not been

treated as asset of the Corporate Debtor, we leave

other questions open for determination by appropriate

authority/ a court of competent jurisdiction.

6. However, taking into consideration that

the Corporate Debtor is undergoing liquidation and the

creditors are entitled for their share in terms of Section

53 including wages, salaries of the employees, but the

employees who are also entitle to withdraw their

Company Appeal (AT) (Insolvency)No. 1292 of 2019 6 gratuity amount from the Fund, we allow the

Appellants or any other employee of other association

to move before appropriate authority or a court of

competent jurisdiction who may take care of their

grievances. In view of the observations above, the

application for impleadment has become infructuous

I.A. No. 880 and another I.A. No. 881 stands disposed

of. The appeal stands disposed of with aforesaid

observations. No costs."

10. Learned Counsel appearing on behalf of the Appellant submitted that this

Appellate Tribunal having already decided that the Adjudicating Authority or this

Appellate Tribunal has no jurisdiction to decide the issue, the impugned order

should not have been passed by the Adjudicating Authority. However, such

submission cannot be accepted as this Appellate Tribunal while passing the order

on 18.7.18 merely observed that "how such shortage in Gratuity Trust Fund has

occurred and who is to make good of such amount and the competent authority,

who is to ensure that the amount is paid to the ex-employees/workmen/officers of

the Corporate Debtor to the extent they are entitled as per their share and law,

could not be decided by the Adjudicating Authority or this Appellate Tribunal in

the Company Petition or in this appeal."

Company Appeal (AT) (Insolvency)No. 1292 of 2019 7

11. However, while observing so and taking into consideration that the

'Corporate Debtor' is undergoing liquidation and the creditors are entitled for

their share in terms of Section 53 including wages, salaries of the employees,

but the employees who are also entitled to withdraw their gratuity amount

from the fund, we allow the Appellants or any other employee or other association

to move before appropriate authority or a court of competent jurisdiction who

may take care of their grievances.

12. It is true that it is not the case of the employees who moved before the

Adjudicating Authority but 'Nicco & Associate Companies Senior Management

Superannuation Fund, a trust incorporated and registered under The Indian

Trust Act, 1882 moved before the Adjudicating Authority and brought to its

notice that although there was a Gratuity Trust Fund of the 'Corporate Debtor'

created by a Trust Deed of 2nd February, 2010, however, there is only an amount

of Rs. 2,23,75,454/- lying in such account as the Corporate Debtor(In

Liquidation) had failed to make appropriate deposits in terms of its obligation

under the payment of Gratuity Act, 1972.

13. We agree with the stand taken by the 'Nicco & Associate Companies Senior

Management Superannuation Fund being 'Secured Financial Creditor' that in

the light of the Trust Deed dated 2nd February, 2010, the 'Corporate Debtor' (in

liquidation) had failed to make appropriate deposits in terms of obligation under

the payment of Gratuity Act, 1972. Even during the liquidation process such

obligation and the 'Corporate Debtor' continues in terms of payment of Gratuity

Company Appeal (AT) (Insolvency)No. 1292 of 2019 8 Act, 1972. Therefore, the Adjudicating Authority was right in providing the

liquidator to fulfil obligation in terms of Gratuity Act, 1972 by depositing the

amount of 5,70,12,800/- with interest in the account as fund.

14. This direction does not amount to determination of claim of one or other

or payable by the Adjudicating Authority. If the obligation is there, it does not

create any right in favour of any Financial Creditor whether 'Secured' or

'Unsecured' or 'Operational Creditor' to oppose the obligation of a 'Corporate

Debtor' under the provisions of the Gratuity Payment Act from being fulfilled.

15. Learned counsel for the Appellant submitted that whatever has been to be in

the fund is only extended however, we are not inclined to deliberate on such issue

because we are determining the obligation of the 'Corporate Debtor' and not about

the amount already deposited with the fund, particularly when during the

liquidation process when the company remains going concern and the

manufacturing and production of the company do not suffer and payment of wages

to the employees/workmen and supplies made during Resolution Process are

made on time. The Insolvency Resolution Professional will take aid of (suspended)

Board of Directors, paid Directors, officers and the employees of the Corporate

Debtor. The Banks having account of the corporate debtor will also cooperate

with the Resolution Professional to ensure compliance of this order.

Company Appeal (AT) (Insolvency)No. 1292 of 2019 9

16. The 'Corporate Debtor' may be prohibited from buying the erstwhile debt and

gratuity fund being not the debt of the employees it cannot be pleaded that the

'Corporate Debtor' is not liable to deposit the amount in accordance with the Funds

Act.

We find no merit in the appeal. It is accordingly dismissed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

[Justice Venugopal M.] Member (Judicial)

ss/sk

Company Appeal (AT) (Insolvency)No. 1292 of 2019 10