In the matter of Nitin Gupta Vs. Applied Electro Magnetics Pvt. Ltd., the NCLAT New Delhi decided whether the Successful Resolution Applicant (SRA) is liable to pay full amount towards the provident fund dues in accordance with the Employee’s Provident Fund and Miscellaneous Provident Act, 1952.
In the instant matter Appeal has been filed by the Appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016(‘IBC/Code’) against the impugned order passed by the Adjudicating Authority. In the said order the AA approved the Resolution Plan submitted by the SRA. As per the Appellant there are certain legal infirmities in the Resolution Plan including the inadequate allocation for salary, pension and gratuity amounts of workmen/employees in the approved Resolution Plan.
Contentions of the Appellant:
Appellant stated that amount of pending gratuity, pension and Provident Fund dues of the employees/workmen of the Corporate Debtor were incorrectly shown in Resolution Plan, the workmen filed a petition under Section 7A of EPF and MP Act, 1952 for correct assessment which was decided by the Provident Fund Authority and the Provident Fund amount was assessed at Rs. 1,35,06,391 in presence of the legal representative of the Corporate Debtor. However, the SRA did not make any change in the resolution plan
Further, the appellant stated that the approved Resolution Plan does not comply with Section 30(2)(e) as the workmen/employees have not been paid their dues in accordance with the provisions of the IBC but have been allocated only 15% out of the 24 months‟ dues of the period preceding the date of insolvency commencement dues for payment.
He has also claimed that the dues of employees of the past 12 months preceding the date of insolvency commencement have not been paid in full but only 10% of the amount admissible was paid to them.
He has also stated that only 20% of the gratuity amount was paid qua the Successful Resolution Plan whereas under the provisions of IBC no reduction can be done in payment of the full due amount.
Contentions of the Respondent:
Respondent argued that the AA had to merely see whether the approved Resolution Plan was in accordance with Section 30(2)(e) of the IBC. He has further argued that since the liquidation value which was admissible to the operational creditor would have been nil, hence, the amount payable to workmen/employees on account of salary, PF and gratuity dues had to be reduced.
Further, it was argued that since the plan was approved by 100% voting in the CoC, the commercial wisdom of the CoC in approving such a Resolution Plan cannot be questioned and the distribution therein to various stakeholders cannot be changed by either the Adjudicating Authority or the Appellate Tribunal.
Decision of the Tribunal:
After hearing the arguments the NCLAT stated that there are several contentious issues with the resolution plan hence the tribunal directed the plan to be modified to the extent it cures the defect in the resolution plan.
In the matter of State Bank of India Vs. Navjit Singh, the NCLAT decided on the liability of the secured creditor not relinquishing their security interest during liquidation to contribute to the liquidation proceeding costs.
In the instant matter, an appeal is filed against the impugned order of the Adjudicating Authority in the Interim Application filed by the Secured Creditor, wherein the AA disposed of the application with the direction to make payment of Liquidator’s fees and ensure compliance of Regulations 2(ea), 2A, 21A, 37 of the IBBI (Liquidation Process) Regulations,2016 and Section 52 & 53 of the Insolvency and Bankruptcy Code 2016, and act as per the provisions of law.
As per the appellant the AA has failed to adjudicate on one of the prayers where claim of Rs. 29,34,54,879.59/- was raised and further the Appellant was not liable to pay any fee with regard to the securities which are out of Liquidation Process as opted by the Appellant. As per the appellant they have not relinquished the security and opted out of the priority mechanism mentioned under Section 53 of the Code.
In reply, the Liquidator submitted that the claim of Rs. 29,34,54,879.59/- of the Appellant has already been admitted by the Liquidator hence no further adjudication was required with regard to the said claim. It is further submitted that even if the securities which are out of Liquidation Process, the Appellant is liable to pay fee as per Regulation 21Aas well as 2(ea) of the Liquidation Regulations.
NCLAT after hearing arguments stated that the order passed by the Adjudicating Authority does not warrant any interference. Direction has been made as per Liquidation Regulation 21A where even if the secured creditor proceeds to realise its security interest it is liable to pay fee as contemplated under Regulation 21A(2)(a).
About AVM- Insolvency Professionals LLP
AVM- Insolvency Professionals LLP is a registered Insolvency Professional Entity (IPE) by The Insolvency and Bankruptcy Board of India (IBBI).(Registration number: IBBI/IPE/0099) ( The partners of IPE are Registered Insolvency Professionals (IP) under Insolvency and Bankruptcy Code, 2016 (IBC) having expertise and rich experience to advise on / carry out all aspects of Insolvency Resolution, Restructuring, Bankruptcy & Liquidation.