NATIONAL COMPANY LAW APPELLATE TRIBUNAL,

PRINCIPAL BENCH, NEW DELHI

Company Appeal (AT) (Insolvency) No. 752 of 2021

(Arising out of Order dated 22.06.2021 passed by the Adjudicating Authority

(National Company Law Tribunal), Mumbai Bench-Court No.-I in IA No.2081 of
2020 in CP (IB) No.2205/MB/2019)

IN THE MATTER OF:

Jet Aircraft Maintenance Engineers

Welfare Association .... Appellant

Vs

Ashish Chhawchharia
Resolution Professional of Jet Airways
(India) Ltd. & Ors. .... Respondents

Present:
For Appellant: Mr. Vikas Mehta, Mr. Mayan Prasad,
Ms. Nitika Grover, Mr. Apoorv Khator
& Ms. Anshula Grover, Advocates.

For Respondent: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya
Chib and Mr. Parimal Kashyap,
Advocates for RP (AZB & Partners)
Mr. Raghav Chadha, Advocate.

Mr. Krishnan Venugopal, Sr. Advocate

with Mr. Raunak Dhillon, Ms. Isha
Malik, Ms. Niharika Shukla,
Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate

with Mr. Rajat Sinha, Mr. Burjis
Shabir, Ms. Srishty Kaul, Advocates
for SRA

Company Appeal (AT) (Insolvency) No. 643 of 2021

& I.A. No. 1700 of 2021

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 1
IN THE MATTER OF:

Association of Aggrieved Workmen of

Jet Airways (India) Ltd. .... Appellant

Vs

Jet Airways (India) Ltd. & Ors. ... Respondent

Present:
For Appellant: Mr. Swarnendu Chatterjee, Ms.
Deepakshi Garg, Mr. Yashwardhan
Singh, Advocates.

For Respondent: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya
Chib and Mr. Parimal Kashyap,
Advocates for RP (AZB & Partners)
Mr. Raghav Chadha, Advocate.

Mr. Raunak Dhillon, Ms. Isha Malik

and Ms. Niharika Shukla, Advocates
for R-2.

Ms. Ritu Sobti, Ms. Priyanka Sethia,

Advocates for Intervenor in I.A 1985,
1986 of 2022.

Mr. Krishnendu Datta, Sr. Advocate

with Mr. Rajat Sinha, Mr. Burjis
Shabir, Ms. Srishty Kaul, Advocates
for SRA

Company Appeal (AT) (Insolvency) No. 801 of 2021

IN THE MATTER OF:

Bhartiya Kamgar Sena & Anr. .... Appellants

Vs

Ashish Chhawchharia
Resolution Professional of Jet Airways
(India) Ltd. &Ors. .... Respondents

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 2
Present:
For Appellant: Mr. Gaurav H. Sethi, Mr. Rahul D
Oak, Mr. Arya Hardik, Advocates.

For Respondent: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya
Chib and Mr. Parimal Kashyap,
Advocates for RP (AZB & Partners)
Mr. Raghav Chadha, Advocate.

Mr. Krishnan Venugopal, Sr. Advocate

with Mr. Raunak Dhillon, Ms. Isha
Malik, Ms. Niharika Shukla,
Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate

with Mr. Rajat Sinha, Mr. Burjis
Shabir, Ms. Srishty Kaul, Advocates
for SRA

Company Appeal (AT) (Insolvency) No. 915 of 2021

IN THE MATTER OF:

Rohit Sharma & Ors. .... Appellants

Vs

Monitoring Committee Through

Ashish Chhawchharia & Ors. .... Respondents

Present:
For Appellant: Mr. Swarnendu Chatterjee, Ms. Deepakshi
Garg, Mr. Yashwardhan Singh, Advocates.

For Respondent: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya Chib
and Mr. Parimal Kashyap, Advocates for RP
(AZB & Partners)
Mr. Raghav Chadha, Advocate.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 3
 Mr. Krishnan Venugopal, Sr. Advocate with
Mr.Raunak Dhillon, Ms. Isha Malik, Ms.
Niharika Shukla, Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate with

Mr. Rajat Sinha, Mr. Burjis Shabir, Ms.
Srishty Kaul, Advocates for SRA

Company Appeal (AT) (Insolvency) No. 771 of 2022

IN THE MATTER OF:

All India Jet Airways Officers and Staff Association .... Appellant

Vs

Ashish Chhawchharia
Resolution Professional &Ors. .... Respondents

Present:
For Appellant: Ms. Ronita Bhattacharya Bector, Ms.
Nupur Kumar, Mr. Divyansh Tiwari,
Advocates.

For Respondents: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya Chib
and Mr. Parimal Kashyap, Advocates for RP
(AZB & Partners)
Mr. Raghav Chadha, Advocate.

Mr. Krishnan Venugopal, Sr. Advocate with

Mr. Raunak Dhillon, Ms. Isha Malik, Ms.
Niharika Shukla, Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate with

Mr. Rajat Sinha, Mr. Burjis Shabir, Ms.
Srishty Kaul, Advocates for SRA

Company Appeal (AT) (Insolvency) No. 792 of 2021

IN THE MATTER OF:

Department of State Tax .... Appellant

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 4
Vs

Ashish Chhawchharia Resolution Professional

For Jet Airways (India) Ltd. & Anr. .... Respondent

Present:
For Appellant: Mr. Aaditya Pande, Mr. Rahul Chitnis, Ms.
Shwetal Shepal, Advocates

For Respondent: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya Chib
and Mr. Parimal Kashyap, Advocates for RP
(AZB & Partners)
Mr. Raghav Chadha, Advocate.

Mr. Krishnan Venugopal, Sr. Advocate with

Mr.Raunak Dhillon, Ms. Isha Malik, Ms.
Niharika Shukla, Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate with

Mr. Rajat Sinha, Mr. Burjis Shabir, Ms.
Srishty Kaul, Advocates for SRA

Company Appeal (AT) (Insolvency) No. 361 of 2022

IN THE MATTER OF:

Concor Air Ltd. .... Appellant

Vs

Ashish Chhawchharia & Anr. .... Respondents

Present:
For Appellant: Ms. Yukti Anand, Mr. Rishi K. Awasthi,
Avinash Ankit and Ms. Zohra Bano,
Advocates

For Respondents: Mr. Malhar Zatakia, Mr. Dhiraj Kumar

Totala, Ms. Aditi Bhansali, Ms. Tanya Chib
and Mr. Parimal Kashyap, Advocates for RP
(AZB & Partners)
Mr. Raghav Chadha, Advocate.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 5
 Mr. Krishnan Venugopal, Sr. Advocate with
Mr.Raunak Dhillon, Ms. Isha Malik, Ms.
Niharika Shukla, Advocates for R-2/ CoC

Mr. Krishnendu Datta, Sr. Advocate with

Mr. Rajat Sinha, Mr. Burjis Shabir, Ms.
Srishty Kaul, Advocates for SRA

Company Appeal (AT) (Insolvency) No. 987 of 2022

IN THE MATTER OF:

Regional P.F. Commissioner .... Appellant

Vs

Ashish Chhawchharia
Resolution Professional for Jet Airways
(India) Ltd. & Anr. .... Respondents

Present:
For Appellant: Mr. B.B. Pradhan, Mr. Sandeep Kumar, Mr.
Kishor Kumar, Advocates.

For Respondents: Dr. Krishnendu Dutta, Mr. Anant Singh,

Mr. Burgis Shabir, Ms. Shrishty Kaul and
Mr. Aashish Vats.
Mr. Raghav Chadha, Advocate for RP.

JUDGMENT

ASHOK BHUSHAN, J.

All these Appeals have been filed against the same order dated

22.06.2021 Passed by the National Company Law Tribunal (NCLT),

Mumbai Bench, Court No.I approving the Resolution Plan submitted by

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 6
‘Jalan Fritesch Consortium’ with respect to the Corporate Debtor – ‘Jet

Airways (India) Limited’. First five appeals have been filed by workmen

and employees of Jet Airways (India) Limited and last three appeals have

been filed by Operational Creditors of Jet Airways (India) Limited. All

the Appellant(s) aggrieved by order of Adjudicating Authority dated

22.06.2021 approving the resolution plan has come up in these Appeal(s).

2. Before we notice the individual facts in each of the above Appeal(s),

it is necessary to notice few background facts giving rise to these appeals:

(i) The Corporate Debtor - Jet Airways (India) Limited has been

in airline operation since 1993. Due to various reasons Jet

Airways (India) Limited stopped its operation on 17.04. 2019.

An Application under Section 7 was filed by State Bank of India

being CP (IB) No.2205/MB/2019, which Application was

admitted by NCLT, Mumbai Bench Wide order dated

22.06.2019. The Adjudicating Authority appointed Mr. Ashish

Chhawachharia, as an Interim Resolution Professional (IRP),

who was confirmed as Resolution Professional (RP) in the First

Meeting of Committee of Creditors (CoC) dated 16.07.2019.

(ii) Public announcement was made on 24.07.2019. The first

advertisement for calling of ‘Expression of Interest’ from

prospective Resolution Applicant was issued on 20.07.2019.

Expression of Interest was issued in four rounds and last on

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 7
 13.07.2020. The Resolution Plan submitted by Jalan Fritesch

Consortium was approved in the 17th CoC Meeting held on

03.10.2020.

(iii) An Application was filed by Resolution Professional seeking

approval of the Resolution Plan submitted by Jalan Fritesch

Consortium. The Adjudicating Authority vide impugned order

dated 22.06.2021 approved the Resolution Plan submitted by

Resolution Applicant. While approving the Resolution Plan,

the Adjudicating Authority also issued various directions.

(iv) Aggrieved by the order approving the Resolution Plan, these

Appeal(s) have been filed.

3. We now proceed to notice certain facts with respect to each of the

above Appellant(s).

Company Appeal (AT) (Insolvency) No. 752 of 2021

4. The Appellant - Jet Aircraft Maintenance Engineers Welfare

Association is a Trade Union representing over 95% of the Aircraft

Maintenance Engineers of the Jet Airways (India) Limited. In pursuance of

public advertisement, the Appellant Union submitted a claim of

Rs.1,889,438,035/- on behalf of 509 workers. Out of the aforesaid claim,

the Resolution Professional has admitted the claim worth

Rs.1,539,783,525/- as reflected in the 7th List of Creditors. The List of

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 8
Creditors was revised and in the 9th List of Creditors, admitted claim was

Rs.1,697,034,005/-. The Appeal has been filed on behalf of 109 workers,

whose admitted claims were Rs.37,13,79,866/-.

5. A Notice dated 27th May, 2020 was issued by the Resolution

Professional requiring all employees of Jet Airways (India) Limited, who

have exited without completing formalities to submit their resignation and

complete their formalities. Resolution Professional filed an Application

being I.A. No.1263/MB/2020 praying for a declaration that the dues

arising after the insolvency commencement date of the workmen and

employees of the Corporate Debtor, who are not part of the Asset

Preservation Team are not covered under “insolvency resolution process

costs under the Code”. The Adjudicating Authority did not decide the issue

at that point of time and IA was permitted to be withdrawn. Liberty was

granted to RP to raise the matter again. The Appellant had also filed an

Application before the Adjudicating Authority praying for copy of the

Resolution Plan and the right to be heard by Adjudicating Authority, which

application was rejected by the order dated 22.02.2021. A clarification note

was also filed by the Resolution Applicant in I.A. No.2081 of 2020 clarifying

certain queries raised by Adjudicating Authority during hearing of the

Resolution Plan. The Resolution Applicant on 05.07.2021 submitted a

proposal for employees and workmen of Jet Airways (India) Limited. As per

Resolution Plan of the Consortium, it offered certain amounts and benefits

for persons who were the employees and workmen of Jet Airways as on

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 9
20.06.2019. The Consortium proposal was over and above any amount

that the employees and workmen were entitled as per the Resolution Plan.

The proposal further stated that the proposal is valid only if 95% of the

employees and workmen vote in favour of it. The Consortium proposal

proposed creation of a trust, equity stake in the Corporate Debtor, equity

stake in Airjet Ground Services Limited (“AGSL”), cash payment, IT assets

etc. However, the proposal dated 05.07.2021 could not be voted by 95% of

the employees and workmen and stood withdrawn. In the Resolution Plan,

which was approved by the Adjudicating Authority, employees and

workmen were proposed a fixed sum of Rs.52 crores towards settlement of

all the claims made by them. The Plan further mentioned that in any case,

if the liquidation value due to admitted employees and workmen dues is

not “NIL”, then the Successful Resolution Applicant undertakes that the

liquidation value due to such admitted employees and workmen dues shall

be paid and shall be paid in priority over payment of Financial Creditors.

The Resolution Applicant has further proposed a scheme for absorption of

the employees. It was decided to retain only 50 employees and workmen

forming part of the Asset Protection Team (“APT”), who were given option

to resign and seek re-employment by the Corporate Debtor on fresh

employment terms. Excluding the retained employees, all employees and

workmen on the payrolls of the Corporate Debtor as on 15.09.2020 will be

demerged from the Corporate Debtor and absorbed into AGSL with effect

from the approved date. As part of such demerger, all the past dues

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 10
towards salaries and other benefits (such as PF dues, leave encashment,

retirement benefits, notice pay, termination dues etc.) of the demerged

employees for the period after the insolvency commencement date and until

approval date, shall also stand demerged from the Corporate Debtor to

AGSL. The Appellant aggrieved by the Resolution Plan has filed this Appeal.

Company Appeal (AT) (Insolvency) No. 643 of 2021

6. This Appeal has been filed by aggrieved workmen of Jet Airways

(India) Limited, which is an Association of workmen of the Corporate Debtor

numbering more than 270 workmen. The Members of the Association are

aircraft maintenance engineers and have been working for several years on

the rolls of the Corporate Debtor. The Successful Resolution Applicant has

arbitrarily provided only a sum of Rs.52 crores to employees and workmen.

The Resolution Professional did not account the salaries and other benefits

due to employees and workmen, which estimated approximately Rs.715

crores as on September 2020 as CIRP cost. The employees and workmen

are entitled to their full provident fund, gratuity, leave encashment etc.,

which have not been provided to employees and workmen. The Appellant

has also referred to the Audited Financial Statement for 2019-20, which

contained the provisions for employees benefits. The Audited Financial

Statement mentions that as many as 13530 workmen and employees have

submitted their claims. Various ground to challenge the Resolution Plan

have been enumerated in the Appeal.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 11
Company Appeal (AT) (Insolvency) No. 801 of 2021

7. The Appellant – ‘Bhartiya Kamgar Sena’ is a registered Trade Union

representing approximately more than 70% of the ground staff of Jet

Airways (India) Limited including workers recruited through contractors.

The Appellant No.2 is Jet Airways Cabin Crew Association, represents

majority of cabin crew employees, which is also affiliated to Appellant No.1.

Appellant No.2 has submitted consolidated claims of its Members with the

Resolution Professional. The Members of the Appellant had not received

their salaries since March 2019. The Appellant had preferred a

Miscellaneous Application No.3574 of 2019 praying for release of part

payment of salary of the Members. The Appellant has also filed an IA

No.2248 of 2020 demanding the copy of the Resolution Plan or the relevant

extract of the said Resolution Plan, which Application was rejected by the

Adjudicating Authority. By a letter dated 05.07.2021, the Resolution

Professional communicated a proposal for employees and workmen of the

Corporate Debtor, which was subject to approval of the same by 95% of the

employees and workmen. The Resolution Professional vide letter dated

10.07.2021 communicated the main features of approved Resolution Plan.

By letter dated 14.07.2021, the Union demanded explanation to various

aspects of the said proposal as well as approved Resolution Plan. Certain

explanation was given by Resolution Professional vide its letter dated

29.07.2021, which were not complete. The statutory rights of the

employees and workmen cannot be done away by Resolution Plan. The

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 12
dues of employees and workmen were about Rs.1254 crores. During the

CIRP, the employees and workmen were also entitled to Rs.715 crores. The

Resolution Plan violates the provisions of Industrial Disputes Act, 1947.

The provident fund and gratuity have not been taken into account. The

CIRP dues of Rs.715 crores were denied by the Resolution Professional on

the pretext that except 50 no other employees and workmen worked for the

Corporate Debtor, whereas all employees and workmen were on the rolls of

the Corporate Debtor, were ready and willing to work, but they were never

allotted any work.

Company Appeal (AT) (Insolvency) No. 915 of 2021

8. This Appeal has been filed by 43 Appellants, who were Engineers

employees of the Corporate Debtor. The Appellants by the appeal

challenges the order dated 22nd June, 2021 and pray for a direction to pay

the Appellants gratuity and provident fund dues upto beginning of CIRP or

respective date of resignation, whichever is earlier. The gratuity and

provident fund dues are claimed for the employees from different dates

prior to initiation of CIRP and from the date of initiation of CIRP, i.e.,

20.06.2019. It is stated that admitted claim of workmen and employees is

Rs.1254 crores. The case of the Appellants is that gratuity and provident

fund are required to be paid in full before making any other payment

whatsoever under the Resolution Plan as these payments are outside the

Waterfall Mechanism under Section 53 of the Code. The employees are

illegally deprived of their statutory dues. The gratuity and provident fund

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 13
dues are excluded from the Liquidation Estate of the Waterfall Mechanism,

so as to enable the employees to realize their savings as well as the

matching contribution, which comes from the employer. They are the

assets of the workers lying in the possession of the Corporate Debtor. The

Resolution Plan does not provide for payment of full gratuity and provident

fund of the workmen and employees. By letter dated 29.07.2021, the

amount payable to the workmen and employees in the Plan, i.e., Rs.52

crores have been revised to Rs.100 crores, which is 8% of Rs.1254 crores.

Company Appeal (AT) (Insolvency) No. 771 of 2022

9. This Appeal has been filed by All India Jet Airways Officers and Staff

Association, which is a Trade Union having approximately 1500 employees

in Mumbai and over 5000 employees across the country. The Appellant

Union along with other Operational Creditors submitted their claim to the

Resolution Professional on 27.07.2019. The admitted claim of the workers

and employees in their capacity as Operational Creditors represented by

the Appellant Union amounting to Rs.905 crores was uploaded on the

website of the Corporate Debtor. Claim for Rs.11 crores was rejected or

not admitted. The additional wages of workers since commencement of

CIRP, amounting to Rs.715 crores was not admitted. The Resolution

Professional has published the List of Creditors, where details of admitted

claims of creditors have been listed. The Resolution Plan provided payment

of Rs.52 crores as payment of the dues of workmen and employees of the

Corporate Debtor. A part of Resolution Plan, only 50 employees of the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 14
Corporate Debtor were to be reinstated. Twenty four months wages of the

workmen would amount to Rs.334.84 crores and 12 months of wages of

the workmen and employees would amount to Rs.160.56 crores. The Plan

fall short of the mandatory requirements under Section 53 read with

Section 30(2)(b) of the Code. The Resolution Applicant has arbitrarily

proposed wholly inadequate sum of Rs.52 crores to offer as full and final

settlement of dues of workmen and employees, which does not cover the

mandatory payments of gratuity, privilege leave encashment, bonus from

April 2018 to June 2019 and retrenchment compensation that must be

paid to the workers. The Resolution Plan does not comply the mandatory

statutory requirement under the Code. The Plan was in contravention of

the provisions of Labour Laws for the time being in force, including

Industrial Disputes Act, 1947 and the Payment of Gratuity Act, 1972. The

Adjudicating Authority committed error in not holding the Resolution Plan

in contravention of Section 30, sub-section (2) (e) of the Code. The Plan is

in breach of Section 25N and Section 25FF of the Industrial Disputes Act,

1947. The question of gratuity being covered under Section 36(4) of the

Code, there is no question of inconsistency and a valid Resolution Plan is

required to comply with the provisions of the Payment of Gratuity Act,

1972.

Company Appeal (AT) (Insolvency) No. 792 of 2021

10. This Appeal has been filed by Department of State Tax, challenging

the order dated 22nd June, 2021. The Appellant’s case is that the Corporate

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 15
Debtor is liable to pay GST from the period July 2017 to March 2020, which

is Rs.80,60,39,949/-. Out of the above GST dues, the Resolution

Professional has admitted claim of Rs.56,85,78,421/-, vide List of Creditors

published on the official website of Corporate Debtor. The Resolution

Professional has admitted the interest upto the date of commencement of

CIRP and rejected the post CIRP GST and interest and penalty. The

Appellant was not party to I.A. No.2081 of 2020. The Adjudicating

Authority has accepted the Resolution Plan, which presumed the claim of

the Appellant to be NIL. The Resolution Plan mentions that the net worth

of the Corporate Debtor would be insufficient to cover the debts of the

Financial Creditors and therefore, the liquidation value due to the

Operational Creditors including government dues, taxes or the other

creditors or stakeholders is presumed to be NIL. The Appellant prays for

setting aside order dated 22.06.2021 with prayer for such other further

orders be passed by this Tribunal as may be deemed fit.

Company Appeal (AT) (Insolvency) No. 361 of 2022

11. This Appeal has been filed by Concor Air Limited, a Government of

India Enterprise & a fully owned subsidiary of CONCOR, Ministry of

Railways with a prayer to set aside the order dated 22.06.2021. The

Appellant’s case is that under the approved Resolution Plan, each of the

Operational Creditors have been proposed a fixed sum of Rs.15,000/-

irrespective of the value of the estimated claim, which is against the

doctrine of fair and equitable treatment within one class. The Resolution

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 16
Plan does not take into account the interest of all stakeholders. The Plan

is neither fair nor equitable and violates Section 30(2)(b) of the Code. The

Plan grossly failed to adequately balance the interest of all stakeholders,

including the Appellant, who is one of the Operational Creditor in the

present case. The Appellant for essential goods and services has submitted

a claim of Rs.1,60,48,700/- out of which Resolution Professional has

admitted the claim of Rs.82,61,378/-.

Company Appeal (AT) (Insolvency) No. 987 of 2022

12. This Appeal has been filed by Regional P.F. Commissioner, Mumbai-

III. The Appellant’s case is that Jet Airways (India) Limited is a covered

establishment and was reporting compliance under the EPF & MP Act,

1952 in respect of its employees and workmen. The establishment failed

to pay the provident fund and allied dues in time for the period from

November 2008 to October 2016 in respect of international workers. A

summon under Section 14-B of the EPF & MP Act was issued vide letter

dated 05.06.2017. An order dated 17.10.2018 for an amount of

Rs.24,40,65,594/- towards damages under Section 14-B and an amount

of Rs.12,85,92,763/- towards interest under Section 7Q have been passed

against the Corporate Debtor. The establishment paid the interest amount

of Rs.12,85,92,763/- assessed under Section 7Q in December 2018. The

Corporate Debtor filed an Appeal against 14-B order and Appeal is still

pending for disposal. The Appellant had submitted claim with the IRP on

26.09.2019 in Form-B in respect of EPF dues of Rs.24,40,65,594/-, which

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 17
was rejected by IRP on 27.09.2019. The Appellant issued a letter to IRP for

status of claim and also sent reminder, but no reply has been received from

IRP. The Plan was approved on 22.06.2021 wherein no provision has been

made for EPFO dues.

13. We have heard learned Counsel for the Appellant(s), learned Counsel

appearing for Resolution Professional, learned Counsel for the Committee

of Creditors and the learned Counsel appearing for Successful Resolution

Applicant.

14. The submissions, which have been advanced on behalf of the

Appellant(s) can be divided into two groups. The first group of submission

are on behalf of employees and workmen of the Jet Airways (India) Limited

and the second group of submissions are on behalf of Appellant(s) who are

Operational Creditors (other than employees and workmen). The

submissions on behalf of employees and workmen have been led by Shri

Vikas Mehta, learned Counsel. We may first notice the submissions, which

have been advanced on behalf of the employees and workmen.

15. The learned Counsel for the Appellant(s) submits that provident

fund/ gratuity, pension is not part of Liquidation Estate by virtue of Section

36(4)(a)(iii) of the Code. The workmen and employees are entitled for

payment of their entire dues of provident fund, gratuity, pension subject to

distribution in accordance with Waterfall Mechanism under Section 53 of

the Code. The Resolution Applicant was obliged to make payment of entire

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 18
dues of provident fund, gratuity and other retiral benefits in full. The

Resolution Plan having not made provisions of payment of entire provident

fund, gratuity and retiral benefits in full, violates mandatory provisions of

the Code and deserves to be set aside on this ground alone. In event of

liquidation, the workmen and employees under Section 36(4)(a)(iii) could

have received the entire payment and gratuity dues. The workmen and

employees could not be placed in a worse situation in the event of

resolution of the Corporate Debtor, than they would have been in the event

of liquidation. The three Member judgment in State Bank of India vs.

Moser Baer Karamchari Union & Anr. in Company Appeal (AT)

(Insolvency) No.396 of 2019 after considering Section 36(4), Section 53

of the Code and Section 326 of the Companies Act, 2013, upheld the order

of the Adjudicating Authority to exclude provident fund and gratuity dues

from the Liquidation Estate. Further, three Member Bench in Tourism

Finance Corporation vs. Rainbow Papers in Company Appeal (AT)

(Insolvency) No.354 of 2019 held that no provision of the EPF&MP Act,

1952 is in conflict with the provisions of the Code. Relying on Section

36(4)(a)(iii) a direction was given to pay the entire dues along with interest

against which order an Appeal has already been dismissed by Hon’ble

Supreme Court. Two Member Bench judgment relied by the Respondent

in Savan Godiwala vs. Apalla Siva Kumar in Company Appeal (AT)

(Insolvency) No.1229 of 2019 does not notice the decision in Tourism

Finance (supra). Further another two Member Bench judgment of this

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 19
Tribunal relied by Respondent is Regional Provident Commissioner v.

Vandana Garg does not note the decisions of three Judges in Moser Baer

and Tourism Finance (supra). The issue raised in the present case are

fully covered by the Two Member Bench judgment in Sikander Singh

Jamuwal vs. Vinay Talwar Company Appeal (AT) (Insolvency) No.483

of 2019. The gratuity and pension are not bounties but hard-earned

benefits which accrue to an employee and thus, is in the nature of property.

The Resolution Plan cannot contravene provisions of any law for the time

being in force. The Resolution Plan contravenes provisions of Section 30,

sub-section (2)(e) of the Code.

16. The learned Counsel for the Appellant(s) submitted that this Tribunal

can exercise its jurisdiction of judicial review in setting aside the Resolution

Plan or remitting the Plan to CoC, since the Plan contravenes statutory and

mandatory provisions of Section 30, sub-section (2) and (4). The learned

Counsel for the Appellant(s) in support of his submission stated that the

Adjudicating Authority and this Tribunal could exercise jurisdiction to

interfere with the Resolution Plan, when the Plan contravenes the

mandatory provisions of the Code, i.e., Section 30, sub-section (2)(b) and

(e). The learned Counsel for the Appellant has referred to judgment of the

Hon’ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank

(2019) 12 SCC 150 and the judgment of the Hon’ble Supreme Court in

(2020) 8 SCC 531 – Committee of Creditors Essar vs. Satish Kumar

Gupta. To support his submission in respect of Section 36, sub-section

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 20
(4)(a)(iii), learned Counsel for the Appellant has relied on BLRC Report para

5.5.5. The learned Counsel further submits that an amount already

deposited in the provident fund and gratuity fund is not a sum due. An

amount deposited in the provident fund can be withdrawn by the

employee/ workmen as per the provisions of the EPF&MP Act. On the other

hand, an amount which has not been deposited by the employer is an

amount due. It is submitted that provident fund and gratuity dues are to

be paid in full despite fact that these dues are included in the definition of

term “workmen’s dues”. It is further submitted that the intention of the

Legislature was to protect the dues of the workmen payable towards

gratuity and provident fund, hence, the same were kept out of liquidation

estate under Section 36, sub-clause (4)(a)(iii). Shri Vikas Mehta elaborating

his submission further contended that mandatory provision of Section 30,

sub-section (2)(b) has been contravened in the Resolution Plan. The

workmen have not even been allowed the minimum liquidation value,

which would be payable to Operational Creditors even in the event of

liquidation of Corporate Debtor under Section 53. In the present case,

liquidation value being Rs.2555 crores and as per additional affidavit dated

25.07.2022 filed by the Resolution Professional, the workmen are entitled

to Rs.104 crores as per Section 30(2)(b). Hence, the allocation of Rs.52/-

crores in all is clearly in contravention of Section 30(2)(b) of the Code. It

is further submitted that Financial Creditors have been given additional

benefit. The Financial Creditors under the Plan are not only getting only

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 21
Rs.959 crores, but they are getting several other additional benefits as has

been mentioned in the Plan. The excess payment to the Financial Creditors

under the Resolution Plan violates Section 30, sub-section (2)(b) as the

workmen are also entitled to pari passu share. Additional benefits given to

Assenting Financial Creditor should be considered as amount to be

distributed under the Resolution Plan for the purpose of Sec30(2)(b).

17. The Resolution Professional has not treated the amounts payable to

workmen and employees subsequent to 20.06.2019 as CIRP costs.

Whereas, till September 2020, the employees and workmen were entitled

to receive Rs.715 crores as CIRP costs, which has wrongly been denied. It

is submitted that the principle of no work no pay, could not be applied for

denying the payment to workmen and employees subsequent to

20.06.2019, since the workmen and employee were in the rolls of the

Corporate Debtor and were not allocated any duties by the Resolution

Professional. The dues of Rs.715 crores have been completely wiped out,

which dues must have also increased upto the date of approval of

Resolution Plan. It is further submitted that Section 53, sub-section (1),

treats dues of Secured Creditor to rank equally with dues of 24 months of

the workmen’s dues. The Resolution Professional while computing the

entitlement of the workmen has treated the entire financial debt of the

secured creditors, whereas the financial debt only to the extent of value of

security interest ought to have been considered. The interest of secured

creditor is restricted to the value of their security under Section 53(1)(b)(ii).

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 22
In view of treating the entire financial debt of the secured creditor under

Section 53(1)(b)(ii), the calculation of 24 months of dues of workmen have

substantially reduced. The Resolution Professional further has not

disclosed the value of secured interest of the secured creditor in the present

case. The entire claim of Rs.7258 crores of Financial Creditors has been

accepted. In the additional affidavit of Resolution Professional of

25.07.2022, there are various discrepancies in Form-H and CIRP costs is

mentioned as Rs.25 crores. In the impugned order also the CIRP costs is

mentioned as Rs.25 crores.

18. The learned Counsel for the Appellants has also attacked the

provisions of the Resolution Plan regarding demerger of the employees and

workmen into AGSL. The transfer of employees and workmen to AGSL is

contrary to the provisions of Section 25FF of the Industrial Disputes Act,

1947. Consequently, it violates Section 30, sub-section (2)(e) of the Code.

The requirement of proviso of Section 25FF is also not satisfied in the facts

of the present case. The AGSL neither have any capacity nor fundings to

carry on any business to offer any employment to the employees and

workmen of the Corporate Debtor. Transfer to AGSL is a subterfuge in

order to deny retrenchment compensation to the workmen of the Corporate

Debtor. The AGSL has assets of only Rs.10 crores and liabilities are more

than Rs.715 crores and with effect from the date of approval of the

Resolution Plan all liabilities to pay salary and other dues of workmen and

employees are on AGSL. The Corporate Debtor could not have transferred

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 23
its liabilities. The Successful Resolution Applicant should have submitted

a Plan to meet all liabilities of Jet Airways and the workmen and employees

are not asked to recover their debts from another entity. Such transfer of

liabilities is a ruse to get rid of the statutory obligation cast under the

various labour laws. It is further submitted that Resolution Plan is a

contingent Resolution Plan, which could not have been implemented. In

the event of non-fulfilment of various approvals and permissions required

for carrying on the operations by Resolution Applicant, the Plan was sure

to fail, hence, the Adjudicating Authority ought not to have approved such

contingent Plan, which has no sufficient provisions for its implementation.

19. Shri Swarendu Chatterjee, learned Counsel has also supported the

submissions advanced by Shri Vikas Mehta. Shri Chatterjee also submits

that it is not open to Respondents to deny the gratuity and provident fund.

The judgments relied by Respondents to support non-payment of provident

fund and gratuity fund, does not help the Respondents. There has been

retrenchment of workmen and employees in the guise of demerger and

transfer to AGSL. The contingent Resolution Plan is barred as per

judgment of Hon’ble Supreme Court in Ebix Singapore vs. Committee of

Creditors of Educomp Solutions Limited and Anr. (2021) SCC OnLine

SC 707.

20. Ms. Ronita Bhattacharya Bector also contended that the Resolution

Plan violates Section 30(2)(b) and Section 30(2)(e). It is submitted that

demerger of AGSL and absorption of workers and employees of Jet airways,

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 24
does not amount to a transfer falling within the scope of the proviso to

Section 25FF of Industrial Dispute Act, 1947. The consent of a worker is

required in order for him to accept a transfer and agree to waiving his

retrenchment compensation under Section 25FF of the Industrial Disputes

Act, 1947. The burden of proving the applicability of proviso of Section

25FF lies with the Resolution Professional and Resolution Applicant. The

liabilities to pay gratuity, pension and retrenchment compensation and

leave encashment etc. cannot be passed on to AGSL. The learned Counsel

further submitted that legislative scheme always has been to give priority

to payment of provident fund, gratuity and other benefits etc. while creating

a first charge over the assets of a Corporate Debtor, which is also reflected

in Section 151(3) of the Code on Social Security, 2020.

21. We have heard other learned counsel appearing for the Appellant(s).

22. Learned Counsel for the Resolution Professional supported the

impugned order passed by the Adjudicating Authority as well as the

Resolution Plan submitted by the Resolution Applicant. It is submitted

that Resolution Plan satisfies the requirement of Section 30(2)(b). The

Resolution Professional has admitted the total claims of workmen

amounting to Rs.578.7 crores, including provident fund, gratuity and the

total claims of the employees of Rs.674.9 crores including salary, privileged

leaves and gratuity benefits. The Resolution Plan proposed a fixed sum of

Rs.52 crores to the workmen and employees towards settlement of the

claims made by them. However, the Plan further contemplated that in

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 25
case, if the liquidation value due to admitted workmen and employees dues

is not NIL, then the Successful Resolution Applicant undertakes that

liquidation value due to such admitted workmen and employees dues shall

be paid in priority over payment to financial creditors. The erstwhile

Management of the Corporate Debtor had not maintained any gratuity fund

under the Payment of Gratuity Act, 1972. The dues of workmen and

employees till insolvency commencement date including the salary (for the

months not paid); unpaid portion of the provident fund dues; retirement

benefits (leaves and gratuity) and other dues for period 24 months prior to

the liquidation commencement date was computed for employees. Section

36 of the Code provides that all sums due to any workman or employee

from the provident fund, the pension fund and the gratuity fund, would be

excluded from the Liquidation Estate of a Corporate Debtor. The existence

of a fund is essential and a pre-requisite for the dues to become as

provident fund, gratuity fund or pension fund dues. The erstwhile

Management of the Corporate Debtor failed to maintain gratuity fund for

workmen and employees and payments towards provident fund were not

made after February 2019. The workmen’s dues have been treated pari

passu with Secured Financial Creditors, in accordance with Section

53(1)(b)(ii) of the Code. The payment from provident/ gratuity fund would

only arise when the same are maintained by erstwhile Management. When

such funds are absent, no amounts are exclusively payable to workmen/

employees. Dues of all workmen and employees with effect from

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 26
20.06.2019 are not CIRP dues. The Corporate Debtor has ceased its airline

operations since April 2019 and it was not a going concern. In order to

preserve the assets of Corporate Debtor, certain existing employees were

retained in Asset Protection Team (total 50). As regards, the workmen and

employees, who were not part of APT, no dues are payable for the CIRP

period. The wages of workmen and employees accrued during CIRP period

amounting to Rs.715 crores cannot be considered as CIRP costs as the

Corporate Debtor was not a going concern and during the CIRP, the

workmen and employees did not work during the said period. The salaries

and dues of workmen and employees arising prior to insolvency

commencement date has been duly admitted by the Resolution

Professional. The Resolution Plan has been in accordance with the Section

30, sub-section (2). Form-H was issued by Resolution Professional after

being fully satisfied that Plan complies with the requirement as provided in

Section 30. The Plan also provided for effective implementation. The

condition precedent in Resolution Plan is not in the nature of contingencies

as contemplated by the Hon’ble Supreme Court in Ebix Singapore (P) Ltd.

vs. CoC of Educomp Solutions Ltd. (supra) but inter alia relate to

mandatory permissions for revival of the Corporate Debtor. The question

of feasibility and viability of the Resolution Plan is left to the majority

decision of the Committee of Creditors. What payments are to be made to

the Operational Creditors and Financial Creditors are in the domain of the

Committee of Creditors and the commercial decision taken by the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 27
Committee of Creditors for disbursement of amount to various creditors is

not subject to judicial review of the Adjudicating Authority or of this

Tribunal. Resolution Plan contemplates demerger of third-party ground

handling business of the Corporate Debtor to its wholly owned subsidiary,

i.e, AGSL, which includes transferring of the ground support equipment

owned by the Corporate Debtor to AGSL. The same falls under the

commercial wisdom of the Committee of Creditors and is non-justiciable.

The demerger of the ground handling business of Corporate Debtor along

with employees and the workmen of the Corporate Debtor into AGSL forms

part of the Resolution Plan. The letter issued by Resolution Applicant

subsequent to approval of the Plan, Resolution Applicant had offered to

increase the payment to workmen and employees.

23. Shri Krishnan Venugopal, learned senior counsel appearing for the

CoC refuting the submissions of learned counsel for the Appellant submits

that the Resolution Plan satisfies all the checks and balances in place

under the Code and the balance of convenience is in favour of approval of

plan and consequently, towards successful revival of the Corporate Debtor.

The Resolution Plan is in critical and final stages of implementation. The

Resolution Plan provides for a fixed sum of Rs.52 Crores to be paid to the

workmen towards settlement of all the claims made by them. Further, in

compliance with Section 30(2)(b) of the Code, the Resolution Plan provides

that in event the liquidation value (which was assumed to be Nil under the

Resolution Plan) is in fact not nil, then the liquidation value payable to

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 28
such admitted workmen and employees shall be paid in full, first out of the

positive bank balance of the Corporate Debtor as on effective date and the

remaining amounts shall be paid out of amounts reserved for the assenting

financial creditors on a pro rata basis, subject to a maximum amount of

Rs.475 Crores. Replying to the submission of learned counsel for the

Appellant on Section 36(4)(a)(iii) of the Code, it is submitted that the

provision provides exclusion of all sums due to workmen or employees from

the provident funds and gratuity funds etc., which constitutes as their

assets from the estate of the Corporate Debtor. The said provision uses the

term “assets” and does not by definition cover a liability that is owed to the

workmen by the Corporate Debtor. Jet Airways was not maintaining any

provident fund and gratuity fund of its own. The provision of Section

36(4)(a)(iii) can come in play in liquidation proceeding and in cases where

the fund is being maintained by the Corporate Debtor, whereas in the facts

of the present case, there was no fund being maintained by the Corporate

Debtor for these statutory dues and same were being directly deposited

with the Employees Provident Fund Organization. Accepting the

submission of Appellants that preference to be given to the dues that

become payable under Employees’ Provident Fund and Miscellaneous

Provisions Act, 1952 or any other Act providing a first charge pertaining to

payment to workmen is wholly contrary to the provisions of the Code. The

Code itself prescribes a waterfall mechanism for payment of creditors

including employees and workmen under the Resolution Plan. It is to be

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 29
strictly observed and any deviation from the aforesaid mechanism will be

against the settled law. The legislature has expressly chosen to limit and

compress the entirety of debt that is owed by the Corporate Debtor to the

workmen by limiting it to the period of 24 months, and further giving such

debt a pari passu charge with the debt of the secured financial creditors.

The intent behind the same was to balance the interest of the workmen vis-

à-vis the various other stakeholders of the Corporate Debtor, and also

keeping the overall objective of revival of the Corporate Debtor in mind.

Judgments relied by learned counsel for the Appellant of this Tribunal in

“Sikander Singh Jamuwal” (Supra) and “Tourism Finance

Corporation of India Ltd.” (Supra) are distinctly different from the facts

at hand. The submission advanced by the Appellant that an amount of

Rs.715 Crores constituting dues towards workmen and employees were

accrued during the CIRP period has rightly been rejected by the

Adjudicating Authority. Only those workmen and employees who have

actually worked to run the Corporate Debtor as going concern are entitled

to be paid as part of CIRP cost. Appellant failed to prove that they have

worked during the CIRP period, hence, they are not entitled for any CIRP

cost. It is settled law that there is no equity based jurisdiction with the

Adjudicating Authority and the Appellate Tribunal. The payments to be

made to the creditors under the Code whether are fair and equitable had

to be determined within the framework of the Code, which is the

commercial wisdom of the CoC, subject to minimum liquidation value to

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 30
be given to creditors. The commercial wisdom of the CoC is not amenable

to judicial review. The Resolution Plan as it stands today provides for

22.3% to 25.8% approximately recovery percentage to the workmen, and a

mere 13.1% to the secured financial creditors. The submission of the

Appellant that Section 53(1)(b) contemplates only security value of the

secured creditors is not correct. The effect and purport of Section 53(1)(b)

of the code is to include the entire dues of the secured financial creditors,

and not to limit it to security interest. The legislative intent behind giving

priority for such creditors is to promote relinquishment, so as to promote

overall value maximization of value of the Corporate Debtor’s estate during

liquidation. Insofar as submission that the Resolution Plan is contingent,

is also not correct. Condition precedent referred under Clause 7.6.1 of the

Resolution Plan relate to obtaining the statutory approvals, which are

imperative to be fulfilled, in order to ensure successful revival of the

Corporate Debtor. The judgment of Hon’ble Supreme Court in “Ebix

Singapore” (Supra) is clearly distinguishable in the facts of the present

case. The scheme of demerger is also valid under the Code. The Resolution

Plan does envisage a business plan for AGSL by providing for inter alia the

Corporate Debtor to transfer of identified related assets book valued at

approx. Rs.10 Crores as well as the ground support equipment, after it has

received the necessary approvals, to enable AGSL, to start operations. The

Adjudicating Authority as well as this Appellate Tribunal does not have the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 31
jurisdiction to review or reverse the commercial wisdom of the CoC in

pursuance of which Resolution Plan was approved.

24. Shri Krishnendu Datta, learned senior counsel appearing for the

Successful Resolution Applicant also supported the Resolution Plan as well

as the order of the Adjudicating Authority. Learned counsel has referred

to provision in the plan related to workmen and employees, which part of

the plan was supplied by the Successful Resolution Applicant in pursuance

of order passed by this Tribunal dated 20.01.2022 in Company Appeal (AT)

(Ins.) No. 643 of 2021. Learned counsel for the Successful Resolution

Applicant has referred to clause 6.4.2 of the plan. It is submitted that the

Resolution Applicant has proposed to pay a fixed sum of Rs.52 Crores to

the workmen/employees towards settlement of all the claims made by

them. However, the plan also envisages that if the liquidation value due to

Operational Creditors (employees/workmen dues) is not ‘NIL’, then the

Resolution Applicant undertakes that the liquidation value due to such

Operational Creditors (workmen/employees) shall be paid and shall be

given priority in payment over Financial Creditors, which payment shall be

first paid out of the positive bank balance of the Corporate Debtor as on

the effective date and the remaining amounts shall be paid out of amounts

reserved for other creditors of the Corporate Debtor on a pro-rata basis,

subject to a maximum of Rs.475 Crores. The Resolution Applicant had

proposed to retain only 50 employees and workmen forming part of the

Asset Protection Team (APT). Excluding the retained employees, all

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 32
employees and workmen of the Corporate Debtor on the payrolls of the

Corporate Debtor as on September 15, 2020 will be demerged from the

Corporate Debtor into Airjet Ground Services Limited, with effect from the

approval date. As part of such demerger, all the past dues towards salaries

and other benefits (such as provident fund dues, leave encashment,

retirement benefits, notice pay, termination dues etc.) of the demerged

employees for the period after ICD and until the approval date; and/or

retirement benefits accruing to demerged employees shall also stand

demerged from the Corporate Debtor to AGSL. It is submitted that the

Resolution Applicant has also made offer on 05.07.2021 proposing to give

certain additional benefits to workmen and employees. It is submitted the

scheme would have approved if 95% or more of the employees and

workmen would have voted in its favour, which ultimately was not

approved. Dues of all workmen and employees after initiation of CIRP are

not CIRP cost. Only 50 workmen and employees who were retained are

entitled to receive salary and other benefits as CIRP cost. The submission

of the Appellant that the plan and the scheme of demerger according to

which all workers and employees except 50 employees are being transferred

to AGSL, amounts to retrenchment as per Section 25F of the ID Act, hence,

the Appellants were entitled for retrenchment compensation, is not correct.

It is submitted that there was no termination of the employment of the

workmen/employees, hence, no question of retrenchment compensation

arises. The Resolution Plan falls squarely within the four corners of the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 33
proviso to Section 25FF. Since, the service of the workmen has not been

interrupted by the transfer and other conditions were fulfilled, the scheme

of demerger under the Resolution Plan is neither contrary to law nor

against the contours of IBC. The submission of the Appellant that the

workmen and employees were entitled to provident fund and gratuity fund

in full by virtue of Section 36(4)(a)(iii) of the Code is not correct. Section

36(4)(a)(iii) uses the term ‘fund’ instead of ‘dues’. In absence of any such

fund, the Resolution Professional cannot apportion a part of the assets of

the Corporate Debtor for payments to be made against such provident

fund, pension or gratuity fund as claimed. Workmen dues as defined in

Section 326 of the Companies Act applicable to the Code have been paid

and are the only amount to be paid to the workmen and employees. Section

36(4)(a)(iii) is applicable to only liquidation proceeding and not in CIRP

process. Reliance on Section 36(4) is wholly misplaced. The submission

of the Appellant that plan is a conditional plan and ought not to have been

approved, is also not correct. The Appellants have misconstrued the nature

of the condition precedent mentioned in the plan. The condition precedents

are conditions that are necessary for revival of the business. They are

business pre-requisites and not conditions precedent as mentioned by the

Hon’ble Supreme Court in Ebix (supra). The conditions as enumerated in

the plan are conditions essential for the airlines to recommence its

operations. The submission of the Appellant that condition precedent

related to the demerger is not been completed is also completely

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 34
misconceived. The conditions precedent pertaining to the demerger as

envisaged in the plan was automatically fulfilled by the approval of the plan

by the Adjudicating Authority. Thus, the Successful Resolution Applicant

has completed all condition precedent to the satisfaction of the Monitoring

Committee as well as the Adjudicating Authority. The Appellant has no

locus to question the domain of the Monitoring Committee and the

Adjudicating Authority. Learned counsel for the Respondent No.3 further

contended that commercial decision taken by the CoC regarding

distribution of amounts to various stakeholders is a business decision

which cannot be interfered either by the Adjudicating Authority or by this

Appellate Tribunal.

25. Learned counsel for the parties have also referred to and relied on

various judgments of the Hon’ble Supreme Court and this Tribunal which

shall be considered while considering the submission in the foregoing

paragraphs.

26. Now, we proceed to notice the submissions made by learned counsel

appearing for the Appellants in appeals filed by the Operational Creditors

(other than workmen and employees). As noted above, Department of State

Tax has filed Company Appeal (AT) (Ins.) No. 792 of 2021. Company Appeal

(AT) (Ins.) No. 361 of 2022 has been filed by Concor Air Ltd. and Company

Appeal (AT) (Ins.) No. 987 of 2022 has been filed by Regional Provident

Fund Commissioner and other Operational Creditors. Learned counsel for

the Appellants in support of the above appeals contend that Operational

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 35
Creditors have filed their claims which are reflected in the List of Creditors

maintained by the Resolution Professional. It is submitted that Resolution

Plan is in violation of Section 30(2)(b).

27. Learned counsel appearing for the Appellant in the appeal filed by

Department of State Tax contends that the name of Department appears

in the list of creditors maintained by the Resolution Professional but note

has been made that claim are under dispute which are pending before

various authorities and appeals. It is contended that charge has been

created in favour of State Tax Department by operation of law for the

adjudicated amount of Tax payable by the Corporate Debtor. State Tax

Department has security interest and it is a secured creditor. The

Adjudicating Authority committed error in not treating the Department of

State Tax as a secured creditor. The Resolution Plan does not provide for

payment of amount to the State Tax Department as per security interest.

Plan also violates Section 30(2)(e). At the highest, the Appellant’s liability

ought to have been treated as a contingent liability and not a disputed

liability. The Adjudicating Authority could not have ordered

extinguishment of the adjudicated claim. The order of the Adjudicating

Authority to the extent it directs extinguishment of already adjudicated

claim deserves to be set aside.

28. Learned counsel for the Appellant appearing in Company Appeal (AT)

(Ins.) No. 361 of 2022 on behalf of Concor Air Ltd. submits that Appellants

claim as Operational Creditor has been admitted to the extent of

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 36
Rs.82,61,378/- whereas the Resolution Plan only provide for a fixed sum

of Rs.15,000/-. The payment made to the Appellant is neither fair nor

equitable, hence, it violates Section 30(2)(b).

29. Learned counsel appearing in Company Appeal (AT) (Ins.) No. 987 of

2022 submits that Appellant’s claim was submitted in stipulated period.

Appellant’s claim of Rs.24,40,65,594/- was verified and admitted by the

Resolution Professional. According to the Appellant the said claim arose

out of an order dated 17.10.2018 passed under Section 14B of Employees’

Provident Fund and Miscellaneous Provisions Act, 1952 for damages

towards delayed contribution of certain employees funds. Learned counsel

for the Resolution Professional refuting the claims of the Appellants

contends that in so far as the claim of Regional Provident Fund

Commissioner is concerned that was a claim based on damages and was

claim of an Operational Creditor and under the plan all the Operational

Creditors have been proposed a fixed amount of Rs.15,000/-. Regional

Provident Fund Commissioner does not have any priority charge on the

assets of the Corporate Debtor. The Resolution Plan complies with all the

provisions of law.

30. Replying to the submission made on behalf of Department of State

Tax, learned counsel for the Resolution Professional submits that no

priority can be claimed by the Appellant in view of Section 82 of the

Maharashtra GST Act, 2017. The claim of the Department of State Tax was

only claim of an Operational Creditor which has been similarly dealt by the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 37
Resolution Applicant with regard to all the Operational Creditors by

allocating an amount of Rs.15,000/-.

31. Replying to the submission made on behalf of learned counsel

appearing in Company Appeal (AT) (Ins.) No. 361 of 2022 – Concor Air Ltd.,

it is submitted that claim as Operational Creditor of the Concor Air Ltd.

was admitted by the Resolution Professional for an amount of

Rs.82,61,378/-. It is submitted that the decision regarding feasibility and

viability of the Resolution Plan vests with the Committee of Creditors which

takes into consideration all aspects of the plan including distribution of

funds to various claimant of the Corporate Debtor. The Committee of

Creditor has approved the plan with 99.22% majority and all the

Operational Creditors have been allocated similar fixed amount, hence,

there is no error in the Resolution Plan which may warrant any

interference. The plan does not violates Section 30(2)(b).

32. We have considered submissions of learned counsel for the parties

and perused the record.

33. From the submissions of learned counsel for the parties and the

materials on record following questions arise for consideration in these

appeals:

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915 of 2021, 361, 771 & 987 of 2022, 38
QUESTIONS

I. What is the extent and the limitation of the judicial review by the

Adjudicating Authority and the Appellate Tribunal in context of a

Resolution Plan approved by the CoC with requisite majority?

II. Whether the workmen and employees are entitled to receive the

payment of provident fund, gratuity and other retirement benefits

in full since they are not part of the liquidation estate under

Section 36(4)(b)(iii) of the Code?

III. Whether the workmen and employees are entitled to receive their

dues from the Corporate Debtor as per the provisions of the Code

i.e. the minimum liquidation value envisaged under Section

30(2)(b) by referring to waterfall mechanism provided under

Section 53(1) of the Code?

IV. Whether the Resolution Plan approved by the Adjudicating

Authority violates the provisions of Section 30(2)(b) of the Code

since it does not provide the minimum amount to the workmen/

employees as contemplated under Section 30(2)(b)?

V. Whether the Resolution Plan as approved by the Adjudicating

Authority violates provisions of Section 30(2)(e) of the Code since

it contravenes provisions of Industrial Disputes Act, 1947 it

having not provided for retrenchment compensation to the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 39
 workmen/employees who were so entitled under Section 25-F and

25-FF of the Industrial Disputes Act, 1947 and other legislations?

VI. Whether the demerger of entire workforce except of 50 employees

as Asset Protection Team to AGSL is illegal and contrary to the

provision of Section 25-FF of Industrial Disputes Act, thus,

violates Section 30(2) of the Code?

VII. Whether the workmen/employees are entitled for payment of

Rs.750 crores (or more) as CIRP cost subsequent to insolvency

commencement date they being on the roll of the Corporate

Debtor and principle of no work no pay could not have been

applied by the Resolution Professional?

VIII. Whether for computing the payment to secured financial creditors

under Section 53(1)(b) only the value of their security interest has

to be taken into consideration or their entire financial debt is to

be considered while computing their entitlement?

IX. Whether the Resolution Plan being contingent and conditional

ought not to have been approved in view of the law laid down by

the Hon’ble Supreme Court in “Ebix Singapore Pvt. Ltd. Vs. CoC of

Educomp Solutions Ltd. & Anr., (2022) 4 SCC 401”?

X. Whether the allocation of fixed amount of Rs.15,000/- each to the

Operational Creditors (other than workmen/employees) in the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 40
 resolution plan can be held to be fair and equitable and deserves

no interference by this Appellate Tribunal?

XI. Whether the claim of Regional Provident Fund Commissioner

verified to the extent of Rs.24,40,65,594/- arising out of an order

dated 17.10.2018 passed under Section 14B of Employees'

Provident Funds & Miscellaneous Provisions Act 1952 can be

treated as secured debt and the Appellant was entitled to receive

the amount as secured creditors?

XII. Whether the claim of Department of State Tax which was

submitted within time created a charge in favour of the

Department on the assets of the Corporate Debtor by virtue of

operation of law and the State Tax Department has the security

interest and is a secured creditor?

XIII. Reliefs, if any, to which the appellants are entitled?

QUESTION - I

34. Section 31 of the Code provides for approval of Resolution Plan.

Section 31(1) provides as follows:

“31(1) If the Adjudicating Authority is

satisfied that the resolution plan as approved by
the committee of creditors under sub-section (4) of
section 30 meets the requirements as referred to in
sub-section (2) of section 30, it shall by order

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 41
 approve the resolution plan which shall be
binding on the corporate debtor and its employees,
members, creditors, including the Central
Government, any State Government or any local
authority to whom a debt in respect of the payment
of dues arising under any law for the time being in
force, such as authorities to whom statutory dues
are owed, guarantors and other stakeholders
involved in the resolution plan.

Provided that the Adjudicating Authority

shall, before passing an order for approval of
resolution plan under this sub-section, satisfy that
the resolution plan has provisions for its effective
implementation.”

35. The satisfaction referred to in Sub-section (1) of Section 31 of the

Adjudicating Authority is objective satisfaction based on materials on

record. The crucial words in Sub-section (1) are:

“the resolution plan as approved by the committee

of creditors under sub-section (4) of section 30
meets the requirements as referred to in sub-
section (2) of section 30”
[Emphasis supplied]

36. The statutory scheme itself delineate that a plan which meets

requirement of Sub-section (2) of Section 30 can be approved. The

connotation is that when the plan does not meet requirements of Sub-

section (2) of Section 30, it need not be approved. Hon’ble Supreme Court

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 42
had occasion to consider the scope of judicial review by Adjudicating

Authority of a Resolution Plan approved by the CoC in several cases. We

may first notice the judgment of Hon’ble Supreme Court in “K. Sashidhar

vs. Indian Overseas Bank, (2019) 12 SCC 150”. Dealing with the

functions of the Adjudicating Authority after receipt of the proposal from

the Resolution Professional for approval of a plan, following has been

observed in Para 35:

“35. …… On receipt of such a proposal, the

adjudicating authority (NCLT) is required to satisfy
itself that the resolution plan as approved by CoC
meets the requirements specified in Section 30(2).
No more and no less. This is explicitly spelt out in
Section 31 of the I&B Code,”

37. Further in Para 52, Hon’ble Supreme Court laid down that

commercial wisdom of the CoC has to be given paramount status. In Para

52 and 55 following has been laid down: -

“52. Besides, the commercial wisdom of the CoC

has been given paramount status without any
judicial intervention, for ensuring completion of the
stated processes within the timelines prescribed
by the I&B Code. There is an intrinsic assumption
that financial creditors are fully informed about the
viability of the corporate debtor and feasibility of
the proposed resolution plan. They act on the basis
of thorough examination of the proposed resolution
plan and assessment made by their team of

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 43
 experts. The opinion on the subject matter
expressed by them after due deliberations in the
CoC meetings through voting, as per voting shares,
is a collective business decision. The legislature,
consciously, has not provided any ground to
challenge the “commercial wisdom” of the
individual financial creditors or their collective
decision before the adjudicating authority. That
is made nonjusticiable.”

x…x…x

“55. Whereas, the discretion of the adjudicating

authority (NCLT) is circumscribed by Section
31 limited to scrutiny of the resolution plan “as
approved” by the requisite percent of voting share
of financial creditors. Even in that enquiry, the
grounds on which the adjudicating authority can
reject the resolution plan is in reference to matters
specified in Section 30(2), when the resolution
plan does not conform to the stated requirements.
Reverting to Section 30(2), the enquiry to be done
is in respect of whether the resolution plan
provides : (i) the payment of insolvency resolution
process costs in a specified manner in priority to
the repayment of other debts of the corporate
debtor, (ii) the repayment of the debts
of operational creditors in prescribed manner, (iii)
the management of the affairs of the corporate
debtor, (iv) the implementation and supervision of
the resolution plan, (v) does not contravene any of
the provisions of the law for the time being in force,

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 44
 (vi) conforms to such other requirements as may be
specified by the Board.”

38. While explaining the scope of judicial review following has been

further observed in Para 62 and 64: -

“62. …… Be that as it may, the scope of enquiry

and the grounds on which the decision of
“approval” of the resolution plan by the CoC can
be interfered with by the adjudicating authority
(NCLT), has been set out in Section 31(1) read with
Section 30(2) and by the appellate tribunal
(NCLAT) under Section 32 read with Section 61(3)
of the I&B Code. No corresponding provision has
been envisaged by the legislature to empower the
resolution professional, the adjudicating authority
(NCLT) or for that matter the appellate authority
(NCLAT), to reverse the “commercial decision” of
the CoC muchless of the dissenting financial
creditors for not supporting the proposed resolution
plan. Whereas, from the legislative history there
is contra indication that the commercial or
business decisions of the financial creditors are
not open to any judicial review by the adjudicating
authority or the appellate authority.”

x…x…x

“64. At best, the Adjudicating Authority (NCLT)

may cause an enquiry into the “approved”
resolution plan on limited grounds referred to in
Section 30(2) read with Section 31(1) of the I&B

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 45
 Code. It cannot make any other inquiry nor is
competent to issue any direction in relation to the
exercise of commercial wisdom of the financial
creditors - be it for approving, rejecting or
abstaining, as the case may be. Even the inquiry
before the Appellate Authority (NCLAT) is limited to
the grounds under Section 61(3) of the I&B
Code. It does not postulate jurisdiction to
undertake scrutiny of the justness of the
opinion expressed by financial creditors at the time
of voting. To take any other view would
enable even the minority dissenting financial
creditors to question the logic or justness of the
commercial opinion expressed by the majority of
the financial creditors albeit by requisite percent of
voting share to approve the resolution plan; and in
the process authorize the adjudicating authority to
reject the approved resolution plan upon accepting
such a challenge. That is not the scope of
jurisdiction vested in the adjudicating authority
under Section 31 of the I&B Code dealing with
approval of the resolution plan.”

39. Next judgment which need to be noticed is judgment of Hon’ble

Supreme Court in “Committee of Creditors of Essar Steel India Limited

Through Authorised Signatory vs. Satish Kumar Gupta & Ors., (2020)

8 SCC 531”. Justice Nariman referred to and relied on the judgment in K.

Sashidhar’s case (supra). In Para 65, 72 and 73 following has been laid

down: -

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 46
 “65. As has already been seen hereinabove, it is
the Adjudicating Authority which first admits an
application by a financial or operational creditor,
or by the corporate debtor itself under Section
7, 9 and 10 of the Code. Once this is done,
within the parameters fixed by the Code, and as
expounded upon by our judgments in Innoventive
Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407
and Macquarie Bank Ltd v. Shilpi Cable
Technologies Ltd. (2018) 2 SCC 674, the
Adjudicating Authority then appoints an interim
resolution professional who takes administrative
decisions as to the day to day running of the
corporate debtor; collation of claims and their
admissions; and the calling for resolution plans in
the manner stated above. After a resolution plan is
approved by the requisite majority of the
Committee of Creditors, the aforesaid plan must
then pass muster of the Adjudicating Authority
under Section 31(1) of the Code. The Adjudicating
Authority’s jurisdiction is circumscribed
by Section 30(2) of the Code. In this context, the
decision of this court in K. Sashidhar (supra) is of
great relevance.”

“72. This is the reason why Regulation 38(1A)

speaks of a resolution plan including a statement
as to how it has dealt with the interests of all
stakeholders, including operational creditors of the
corporate debtor. Regulation 38(1) also states that
the amount due to operational creditors under a
resolution plan shall be given priority in payment

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 47
 over financial creditors. If nothing is to be paid to
operational creditors, the minimum, being
liquidation value - which in most cases would
amount to nil after secured creditors have been
paid - would certainly not balance the interest of
all stakeholders or maximise the value of assets of
a corporate debtor if it becomes impossible to
continue running its business as a going concern.
Thus, it is clear that when the Committee of
Creditors exercises its commercial wisdom to
arrive at a business decision to revive the
corporate debtor, it must necessarily take into
account these key features of the Code before it
arrives at a commercial decision to pay off the dues
of financial and operational creditors.”

“73. There is no doubt whatsoever that the

ultimate discretion of what to pay and how much
to pay each class or sub- class of creditors is with
the Committee of Creditors, but, the decision of
such Committee must reflect the fact that it has
taken into account maximising the value of the
assets of the corporate debtor and the fact that it
has adequately balanced the interests of all
stakeholders including operational creditors. This
being the case, judicial review of the Adjudicating
Authority that the resolution plan as approved by
the Committee of Creditors has met the
requirements referred to in Section 30(2) would
include judicial review that is mentioned
in Section 30(2)(e), as the provisions of the
Code are also provisions of law for the time being

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915 of 2021, 361, 771 & 987 of 2022, 48
 in force. Thus, while the Adjudicating Authority
cannot interfere on merits with the commercial
decision taken by the Committee of Creditors, the
limited judicial review available is to see that the
Committee of Creditors has taken into account the
fact that the corporate debtor needs to keep going
as a going concern during the insolvency resolution
process; that it needs to maximise the value of its
assets; and that the interests of all stakeholders
including operational creditors has been taken
care of. If the Adjudicating Authority finds, on a
given set of facts, that the aforesaid parameters
have not been kept in view, it may send a
resolution plan back to the Committee of Creditors
to re-submit such plan after satisfying the
aforesaid parameters. The reasons given by the
Committee of Creditors while approving a
resolution plan may thus be looked at by the
Adjudicating Authority only from this point of view,
and once it is satisfied that the Committee of
Creditors has paid attention to these key features,
it must then pass the resolution plan, other things
being equal.”

40. Hon’ble Supreme Court in subsequent judgment in “Kalpraj

Dharamrishi vs. Kotak Investment Advisors Ltd. (2021) 10 SCC 401”,

after referring to the earlier judgments of the Supreme Court reiterated the

principle in Para 171 in following words: -

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 49
 “171. It would thus be clear, that the legislative
scheme, as interpreted by various decisions of this
Court, is unambiguous. The commercial wisdom of
CoC is not to be interfered with, excepting the
limited scope as provided under Sections 30 and
31 of the I&B Code.”

41. It is, thus, settled that commercial wisdom of CoC in approving the

Resolution Plan is not to be interfered in exercise of jurisdiction of judicial

review by Adjudicating Authority or by this Appellate Tribunal except in

cases where Resolution Plan violates mandatory requirement as provided

under Sub-section (2) of Section 30 of the Code. We, thus, need to proceed

to examine the contention of both the parties in light of the above ratio laid

down by the Hon’ble Supreme Court in above noted cases.

QUESTION - II & III

42. A great emphasis has been laid down by learned counsel for the

appellant on workmen/employees entitlement to payment of provident

fund, gratuity and other retirement benefits in full. The submission is

supported by provisions of Section 36 Sub-section (4) of the Code. Section

36 deals with liquidation estate. Section 36(1) provides as follows: -

“36. Liquidation Estate. – (1) For the purposes

of liquidation, the liquidator shall form an estate
of the assets mentioned in sub-section (3), which
will be called the liquidation estate in relation to
the corporate debtor.”

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915 of 2021, 361, 771 & 987 of 2022, 50
43. Section 36(4) provides that the assets which shall not include in the

liquidation estate. Section 36(4)(a) is as follows:-

“36(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;”

44. Section 36(4) contains an injunction “the following shall not be

included in the liquidation estate assets and shall not be used for recovery

in the liquidation”. We, in the present case, are concerned with clause (iii)

of sub-section 4(a) which is “all sums due to any workman/employee from

the provident fund, pension fund or the gratuity fund”.

45. A plain reading of the above provision indicate that what is excluded

from the liquidation estate are sums due to any workman or employee from

the provident fund, pension fund and gratuity fund. Thus, sums due to

any workman from the above funds are excluded from the liquidation

estate. Legislative intent is clear that any sums due to any workman from

aforesaid fund are excluded and cannot be used for recovery in the

liquidation. The object is that sums due to any workman and employee

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 51
from the aforesaid funds should not be used for recovery in liquidation for

dues of other creditors since those dues are exclusive to workmen and

employees.

46. Learned counsel for the Appellant has relied on “Report of the

Bankruptcy Law Reforms Committee, November, 2015”. He has

referred to Para 5.5.5. The Committee opined that assets held by the entity

in trust, such as employee pension must be kept out of the liquidation

process. The submission of the Appellant is that when the sums due to the

workmen from provident fund, gratuity fund and pension fund are excluded

from the liquidation estate, the sums due to any workmen towards

provident fund, gratuity fund and pension fund should be paid in full and

waterfall mechanism provided under Section 53(1)(b) should not be made

applicable for computing such claims of the workmen and employees.

47. Learned counsel for the Appellant has also relied on “Report of the

Joint Committee on The Insolvency and Bankruptcy Code, 2015 -

April, 2016”, where in para 27 following has been stated which is reflected

in Section 36(4). Para 27 is as follows:-

“27. Exclusion of provident fund, pension

fund and the gratuity fund from the
liquidation estate assets and estate of
bankrupt – Clause 36(4) and 155(2)

The representative of EPFO during the

course of deliberations stated that the priority of

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 payment of debts under the Code is changed and
EPF dues in the Bill have been placed on a lower
priority and the Eleventh Schedule of the Code
proposes that Section 326 and 327 shall not be
applicable in the event of liquidation under the
Code. By this the provisions of Section 11 of the
EPF and MP Act are rendered null and void. The
representative drew the attention of the Committee
to the Supreme Court Judgment whereby it was
held that the EPF dues shall get priority over all
other debts including secured creditors.

Similarly, PFRDA in the memorandum has

stated that the investment for old age
security/pension should be given higher priority in
case of liquidation of assets of bankrupt entities in
line with the priority given to the dues of
employees. Further, as most of the subscribers
under NPS regulated by PFRDA are from
Government sector and the NPS Life (Scheme for
Economically Weaker Section), where the share of
the contribution is from the Government funds
also, higher priority should be given to the dues to
pension fund investments to the bankrupt entities.

The Committee after in depth

examination are of the view that provident
fund, pension fund and the gratuity fund
provide the social safety net to the workmen
and employees and hence need to be secured
in the event of liquidation of a company or
bankruptcy of partnership firm. The

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915 of 2021, 361, 771 & 987 of 2022, 53
 Committee, therefore, feel that all sums due
to any workman or employee from the
provident fund, the pension fund and the
gratuity fund should not be included in the
liquidation estate assets and estate of the
bankrupt.

In view of the above the Committee decide

that the Clause 36(4)(a)(iii) may be substituted by
the following:

‘all sums due to any workman or employee

from the provident fund, the pension fund
and the gratuity fund’

Similarly, the following new sub-Clause

155(2)(d) may be added after Clause 155(2)(c).

‘all sums due to any workman or employee

from the provident fund, the pension fund
and the gratuity fund.’

Clause 155(2)(c) may accordingly be renumbered

155(2)(d).”

48. Learned counsel for both the parties have referred to and relied on

various judgment of this Tribunal as well as the Hon’ble Supreme Court in

the above context which need to be noticed by us. The first judgment which

has been relied by the Appellant is judgment of this Tribunal in “Company

Appeal (AT) (Ins.) No.396 of 2019, State Bank of India vs. Moser Baer

Karamchari Union & Anr.”. In the above case, order of liquidation was

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915 of 2021, 361, 771 & 987 of 2022, 54
passed by the Adjudicating Authority in which proceeding an application

was filed by ‘Moser Baer Karamchari Union’ praying that direction be issued

to the liquidator to exclude the amount of provident fund from the waterfall

mechanism envisaged under Section 53 of the Code. The Adjudicating

Authority allowed the application holding that the provident fund, pension

fund dues and gratuity fund dues cannot be part of Section 53 for the Code.

State Bank of India filed an Appeal. This Tribunal after noticing Section

36(4) and 53 of the Code as well as Section 326 and 327 of the Companies

Act, 2013 laid down following in Para 20 to 25:-

“20. 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
twentyfour months preceding the liquidation
commencement date.

21. 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).

22. On the other hand, the workmen’s dues as

mentioned in Section 326(1) (a) is not confined to a

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915 of 2021, 361, 771 & 987 of 2022, 55
 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.

23. This apart, as the provisions of the ‘I&B Code’

have overriding effect in case of consistency 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.”

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49. In the above case, this Tribunal approved the decision of the

Adjudicating Authority by which the Adjudicating Authority directed that

the provident fund, pension fund and gratuity fund do not come within the

meaning of liquidation estate which has been specifically noticed in Para

25 of the judgment, as extracted above.

50. Next judgment which we need to notice is judgment of “Tourism

Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors.,

Company Appeal (AT) (Ins.) No. 354 of 2019 & Other Appeals”. Above

was a case where Resolution Plan was approved by the Adjudicating

Authority. One of the Appeal was filed by the Regional Provident Fund

Commissioner. It was submitted in the Appeal that Successful Resolution

Applicant was supposed to pay the total provident fund amount but only

part of the amount has been allowed by the Resolution Professional.

Section 36(4)(a)(iii) was relied. In Para 40 to 45 while allowing the Company

Appeal (AT) (Ins.) No. 1001 of 2019 following was held by this Tribunal:-

“40. According to Appellant- ‘Regional Provident

Fund Commissioner’, ‘Successful Resolution
Applicant’ is supposed to pay the total provident
fund amount, but only a part of the amount has
been allowed by the ‘Resolution Professional’.

41. It was submitted that the ‘Resolution Plan’ is

against the provisions of Section 36(4) (iii) of the
‘I&B Code’ as per which the ‘provident fund’ and

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 ‘gratuity fund’ cannot be included as assets of the
‘Corporate Debtor’.

42. An Affidavit has been filed by ‘Kushal Limited’-

(‘Successful Resolution Applicant’) stating that the
approved ‘Resolution Plan’ has duly taken care of
all the statutory dues amounting to total Rs.5.09
crore. It was further submitted that the principal
amount of ‘provident fund’ has been taken into
consideration whereas the order of levying of
interest by the ‘PF Authority’ post ‘Corporate
Insolvency Resolution process’ is not permissible
under the law for the time being in force.

43. Further, according to ‘Successful Resolution

Applicant’, Section 7Q and 14B of the ‘Employees
Provident Funds and Miscellaneous Provision Act,
1952’ cannot be relied upon as the provision of the
‘I&B Code’ has overriding effect on the same in
terms of Section 238 of the ‘I&B Code’.

44. However, as no provisions of the ‘Employees

Provident Funds and Miscellaneous Provision Act,
1952’ is in conflict with any of the provisions of the
‘I&B Code’ and, on the other hand, in terms of
Section 36 (4) (iii), the ‘provident fund’ and the
‘gratuity fund’ are not the assets of the ‘Corporate
Debtor’, there being specific provisions, the
application of Section 238 of the ‘I&B Code’ does
not arise.

45. Therefore, we direct the ‘Successful Resolution

Applicant’- 2nd Respondent (‘Kushal Limited’) to

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 release full provident fund and interest thereof in
terms of the provisions of the ‘Employees Provident
Funds and Miscellaneous Provision Act, 1952’
immediately, as it does not include as an asset of
the ‘Corporate Debtor’. The impugned order dated
27th February, 2019 approving the ‘Resolution
Plan’ stands modified to the extent above.”

51. Against the above judgment of this Tribunal a Civil Appeal was filed

in the Supreme Court which was dismissed on 22.05.2020 by following

order:

“O R D E R

We find no merit in this appeal. The Civil

Appeal is, accordingly, dismissed.”

52. In the above case, it is clear that the case of the Regional Provident

Fund Commissioner was that the total provident fund amount has not been

included in the Resolution Plan whereas the Successful Resolution

Applicant has contended that Principal Amount of provident fund has been

taken in consideration, whereas the order of levying of interest by the PF

Authority post Corporate Insolvency Resolution process has not been

included. This Tribunal held that no provision of the Employees Provident

Funds and Miscellaneous Provision Act, 1952 is in conflict with the

provisions of I&B Code and direction was issued to pay the full amount of

provident fund by the Successful Resolution Applicant.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 59
53. Learned counsel for the Respondents have placed reliance on two

other judgments of this tribunal rendered by two member bench i.e.

judgment of this Tribunal in “Company Appeal (AT) (Ins.) No. 1229 of

2019, Mr Savan Godiwala, the liquidator of Lanco Infratech Limited

vs. Apalla Siva Kumar”. In which case, the Adjudicating Authority has

directed the Liquidator to pay gratuity to the employees. An appeal was

filed in this Tribunal which has been allowed. After noticing the three

member bench judgment in “State Bank of India v Moser Baer Karamchari

Union and Another” following observations have been made in Paras 16, 17

and 18:-

“16. ….. Thus it is the settled position of law,

that the provident fund, the pension fund and the
gratuity fund, do not come within the purview of
‘liquidation estate’ for the purpose of distribution
of assets under Section 53 of the Code. Based on
this, the only inference which can be drawn is that
Pension Fund, Gratuity Fund and Provident Fund
can’t be utilised, attached or distributed by the
liquidator, to satisfy the claim of other creditors.
Sec 36(2) of the I B Code 2016 provides that the
Liquidator shall hold the Liquidation Estate in
fiduciary for the benefit of all the Creditors. The
Liquidator has no domain to deal with any other
property of the corporate debtor, which is not the
part of the Liquidation Estate.

In a case, where no fund is created by a

company, in violation of the Statutory

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 60
 provision of the Sec 4 of the Payment of
Gratuity Act, 1972, then in that situation
also, the Liquidator cannot be directed to
make the payment of gratuity to the
employees because the Liquidator has no
domain to deal with the properties of the
Corporate Debtor, which are not part of the
liquidation estate.

On perusal of the statutory provision of

Section 5 of the Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952. It is apparent
that the establishment, to which the said Scheme
of Employees’ Provident Fund applies, has to
create a fund in accordance with the provision of
the Act and the Scheme. Section 5(1-a) provides
that the Fund shall vest in, and be administered
by the Central Board constituted under Section
5(a). Section 4 of the Payment Gratuity Act, 1972
provides that Gratuity shall be payable to an
employee on the termination of his employment
after he has rendered continuous service for not
less than five years –

(a) On his superannuation,

(b) On his retirement or resignation,

(c) On his death or disablement due to

accident or disease.

In this case, we are not concerned with

determination about the entitlement of Gratuity by
the employees of the ‘Corporate Debtor’. Payment

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 61
 of Gratuity to employees depends on their
entitlement of Gratuity, subject to the fulfilment of
the conditions laid down under the payment of
Gratuity Act, 1972 and also on the availability
of the fund in this regard.

17. Based on the judgment of this Appellate

Tribunal in case of the State Bank of India Vs.
Moser Baer Karamchari Union and Another, 2019
SCC Online NCLAT 447, it is clear that in terms of
sub-Section (4)(a)(iii) of Section 36 all sums due to
any workman or employees from the Provident
Fund, Pension Fund and the Gratuity Fund, do not
form part of the liquidation estate/liquidation
assets of the ‘Corporate Debtor’. Therefore, the
question of distribution of Provident Fund or the
Pension Fund or the Gratuity Fund in order to
priority, and within such period as prescribed
under Section 53(1), does not arise. It is further
held in the above case that 53(1)(b)(i) of the I&B
Code, regarding distribution of assets, relating to
workmen‘s dues is confined to a period of 24
months, preceding the liquidation commencement
date. This question as already been decided that
Gratuity Fund does not form the part of the
liquidation asset.

18. Therefore, the question of distribution of the

Gratuity Fund in order of priority, provided under
Section 53(1) of the Code does not arise. However,
the Adjudicating Authority has given direction to
the Liquidator that, ―the Liquidator cannot avoid

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 62
 the liability to pay Gratuity to the employees, on
the ground, that ‘Corporate Debtor’ did not
maintain separate funds, even if, there is no fund
maintained, the Liquidator has to provide
sufficient provision for payment of Gratuity to the
Applicants according to their eligibility.”

54. Against the above judgment, appeal has been filed in the Supreme

Court and the judgment is under scrutiny by Hon’ble Supreme Court in

Civil Appeal No. 2520 of 2020.

55. The next judgment relied by learned counsel for the Respondent is

the judgment of “Regional Provident Fund Commissioner, Employees

Provident Fund Organisation vs. Vandana Garg, Company Appeal (AT)

(CH) (Ins) No. 50 of 2021”, which judgment follows the earlier judgment of

this Tribunal in ‘Sawan Godiwala vs. Apalla Siva Kumar’. In the above

case, the Adjudicating Authority approved the Resolution Plan which

waives off a major portion of provident fund dues owed by the Corporate

Debtor. An Appeal was filed by the Regional Provident Fund Commissioner

challenging the resolution plan on the ground that it violates Section 11 of

the 1952 Act and also violates Section 36(4)(a)(iii) and Section 32(e) of the

Code. In Para 27 and 28 of the Judgment following has been held:-

“27. Further, it is necessary to mention that the

question of applicability of Section 36 (4) (a) (iii) of
the Insolvency and Bankruptcy Code 2016 arises
at the stage of the formation of Liquidation Estate
by the Liquidator. Since the Corporate Debtor has

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 63
 not gone into Liquidation and is currently under
Insolvency Resolution, Section 36 of the I&B Code
cannot be applied. Moreover, no fund could be
excluded from the Liquidation Estate in terms of
Section 36 (4) (a)(iii) of the I & B Code 2016.

28. It is pertinent to mention that this Appellate

Tribunal while dealing with the same issue in
Company Appeal (AT) (insolvency) No 1229 of
2019 in the matter of Mr Savan Godiwala,
Liquidator of Lanco Infratech Ltd v Apalla Siva
Kumar held;

"Thus it is the settled position of law

that the provident fund, the pension
fund and the gratuity fund, do not
come within the purview of
'liquidation estate 'for the purpose of
distribution of assets under Section
53 of the Code. Based on this, the only
inference which can be drawn is that
Pension Fund, Gratuity Fund and
Provident Fund can't be utilised,
attached or distributed by the
Liquidator, to satisfy the claim of
other creditors.

Sec 36(2) of the I B Code 2016

provides that the Liquidator shall hold
the Liquidation Estate in fiduciary for
the benefit of all the Creditors. The
Liquidator has no domain to deal with
any other property of the corporate
debtor, which is not the part of the
Liquidation Estate. In a case, where
no fund is created by a company, in
violation of the Statutory provision of
the Sec 4 of the Payment of Gratuity
Act, 1972, then in that situation also,
the Liquidator cannot be directed to
make the payment of gratuity to the
employees because the Liquidator

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 64
 has no domain to deal with the
properties of the Corporate Debtor,
which are not part of the liquidation
estate.

On perusal of the statutory provision

of Section 5 of the Employees'
Provident Fund and Miscellaneous
Provisions Act, 1952. It is apparent
that the establishment, to which the
said Scheme of Employees' Provident
Fund applies, has to create a fund in
accordance with the provision of the
Act and the Scheme. Section 5(1-a)
provides that the Fund shall vest in,
and be administered by the Central
Board constituted under Section 5(a).
Section 4 of the Payment Gratuity Act,
1972 provides that Gratuity shall be
payable to an employee on the
termination of his employment after
he has rendered continuous service
for not less than five years –

(a) On his superannuation,

(b) On his retirement or

resignation,

(c) On his death or disablement

due to accident or disease.

In this case, we are not concerned

with determination about the
entitlement of Gratuity by the
employees of the 'Corporate Debtor '.
Payment of Gratuity to employees
depends on their entitlement of
Gratuity, subject to the fulfilment of
the conditions laid down under the
payment of Gratuity Act, 1972 and
also on the availability of the fund in
this regard.

Based on the judgment of this

Appellate Tribunal in case of the State
Bank of India Vs. Moser Baer

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 65
 Karamchari Union and Another, 2019
SCC Online NCLAT 447, it is clear that
in terms of sub-Section (4)(a)(iii) of
Section 36 all sums due to any
workman or employees from the
Provident Fund, Pension Fund and
the Gratuity Fund, do not form part of
the liquidation estate/liquidation
assets of the 'Corporate Debtor '.
Therefore, the question of distribution
of Provident Fund or the Pension Fund
or the Gratuity Fund in order to
priority, and within such period as
prescribed under Section 53(1), does
not arise. It is further held in the
above case that 53(1)(b)(i) of the I&B
Code, regarding distribution of
assets, relating to workmen's dues is
confined to a period of 24 months,
preceding the liquidation
commencement date. This question
has already been decided that
Gratuity Fund does not form the part
of the liquidation asset. Therefore, the
question of distribution of the Gratuity
Fund in Order of priority, provided
under Section 53(1) of the Code does
not arise. However, the Adjudicating
Authority has given direction to the
Liquidator that, ―the Liquidator
cannot avoid the liability to pay
Gratuity to the employees, on the
ground, that 'Corporate Debtor 'did
not maintain separate funds, even if,
there is no fund maintained, the
Liquidator has to provide sufficient
provision for payment of Gratuity to
the Applicants according to their
eligibility."”

56. In the above case the claim submitted by EPFO of Rs.1,95,01,301/-

was admitted by Resolution Professional and reflected in the Resolution

Plan. In appeal enhanced claim of Rs.2,84,69,497/- was sought to be

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 66
raised which was not accepted by this Appellate Tribunal. Further the

Judgment of this Tribunal in above case is based on Judgment of “Savan

Godiwala” which is pending consideration before Hon’ble Supreme Court.

57. Learned counsel for the Appellant has relied on Judgment of this

Tribunal in “Sikander Singh Jamuwal vs. Vinay Talwar & Ors.,

Company Appeal (AT) (Ins.) No. 483 of 2019”, decided on 11.03.2022.

In the above case, an appeal was filed by ex-employee of Respondent No.3,

Corporate Debtor, challenging the order dated 02.04.2019 passed by the

Adjudicating Authority approving the resolution plan. Grievance of the

Appellant was that they have not been made the full payment of provident

fund due to the Corporate Debtor. Other grounds for challenge were also

raised. This Tribunal while considering the appeal considered provisions

of Section 36(4) and Section 53 of the Code. This Tribunal placed reliance

on the judgment of Tourism Finance Corporation of India Ltd. vs.

Rainbow Papers Ltd.” (Supra) and issued following directions in Para

13(f):

“(f) Hence, We direct the Respondent

No.2/Successful Resolution Applicant to
release full provident fund dues in terms of
the provisions of the Employees Provident
Funds and Miscellaneous Provident Fund
Act, 1952 immediately by releasing the
balance amount of (Rs. 1,35,06,391 full
dues – (minus) considered in the Resolution
Plan Rs.78,00,000). The impugned order

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 67
 dated 02nd April, 2019 approving the
‘Resolution Plan’ stands modified to the
extent above.”

58. Against the above judgment of this Tribunal Civil Appeal was filed

before Hon’ble Supreme Court which has been dismissed on 23.09.2022 by

following order:

“O R D E R

Having heard learned counsel for the

appellant, we find no merits in the appeal.

The Civil Appeal is, accordingly, dismissed.

However, the appellant is permitted to make

a request before the appropriate forum, to provide
sometime for the deposit of the difference of the
provident fund.”

59. Another judgment relied by learned counsel for the Appellant is

judgment of this Tribunal in “Nitin Gupta vs. Applied Electro-Magnetics

Pvt. Ltd. & Ors., Company Appeal (AT) (Ins.) No. 502 of 2019”, decided

on 16.03.2022. Judgment of “Nitin Gupta” relied on earlier judgment of

“Sikander Singh Jamuwal”. Resolution Plan wad modified with direction

as issued in Para 30:

“30. We are, therefore, of the view that the

approved resolution plan complies with the
provisions of the IBC with slight modification in the
amounts proposed to be paid to the workmen and

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 68
 employees in relation to their dues including
provident fund which is as follows:

 The workmen should get an additional

payment of Rs. 0.1652 crores - Rs. 0.09
crores = Rs. 0.8834 crores to be distributed
among them as per their proportionate
shares.

 The payment of provident fund amounts

should be in accordance with the judgment
of this tribunal in the matter Sikander Singh
Jamuwal Vs. Vinay Talwar & Ors. [CA (AT)
(Ins) No. 483 of 2019].

With the above-stated modifications in the

Resolution Plan we uphold the approval of the
Resolution Plan by the Adjudicating Authority. The
appeal is disposed of accordingly.”

60. The submissions which has been pressed by learned counsel for the

Appellant are based on two three bench judgments of this Tribunal in

“State Bank of India vs Moser Baer Karamchari Union” (Supra) and

“Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.”

(Supra). The judgment of “State Bank of India vs. Moser Baer Karamchari

Union” was a case relating to liquidation proceeding, in which proceeding,

relying on Section 36(4)(a)(iii) the Adjudicating Authority has directed the

Liquidator to make the payment of provident fund, pension fund and

gratuity fund. The basis of judgment of this Tribunal in State Bank of

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 69
India’s Case was that the I&B Code will have overriding effect and the

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

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

of the Companies Act, 2013. Explanation to Section 326 of the Companies

Act, 2013 is as follows:-

“Explanation.—For the purposes of this section,

and section 327—

(a) "workmen'', in relation to a company,

means the employees of the company, being
workmen within the meaning of clause (s) of
section 2 of the Industrial Disputes Act,
1947 (14 of 1947);

(b) "workmen's dues'', in relation to a

company, means the aggregate of the
following sums due from the company to its
workmen, namely:—

(i) all wages or salary including

wages payable for time or piece work
and salary earned wholly or in part
by way of commission of any
workman in respect of services
rendered to the company and any
compensation payable to any
workman under any of the provisions
of the Industrial Disputes Act, 1947
(14 of 1947);

(ii) all accrued holiday remuneration

becoming payable to any workman or,

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 70
 in the case of his death, to any other
person in his right on the termination
of his employment before or by the
effect of the winding up order or
resolution;

(iii) unless the company is being

wound up voluntarily merely for the
purposes of reconstruction or
amalgamation with another company
or unless the company has, at the
commencement of the winding up,
under such a contract with insurers
as is mentioned in section 14 of the
Workmen's Compensation Act, 1923
(19 of 1923), rights capable of being
transferred to and vested in the
workmen, all amount due in respect of
any compensation or liability for
compensation under the said Act in
respect of the death or disablement of
any workman of the company;

(iv) all sums due to any workman from

the provident fund, the pension fund,
the gratuity fund or any other fund for
the welfare of the workmen,
maintained by the company;

(c) "workmen's portion'', in relation to the

security of any secured creditor of a
company, means the amount which bears to
the value of the security the same proportion

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 71
 as the amount of the workmen's dues bears
to the aggregate of the amount of workmen's
dues and the amount of the debts due to the
secured creditors.”

61. Section 326 and 327 of the Companies Act is not applicable in the

event of liquidation under the Insolvency and Bankruptcy Code, 2016 as

per Sub-section (7) added in Section 327 by Schedule Eleven of the Code.

Section 53 refers to workmen dues and by explanation appended to Section

53(1) at (ii) the term “workmen’s dues” shall have the same meaning as

assigned to it in Section 326 of the Companies Act, 2013. Thus, for

computation of the workmen’s dues the definition under Section 326 has

to be resorted to. Workmen dues for period of 24 months include salary,

allowances and all other claims which workmen is entitled. For

computation of workmen dues, which is to be paid by the Corporate Debtor,

in event of liquidation under Section 53(1)(b) workmen’s dues are ranked

equally with the secured creditors. The question which has arisen before

us is with regard to payment of provident fund and gratuity which is due

to an applicant.

62. Three Member Bench judgment in both “State Bank of India vs

Moser Baer Karamchari Union and Another” (Supra) and “Tourism

Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.” (Supra)

where this Tribunal has categorically held that provident fund has to be

paid to workmen and employees in full and that cannot be made subject to

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 72
distribution under waterfall mechanism of Section 53(1). Hon’ble Supreme

Court has dismissed the appeal against the judgment of the Tribunal in

“Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd.”,

as noted above.

63. Learned counsel for the Respondent has relied on two two members

judgments delivered by this Tribunal in “Sawan Godiwala vs. Apalla

Siva Kumar” and “Regional Provident Fund Commissioner, Employees

Provident Fund Organisation vs. Vandana Garg” (Supra) where

direction issued by the Adjudicating Authority for payment of provident

fund was interfered with by this Appellate Tribunal. The judgment of

“Sawan Godiwala” only refers to the judgment of “State Bank of India

vs Moser Baer Karamchari Union”, and does not notice the another three

member bench judgment in “Tourism Finance Corporation of India Ltd.

vs. Rainbow Papers Ltd.”. The two member bench judgment in “Sawan

Godiwala” also follows the three member bench judgment in “State Bank

of India vs Moser Baer Karamchari Union” and does not take any

different view. However, with regard to direction to pay gratuity the two

member bench judgment set aside the order of Adjudicating Authority

holding that no gratuity fund was created. Another judgment in “Regional

Provident Fund Commissioner, Employees Provident Fund

Organisation vs. Vandana Garg” (Supra) delivered by two member bench

does not refer to any of the earlier three member bench judgments and has

relied on “Sawan Godiwala” judgment. We find ourself bound to follow

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 73
the three member bench judgment in “Tourism Finance Corporation of

India Ltd. vs. Rainbow Papers Ltd.” where direction was issued to the

Successful Resolution Applicant to release full provident fund and interest

thereof in terms the Employees’ Provident Funds and Miscellaneous

Provision Act, 1952, which judgment has also received approval by the

Hon’ble Supreme Court.

64. The Hon’ble Supreme Court in “Sunil Kumar Jain vs Sundaresh

Bhatt, Civil Appeal No. 5910 of 2019” decided on 19th April, 2022, had

occasion to consider a case where an appeal by workmen/employees of M/s

ABG Shipyard Limited Mumbai was dismissed by this Tribunal. The facts

of the above case need to be noticed in some details. The Adjudicating

Authority admitted an application under Section 7 on 01.08.2017 against

the Corporate Debtor. An order of liquidation was passed. An application

was filed by the workmen and employees for claim of salary for the period

involving CIRP and the prior period, which was rejected. Before the Hon’ble

Supreme Court submission was made that employees and workmen were

entitled to wages/salary during the CIRP period and were also entitled for

their dues of provident fund, gratuity and pension fund. The said

submission has been noted in Para 13 of the judgment:-

“13. Learned counsel appearing on behalf of the

appellants has taken us to the relevant provisions
of the IB Code in support of her submission that
the workmen/employees of the Dahej Yard and
Mumbai Head Office are at least entitled to the

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 74
 wages/salaries during the period of CIRP and are
also entitled to the amount due and payable
towards provident fund, gratuity and pension.
Learned counsel appearing on behalf of the
appellants has taken us to Section 3(36); Section
5(13); Section 5(14); Section 5(23); Section
17, Section 18; Section 19; Section 20; Section
25; Section 33(7); Section 36(4) and Section 53 of
the IB Code.”

65. Hon’ble Supreme Court has noticed all provisions of I&B Code

including Section 36(4) and Section 53. While considering the claim of dues

of employees and workmen towards provident fund, pension fund and

gratuity following was laid down by Hon’ble Supreme Court in Para 53 and

54:-

“53. Now so far as the dues of the

workmen/employees on account of provident
fund, gratuity and pension are concerned, they
shall be governed by Section 36(4) of the IB Code.
Section 36(4)(iii) of the IB Code specifically
excludes “all sums due to any workman or
employee from the provident fund, the pension
fund and the gratuity fund”, from the ambit of
“liquidation estate assets”. Therefore, Section
53(1) of the IB Code shall not be applicable to such
dues, which are to be treated outside the
liquidation process and liquidation estate assets
under the IB Code. Thus, Section 36(4) of the IB
Code has clearly given outright protection to

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 75
 workmen’s dues under provident fund, gratuity
fund and pension fund which are not to be treated
as liquidation estate assets and the Liquidator
shall have no claim over such dues. Therefore, the
concerned workmen/employees shall be entitled
to provident fund, gratuity fund and pension fund
from such funds which are specifically kept out of
liquidation estate assets and as per Section 36(4)
of the IB Code, they are not to be used for recovery
in the liquidation.

54. In view of the above and for the reasons stated

above, it is held as under:

i) that the wages/salaries of the workmen/

employees of the Corporate Debtor for the period
during CIRP can be included in the CIRP costs
provided it is established and proved that the
Interim Resolution Professional/ Resolution
Professional managed the operations of the
corporate debtor as a going concern during the
CIRP and that the concerned workmen/ employees
of the corporate debtor actually worked during the
CIRP and in such an eventuality, the
wages/salaries of those workmen/ employees
who actually worked during the CIRP period when
the resolution professional managed the
operations of the corporate debtor as a going
concern, shall be paid treating it and/or
considering it as part of CIRP costs and the same
shall be payable in full first as per Section 53(1)(a)
of the IB Code;

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 76
 ii) considering Section 36(4) of the IB code and
when the provident fund, gratuity fund and
pension fund are kept out of the liquidation estate
assets, the share of the workmen dues shall be
kept outside the liquidation process and the
concerned workmen/employees shall have to be
paid the same out of such provident fund, gratuity
fund and pension fund, if any, available and the
Liquidator shall not have any claim over such
funds.”

66. The conclusions and directions of Hon’ble Supreme Court are

contained in Para 54(ii) in reference to provident fund, gratuity fund and

pension fund. The Hon’ble Supreme Court has directed that the share of

workmen dues shall be kept outside the liquidation process and the

concerned workmen/employees shall have to be paid the same out of such

provident fund, gratuity fund and pension fund, if any, available.

67. Thus, from the above preposition it is clear that share of workmen

dues have to be kept out of liquidation process and same shall have to be

paid to the employees and workmen out of such provident fund, gratuity

fund and pension fund, if any, available. Thus, it is clear that if any

provident fund, gratuity fund and pension fund is available with the

Corporate Debtor, the share of employees and workmen has to be paid from

the said fund which has to be kept out of the liquidation process. Thus, if

the claim of workmen/employees regarding payment of provident fund,

gratuity fund and pension fund can be satisfied from the fund maintained

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 77
by the Corporate Debtor that has to be kept out of the liquidation and

cannot be utilized for distribution amongst other stakeholders.

68. The judgment of Hon’ble Supreme Court as relied by learned counsel

for the Respondent also in Para 53 clearly held that Section 53(1) of the

Code shall not be applicable to such sums, which are to be treated outside

the liquidation process and liquidation estate assets under the Code.

Direction issued by Hon’ble Supreme Court in Para 54(i) was with regard

to wages and salary of the workmen/employees of the Corporate Debtor

during the CIRP period and under direction (ii) at Para 54, Hon’ble Supreme

Court directed in reference to Section 36(4) of the Code that provident fund,

gratuity fund and pension fund are kept out of the liquidation estate assets

and the share of the workmen dues shall be kept outside the liquidation

process. Learned counsel for the Respondent has relied on words “if any,

available” occurring in direction (ii). The above words cannot be read to

mean that the workmen and employees are not entitled for provident fund,

gratuity fund and pension fund if not available with the Liquidator.

69. The present is a case where resolution plan has been approved;

present is not a case of liquidation. Under the provisions of 1952 Act, the

Corporate Debtor is statutorily obliged to deposit the provident fund of the

workmen and employees with the EPFO. It has been clearly stated in the

Additional Affidavit of the Resolution Professional dated 25.07.2022 that

no amount towards provident fund of the workmen and employees were

deposited after February, 2019. Insolvency commencement date being

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 78
20.06.2019, the Corporate Debtor was obliged to deposit the contribution

towards provident fund with EPFO. The claim of provident fund till the

insolvency commencement date, of the workmen and employees was to be

accepted and Successful Resolution Applicant was liable to make payment

of provident fund till the date of initiation of CIRP and statutory obligation

of the Corporate Debtor was liable to be discharged by the Successful

Resolution Applicant. From the Affidavit of Resolution Professional it is

clear that Resolution Professional in the claim which has been admitted of

the workmen for 24 months, the provident fund and gratuity amount was

also included. The workmen have received payments with regard to

provident fund and gratuity in part under the Resolution Plan subject to

the liquidation value of the workmen. We, thus, are satisfied that workmen

are entitled for issuing appropriate direction to Successful Resolution

Applicant to make payment of the workmen of the provident fund and

gratuity dues upto the date of insolvency commencement date less the

amount already received under the Resolution Plan towards provident fund

and gratuity. The Corporate Debtor having not deposited the statutory

dues with the EPFO, the said statutory liability has to be discharged by the

Successful Resolution Applicant.

70. It is further relevant to notice with regard to pension no materials

have been brought before us to indicate that the Corporate Debtor has any

rules /provisions for payment of pension, hence, no direction with regard

to pension need to be issued.

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71. In view of the aforesaid discussion, we arrive at following

conclusions:

(i) The workmen and employees are entitled for payment of full

amount of provident fund and gratuity till the date of

commencement of the insolvency which amount is to be paid

by the Successful Resolution Applicant consequent to approval

of the Resolution Plan in addition to the 24 months workmen

dues as the workmen is entitled to under Section 53(1)(b) of

the Code. It is made clear that in addition to part amount of

provident fund and gratuity as proposed in Resolution Plan to

workmen, Successful Resolution Applicant is obliged to make

payment of balance unpaid amount of provident fund and

gratuity to workmen and employees.

72. Our answer to Question II and III is as follows:

(i) The workmen and employees are entitled to receive the amount

of provident fund and gratuity in full since they are not part of

the liquidation estate under Section 36(4)(b)(iii).

(ii) The workmen are entitled to receive their dues from the

Corporate Debtor for period of 24 months as per provision of

Section 53(1)(b) at least to minimum liquidation value

envisaged under Section 32(2)(b) read with Section 53(1).

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73. To further examine the issues, we need to look into few more

provisions of the Code as well as facts on record relating to provident fund,

gratuity fund and other retirement benefits.

74. Although Section 36, sub-section (4)(a)(iii) of the Code applies to

liquidation, but the purpose and object for which the above provisions was

enacted also finds reflections in Section 18 of the Code. Section 18

enumerates the duties of IRP. Section 18, sub-section (f) provides as

follows:

“18(f) take control and custody of any asset over

which the corporate debtor has ownership rights as
recorded in the balance sheet of the corporate debtor, or
with information utility or the depository of securities or
any other registry that records the ownership of assets
including –
(i) assets over which the corporate debtor
has ownership rights which may be located in a
foreign country;
(ii) assets that may or may not be in
possession of the corporate debtor;
(iii) tangible assets, whether movable or
immovable;
(iv) intangible assets including intellectual
property;
(v) securities including shares held in any
subsidiary of the corporate debtor, financial
instruments, insurance policies;

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 (vi) assets subject to the determination of
ownership by a court or authority;”

75. The Explanation to Section 18, which is also relevant provides:

“Explanation. – For the purposes of this 1[section],

the term “assets” shall not include the following,
namely:-
(a) assets owned by a third party in
possession of the corporate debtor held under trust
or under contractual arrangements including
bailment;
(b) assets of any Indian or foreign
subsidiary of the corporate debtor; and
(c) such other assets as may be notified by
the Central Government in consultation with any
financial sector regulator.”

76. If a Corporate Debtor maintains a fund for payment of provident

fund, gratuity fund and other retirement benefits to its workers and

employees, that shall be an asset, but IRP is required to take control and

custody of the assets over which the Corporate Debtor has ownership rights

by virtue of Section 18(1)(f)(i). When we look into the Explanation to Section

18(1), the assets comprising of provident funds, gratuity funds or a pension

fund and belonging to be maintained by Corporate Debtor, are assets on

which employees and workmen have right although assets are in

possession and control of the Corporate Debtor. The above mentioned

assets, thus, are not to be taken control by IRP, after initiation of CIRP.

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Hence, the said funds, i.e., provident fund, pension fund and gratuity fund

maintained by the Corporate Debtor, have to be utilized fully for payment

of provident fund, pension fund and gratuity fund of the workmen and

employees and thus, these assets cannot be included in the Information

Memorandum as the assets of the Corporate Debtor, while inviting the

Resolution Plan.

77. Now we look into the facts of the present case. The Resolution

Professional has filed an additional affidavit dated 25.07.2022 as directed

by this Tribunal vide its order dated 22.07.2022. In paragraph 11.1 while

dealing with provident fund, following has been stated:

“11.1 I say that the amounts deposited by the erstwhile

management of the Corporate Debtor into
Employee Provident Fund Organisation ("EPFO")
do not form part of the estate of the Corporate
Debtor and accordingly, such amounts do not form
part of the Resolution Plan. I state that the
provident fund deductions from the salaries of the
employees/workmen which were deposited into
the respective accounts of such
workmen/employees maintained with the EPFO
can be withdrawn by the respective
employees/workmen from their respective
accounts, without the knowledge of the employer.
Hence, pursuant to the ICD when I assumed
control of the accounts of the Corporate Debtor, the
amounts in the above accounts of the
workmen/employees which were deposited with

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 the EPFO did not form part of the records of the
Corporate Debtor. Hence, I am unaware of the total
amounts deposited prior to the ICD or the balance
in the respective employee/workmen accounts as
on date. The records of the Corporate Debtor as on
ICD show that in February 2019, a payment of INR
13.94 Crore was made by the Corporate Debtor
into the EPFO account However, after monies are
deposited with the EPFO, the amounts are under
the control of the respective employee/workmen
and not the Corporate Debtor.”

78. The above facts indicate that the workmen and employees are

Members of the provident fund, which is maintained by Employees

Provident Fund Organisation (“EPFO”) and the Corporate Debtor was

depositing provident fund deductions from the salaries of the employees

and workmen into EPFO. The Resolution Professional has stated that in

February 2019, a payment of Rs.13.94 crores was made by the Corporate

Debtor into the EPFO account. No payments have been made in the EPFO

account thereafter. The above fact clearly indicate that Corporate Debtor

does not maintain any provident fund for payment of provident fund to its

workmen and employees and workmen and employees are entitled to

withdraw the provident fund deposited with EPFO as per the Scheme. The

provident fund deposited by the Corporate Debtor in the EPFO account

towards deduction with regard to its workmen and employees can be

withdrawn directly by the workmen and employees from the EPFO. The

claim of workmen and employees towards provident fund shall obviously

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915 of 2021, 361, 771 & 987 of 2022, 84
be towards the provident fund which is not deposited in the EPFO account.

After issuance of publication by the Resolution Professional, claims have

been filed by the workmen and employees before the Resolution

Professional towards their salary, provident fund, gratuity etc., which after

verification were admitted by the Resolution Professional. The Resolution

Professional in paragraph 8.3 of the additional affidavit dated 25.07.2022

has given details of workmen dues (for the period of 24 months) ICD as well

as employees dues (for the period of 12 months) ICD in paragraph 8.3 is as

follows:

“8.3 It is pertinent to note that under Section 30(2)(b)

read with Section 53 of the Code: (i) workmen's
dues for the period of twenty-four months
preceding the ICD rank pari passu with the dues
of the financial creditors terms of Section 53(1)(b);
and (ii) employees' dues for the period of twelve
months preceding the ICD are to be calculated in
terms of Section 53(1)(c). I say that the dues of the
workmen (for the period of twenty-four months)
and employees (for the period of twelve months)
under Section 53 of the Code are as follows:

Details of dues of workmen (24 Months) and employees (12

Months)
In INR Cr.
Category Salary Provident Leaves Gratuity Total
Fund
Workmen 411.6 9.8 25.2 18.7 465.3
Employees 466.8 6.7 16.0 9.6 499.1
Total 878.4 16.5 41.2 28.3 964.4

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 Details of dues of workmen (beyond 24 Months) and
Employees (12 Months)
In INR Cr.
Category Salary Provident Leaves Gratuity Total
Fund
Workmen -- -- 2.2 111.2 113.4
Employees -- -- 39.2 136.6 175.8
Total -- -- 41.4 247.8 289.2

79. The above table indicates that the claim admitted by the Resolution

Professional includes the provident fund, gratuity fund and leave

encashment also. The above claim submitted by employees and workmen

were obviously the claim of unpaid provident fund, leave encashment and

gratuity fund as well as salary. When no provident fund, gratuity fund and

fund for leave encashment is maintained by the Corporate Debtor,

obviously, such claim which have been filed before Resolution Professional

and admitted by Resolution Professional have to be satisfied as per the

provisions of the Code and as per Section 30, sub-section (2) read with

Section 53(1) of the Code. Present is not a case where Resolution

Professional has in Information Memorandum entered provident fund,

gratuity fund or other funds or retirement benefits maintained by the

Corporate Debtor, so as to be part of resolution process.

80. As observed above, in admitted claim of workmen provident fund,

gratuity and leave encashment was included, and payment proposed in

plan partly satisfy above dues also. The workmen are entitled to full

payment of provident fund and gratuity, hence, the balance of above dues

are to be paid by the Successful Resolution Applicant, to satisfy statutory

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915 of 2021, 361, 771 & 987 of 2022, 86
obligations. Non-payment of full provident fund and gratuity shall lead to

violation of Section 30(2)(e), hence, to save the plan the above payments

have to be made.

QUESTION – IV

81. As noted above, law is well settled, i.e., Resolution Plan, which

requires approval by Adjudicating Authority must comply the requirement

as provided in Section 30, sub-section (2) of the Code. Section 30, sub-

section (2) provides as follows:

“30. Submission of resolution plan. - (1) A

resolution applicant may submit a resolution plan
2[along with an affidavit stating that he is eligible under
section 29A] to the resolution professional prepared on
the basis of the information memorandum.
(2) The resolution professional shall examine each
resolution plan received by him to confirm that each
resolution plan -
(a) provides for the payment of insolvency
resolution process costs in a manner specified by
the Board in priority to the payment of other debts
of the corporate debtor;
[(b) provides for the payment of debts of
operational creditors in such manner as may be
specified by the Board which shall not be less
than-
(i) the amount to be paid to such creditors in
the event of a liquidation of the corporate
debtor under section 53; or

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 (ii) the amount that would have been paid to
such creditors, if the amount to be
distributed under the resolution plan had
been distributed in accordance with the
order of priority in sub-section (1) of section
53,
whichever is higher, and provides for the payment
of debts of financial creditors, who do not vote in
favour of the resolution plan, in such manner as
may be specified by the Board, which shall not be
less than the amount to be paid to such creditors
in accordance with sub-section (1) of section 53 in
the event of a liquidation of the corporate debtor.
Explanation 1. — For removal of doubts, it is
hereby clarified that a distribution in accordance with the
provisions of this clause shall be fair and equitable to
such creditors.
Explanation 2. — For the purpose of this clause, it
is hereby declared that on and from the date of
commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019, the provisions of this clause
shall also apply to the corporate insolvency resolution
process of a corporate debtor-
(i) where a resolution plan has not been
approved or rejected by the Adjudicating
Authority;
(ii) where an appeal has been preferred
under section 61 or section 62 or such an appeal
is not time barred under any provision of law for
the time being in force; or

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 (iii) where a legal proceeding has been
initiated in any court against the decision of the
Adjudicating Authority in respect of a resolution
plan;”

82. We need to examine as to whether the Resolution Plan approved by

the Committee of Creditors on 03.10.2020 and by Adjudicating Authority

on 22.06.2021 complies the requirement under Section 30, sub-section (2)

(b) of the Code.

83. The Resolution Professional in its additional affidavit dated

25.07.2022 has given details of liquidation value of the Corporate Debtor,

which is also reflected in Form-H. The approximate liquidation value of the

Corporate Debtor is Rs.2,555/- crores. Regulation 39, sub-regulation (4)

of the Insolvency and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate Persons) Regulation 2016 provides:

(4) The resolution professional shall endeavour to

submit the resolution plan approved by the committee to
the Adjudicating Authority at least fifteen days before the
maximum period for completion of corporate insolvency
resolution process under Section 12, along with a
compliance certificate in Form H of the Schedule and
evidence of receipt of performance security required
under sub-regulation (4-A) of regulation 36-B).

84. After approval of the Resolution Plan by the Committee of Creditors,

a compliance certificate in Form-H is required to be filed before the

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Adjudicating Authority. After approval of the Resolution Plan, Resolution

Professional has filed Form-H along with his application for approval of

Resolution Plan, which has been brought on record by the Resolution

Professional along with additional compilation filed on 06.07.2022. Form-

H mentions the liquidation value as Rs.2555,21,40,000/-. Form-H in

Clause-7 refers to Annexure-A. Note-3 deals with breakup of payments to

workmen and employees. It is relevant to extract Note-3, which is to the

following effect:

Sl. Particulars Amount Remarks

No. (INR
Lakhs)
1 Total amount 52,00 Please refer S. No.11 in the
proposed by table in Annexure A for
Resolution details
Professional
2 Add: Additional 6100 Resolution Applicant has
payout towards the proposed total INR 5200
workmen & lakhs towards the dues of
employees workmen & employees

The estimated minimum

liquidation value due towards
the workmen is INR 11300
lakhs. For the purposes of
the computations set out
herein, the shortfall of INR
6100 lakhs has been
deducted from the amount
allocated to the assenting FCs
& Operational Creditors in
the ratio of their payouts.

In relation to the above, for

the purposes of this table, an
amount of INR 6044 lakhs
has been deducted in
computing the payout to be
made to the assenting FCs
and an amount of INR 56
lakhs has been deducted in

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 computing the payouts to be
made to the Operational
Creditors (other than
workmen and employees).
3. Total Payout to 11,300
Workmen &
Employees

85. The above breakup, which is part of Form-H estimate minimum

liquidation value due to the workmen is INR 11,300 lakhs, i.e., Rs.113/-

Crores.

86. At this stage, we may also notice the paragraph 6.42 of the

Resolution Plan, which refers to treatment of employees/ workmen dues.

Para 6.4.2, (a), (b) and (c) is as follows:

“6.4.2 Treatment of Employees/ Workmen dues, including

dues of Authorized Representatives of Employees/
Workmen

(a) The Resolution Applicant proposes to pay a fixed sum of

Rs.52 Crores to the Workmen/ Employees towards
settlement of all the claims made by the Employees and
Workmen of the Corporate Debtor, including to the
Authorized Representatives of Employees and Workmen
as set out in the List of Creditors (“Admitted Workmen and
Employees Dues”).
(b) The payments towards Admitted Workmen and
Employees Dues shall be made out of funds infused by
the Resolution Applicant in the Corporate Debtor and as
per the Implementation Schedule set out in Clause 7.7
below. The said payment is also being made in priority
to the payment to the financial creditors.

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 (c) In any case, if the Liquidation Value due to Operational
Creditors (Employees/ Workmen dues, including dues of
the Authorized Representatives of Employees/ Workmen)
is not “NIL”, then the Resolution Applicant undertakes
that the Liquidation Value due to such Operational
Creditors (Employees/ workmen dues including dues of
Authorized Representatives of Employees/ Workmen)
shall be paid and shall be given priority in payment over
Financial Creditors as is already reflected in the
Implementation Schedule in Clause 7.7 below. The entire
payment to the Employees/ Workmen dues including
dues of Authorized Representatives of Employees/
Workmen is being made in priority within 175 (one
hundred seventy five) days from the Effective Date.”

87. The Resolution Plan clearly contains an undertaking of the

Resolution Applicant that liquidation value due to Operational Creditors,

i.e., employees and workmen shall be paid. When liquidation value has

been estimated by Resolution Professional in Form-H as Rs.113 crores for

workmen and employees, we fail to see the reason for allocating only Rs.52

crores towards dues of workmen. Hence, the workmen are entitled to at

least Rs.113 crores, which is their minimum liquidation value estimated by

Resolution Professional. The above fact clearly mandates direction to be

issued to Resolution Applicant to pay at least Rs.113 crores towards

workmen dues as per their entitlement under Section 30, sub-section (2)

(b) read with Section 53(1) of the Code.

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88. We, thus, arrive at a conclusion that had there not been an

undertaking as contained in paragraph 6.4.2 (c) for payment of liquidation

value, allocation of Rs.52 crores only was in clear violation of Section 30,

sub-section (2), sub-clause (b), but in view of the undertaking by the

Resolution Applicant, we do not find any necessity of interfering with the

Resolution Plan except issuing a direction for payment of Rs.113 crores,

which is a minimum liquidation value of workmen dues.

QUESTION – V & VI

89. The issue to be considered is as to whether the Resolution Plan as

approved by the Adjudicating Authority violates provisions of Section

30(2)(e) of the Code. Section 30(2)(e) requires that Resolution Plan does not

contravene any of the provisions of the law for the time being in force. The

contention pressed by the Appellant is that provisions of Section 25F and

25FF of the Industrial Dispute Act, 1947 are the law time being in force

and demerger of the workmen and employees of the Corporate Debtor to

AGSL is in essence retrenchment of the workmen and workmen were

entitled for retrenchment compensation and no retrenchment

compensation having been paid to the workmen, there is violation of

Section 25F and 25FF of the Industrial Disputes Act, 1947.

90. Before we proceed further, we may notice Section 25F and 25FF of

the Industrial Disputes Act, 1947, which is as follows:

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 “25F. Conditions precedent to retrenchment of
workmen.--No workman employed in any industry who
has been in continuous service for not less than one year
under an employer shall be retrenched by that employer
until--

(a) the workman has been given one months notice

in writing indicating the reasons for retrenchment and
the period of notice has expired, or the workman has
been paid in lieu of such notice, wages for the period of
the notice;

(b) the workman has been paid, at the time of

retrenchment, compensation which shall be equivalent to
fifteen days' average pay 3[for every completed year of
continuous service] or any part thereof in excess of six
months; and

(c) notice in the prescribed manner is served on the

appropriate Government 4[or such authority as may be
specified by the appropriate Government by notification
in the Official Gazette.

25FF. Compensation to workmen in case of

transfer of undertakings.--Where the ownership or
management of an undertaking is transferred, whether
by agreement or by operation of law, from the employer
in relation to that undertaking to a new employer, every
workman who has been in continuous service for not less
than one year in that undertaking immediately before
such transfer shall be entitled to notice and
compensation in accordance with the provisions of
section 25F, as if the workman had been retrenched:

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 Provided that nothing in this section shall apply to
a workman in any case where there has been a change
of employers by reason of the transfer, if--

(a) the service of the workman has not been

interrupted by such transfer;

(b) the terms and conditions of service applicable

to the workman after such transfer are not in any way
less favourable to the workman than those applicable to
him immediately before the transfer; and

(c) the new employer is, under the terms of such

transfer or otherwise, legally liable to pay to the
workman, in the event of his retrenchment, compensation
on the basis that his service has been continuous and
has not been interrupted by the transfer.”

91. We may also first notice certain clauses of Resolution Plan. The

Scheme of demerger is contained in Clause 6.4.2 (i), which is as follows:

“6.4.2 (i) Scheme

(i) The Resolution Applicant propose to retain 50 (fifty)

employees and workmen forming part of the APT.
Such employees will be given the option to resign
and seek re-employment by the Corporate Debtor
on fresh employment terms as agreed between the
Resolution Applicant and such employees,
commencing from the Approval Date. An employee
who refuses to exercise such option shall not be
retained by the Corporate Debtor ("Retained
Employees").

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 (ii) Excluding the Retained Employees, all employees
and workmen of the Corporate Debtor on the
payrolls of the Corporate Debtor ("Demerged
Employees") as on September 15, 2020 ("Record
Date") will be demerged from the Corporate Debtor
into Airjet Ground Services Limited, with effect
from the Approval Date.
(iii) As part of such demerger, all the past dues
towards salaries and other benefits (such as PF
dues, leave encashment, retirement benefits,
notice pay, termination dues etc.) of the Demerged
Employees for the period after the ICD and until
the Approval Date; and/ or retirement benefits
accruing to Demerged Employees which have
arisen after the ICD, shall also stand demerged
from the Corporate Debtor to AGSL with effect from
the Approval Date and the Corporate Debtor shall
absorb no liability or responsibility for such
payments as the Resolution Professional has not
accounted such salaries and other benefits as
CIRP Costs of the Corporate Debtor.
(iv) As part of such demerger, ground handling
services business of the Corporate Debtor will be
demerged into AGSL along with identified related
assets of the Corporate Debtor book valued at
approx. Rupees Ten Crore. The business of AGSL
will be to provide third party ground handling
services in India to any person interested in taking
their services and AGSL will apply for all
necessary approvals from the relevant
Governmental Authority for carrying out such third

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 party ground handling business after the Approval
Date.
(v) The Resolution Applicant commits to utilize the
ground handling services of AGSL on first priority
basis after it has received all necessary approvals
from the relevant Governmental Authority.
(vi) The Resolution Applicant commits to transfer the
ground support equipment owned by the Corporate
Debtor to AGSL after it has received the necessary
approvals, to enable AGSL to start operations. Any
such transfer of equipment by Corporate Debtor to
AGSL will be at nominal consideration in
compliance with Applicable Laws.
(vii) The Corporate Debtor will offer 76% of its
shareholding in AGSL to the employees Trust and
retain the remaining 24% shareholding. If the Trust
fails to exercise or refuses to accept such offer
within 30 (thirty) days from the Approval Date or
challenges the implementation of this Resolution
Plan, then the Corporate Debtor will retain 100%
shareholding in AGSL and deal with AGSL in such
manner as deemed appropriate by it, without any
interference of any other person.
(viii) The Corporate Debtor shall not be required to make
any separate application before the Adjudicating
Authority under the provisions of the IBC for the
demerger as stated herein and the approval of this
Resolution Plan by the Adjudicating Authority
along with the Scheme shall be treated as if the
necessary approvals required to have been
obtained under the CA 2013, including the consent

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 of shareholders or creditors of the Corporate
Debtor and AGSL and application for demerger to
Adjudication Authority or any other person/
appropriate authority, as required under CA 2013
(including Chapter XV of the CA 2013), together
with the process laid down under the CA 2013,
have been obtained and duly complied with. No
further approval of the Adjudicating Authority or
any other person or authority will be required to
give effect to the Scheme, as proposed hereunder.
(ix) The demerger will be on the above-mentioned
principal terms and a Scheme will be filed before
the Adjudicating Authority for its approval as part
of this Resolution Plan. For the purposes of such
demerger, the Scheme as set out in its present form
or with any modification(s) approved or imposed or
directed by the Adjudicating Authority, shall be
effective and operative from the "Appointed Date",
being the Approval Date for the purposes of this
Resolution Plan.
(x) The Scheme is expected to result in the following
benefits:
 Demerger is in the commercial interest of the
Demerged Employees, given as part of such
demerger, AGSL will be entitled to carry out
ground handling services, subject to receipt
of approvals under Applicable Laws.
 It would facilitate focused growth,
concentrated approach, business synergies
and increased operational and focus of the

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915 of 2021, 361, 771 & 987 of 2022, 98
 Demerged Employees in the business
verticals they have knowledge of.
 The demerger will help in the rationalization
of operations, with greater degree of
operational efficiency and optimum
utilization of various resources for both
AGSL and the Corporate Debtor.
 Demerger is the most suited manner to
address unemployment in skilled/ unskilled
sectors associated to aviation and welfare of
the Demerged Employees will be taken care
of through such demerger and concentrating
of resources and associated manpower in
the relevant entity and business vertical.
 Demerger of AGSL will be enable it to
address its independent business
opportunities with efficient capital allocation
and attract different set of investors,
strategic partners, lenders and other
stakeholders, thus leading to enhanced
value creation for the employees and
shareholders of AGSL and would therefore
be in the best interest of AGSL, the
Corporate Debtor and their respective
stakeholders connected therewith.
(xi) For the avoidance of doubt it is hereby clarified
that notwithstanding the acceptance or rejection of
the terms of the proposed demerger by the
employees and/or workmen, the Resolution
Applicant shall ensure the payment of (i) minimum
value due and payable to such employees and

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 workmen (under Section 30(2) of the IBC); and (ii)
the CIRP costs admitted by the Resolution
Professional, subject to a maximum of Rs. 475
Crores.”

92. The learned Counsel for the Resolution Applicant referring to

Demerger Scheme submits that case of retrenchment can be made out only

when there is termination by the employer. The learned Counsel for

Successful Resolution Applicant relied on Clause 8 of Scheme of

Arrangement between Jet Airways and AGSL, which Scheme was filed as

part of the Resolution Plan. Clause 8.1 of the Scheme provides:

“8.1 On the Scheme coming into effect, the Demerged

Employees will become workmen and employees
of Resulting Company with effect from the
Appointed Date on terms to be notified by the
Resulting Company. The Resulting Company shall
make best efforts to retain the Demerged
Employees, subject to assessment and due
diligence on the basis of their competencies and
abilities to perform their functional obligations. It is
clarified that no employee or workman of
Demerged Undertaking will be laid off in
contravention to the law or of the contracts already
entered into between the Corporate Debtor and the
respective employee or workmen, before the
Appointed Date provided the employee or
workmen have adhered to the same. The position,
rank and designation of the employees and

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 workmen would however be decided by the
Resultant Company.”

93. It is submitted that allegation regarding the purported future

prospect of AGSL is only an apprehension. The Scheme of demerger cannot

be turned down. The facts of present case squarely falls within the four

corners of proviso to Section 25FF of Industrial Disputes Act. The

Resolution Plan fulfill the requirement under the proviso. The Committee

of Creditors has approved the Resolution Plan, which contains Clause 8.1

of the Scheme and Clause 6.4.2(i) as extracted above, which is a business

decision to somehow create revenues for continuing the workmen and

employees in employment to a subsidiary of the Corporate Debtor. The

Scheme is beneficial for all the employees, who have been out of the

employment for last three years. The decision of hiving-off of Ground

Handling Business to AGSL was contemplated and considered by the

erstwhile Corporate Debtor, in its commercial wisdom to ensure stability in

the primary aviation business. The Resolution Plan, which had received

approval by the Committee of Creditors by 99.22% vote share is a business

decision of the Committee of Creditors, which has to be given paramount

importance. The submission of the Appellant(s) that AGSL is only a smoke

screen, who has no capacity to carry on any business or to make payment

of salary and wages to workmen and employees, this submission needs to

be considered in the background of the fact that Corporate Debtor is in

CIRP and efforts are being made to revive the Corporate Debtor by

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Resolution Applicant. The Corporate Debtor was a sinking ship, due to its

inability to carry on the weight of its debt. The submission that Corporate

Debtor is obliged to continue with all liabilities of its employees and

workmen even after insolvency commencement date, cannot be accepted

keeping in view that the object and purpose of the Insolvency Resolution

Process, is to revive the Corporate Debtor. Hence, we do not subscribe to

the submission of the learned Counsel for the Appellant(s) that Resolution

Plan violates Section 25F and 25FF of the Industrial Disputes Act, resulting

in violation of Section 30(2)(e) of the Code.

94. Now we come to submission that non-compliance of provisions of

Employees' Provident Funds & Miscellaneous Provisions Act, 1952 and

Payment of Gratuity Act, 1972. It is an admitted case that Corporate

Debtor was covered by 1952 Act and Employees Provident Fund Scheme

and it was statutory obligation of the Corporate Debtor to deposit provident

fund contribution to EPFO. Resolution Professional in its affidavit dated

25.07.2022 has stated that no contribution was deposited after February,

2019, thus depositing of the provident fund contribution till 20.06.2019

was statutory obligation of Corporate Debtor and making no provision in

plan for unpaid provident fund dues may lead to breach of Section 30(2)(e).

Further, the payment of Gratuity Act, 1972 also cast a statutory obligation

on Corporate Debtor to make payment of Gratuity for those workmen and

employee for which it became due till insolvency commencement date.

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95. The Successful Resolution Applicant in plan has not made provision

of full payment of provident fund dues which were due till insolvency

commencement date. Ends of justice be served in directing the Successful

Resolution Applicant to move payment of full provident fund dues which

were unpaid till insolvency commencement dated after adjusting the

payment to workmen towards provident fund in the Plan.

96. The employees have not been paid anything in the plan towards

provident fund which became due till insolvency commencement date. The

employees are entitled to be paid provident fund amount as admitted by

Resolution Professional till insolvency commencement date. Similarly, the

workmen whose gratuity amount became due before insolvency

commencement date are also entitled to receive the same after adjusting

the part amount of gratuity paid in the Plan. Employees who became

entitled to gratuity before insolvency commencement date are also entitled

to receive the same. At this juncture, we may clarify that those workmen

and employees who were demerged from the Corporate Debtor to AGSL and

have not been treated to be terminated were not entitled for any gratuity or

leave encashment.

97. The above deficiencies in the plan need to be remedied by issuing

appropriate direction to the Successful Resolution Applicant to make

requisite plan so that plan may become compliant of Section 30(2)(e).

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QUESTION - VII

98. The workmen and employees attacked the Resolution Plan on the

ground that it does not take into consideration payment of Rs.750 crores

or more, which was dues of the workmen and employees after insolvency

commencement date. The Resolution Professional in his additional

affidavit in paragraph 7, while dealing with the aforesaid contention stated

following:

“7. In view thereof, wages of workmen/employees

accrued during CIRP (amounting to approx. INR 715
crores) cannot be considered as CIRP costs as the
Corporate Debtor was not a going concern during the
CIRP and the workmen/employees did not work during
such period. Accordingly, the dated June 22, 2021.
approving the Resolution Plan, has rightfully records that
claims of employees and workmen are not CIRP costs as
the workmen/employees did not work for the Corporate
Debtor during the CIRP period and any payments to such
persons for the period after ICD were not approved by the
CoC. In any event, salaries and dues of these
workmen/employees arising prior to ICD have been duly
admitted by me and will be distributed to
employees/workmen as per the Resolution Plan in
accordance with Section 30 read with Section 53 of the
Code.”

99. In the Resolution Plan, we have already noticed that the Scheme,

which was contemplated was to retain only 50 workmen, forming part of

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Asset Protection Team and rest of the workmen and employees were

demerged to another subsidiary, i.e., AGSL. Insolvency Resolution Process

Costs defined in Section 5(13) in following words:

“(13) “insolvency resolution process costs” means –

(a) the amount of any interim finance and the costs

incurred in raising such finance;

(b) the fees payable to any person acting as a

resolution professional;

(c) any costs incurred by the resolution

professional in running the business of the
corporate debtor as a going concern;

(d) any costs incurred at the expense of the

Government to facilitate the insolvency resolution
process; and

(e) any other costs as may be specified by the

Board;”

100. As per above definition any costs incurred by the Resolution

Professional for running the business of the Corporate Debtor as a going

concern is CIRP Costs. The Resolution Professional has not utilized

services of workmen and employees apart from 50 employees and workmen

during the CIRP period. The issue, which has been raised is fully covered

by the Hon’ble Supreme Court judgment in Sunil Kumar Jain & Ors. vs.

Sundaresh Bhatt & Ors. – (2022) SCC OnLine SC 467. In the above

case also, an application was filed by workmen and employees for payment

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of their wages during the CIRP period, which Application was rejected by

the Adjudicating Authority. In paragraphs 25.1 and 25.2, Hon’ble Supreme

Court laid down following:

“25.1. That the wages/salaries of the

workmen/employees of the corporate debtor for the
period during CIRP can be included in the CIRP costs
provided it is established and proved that the interim
resolution professional/resolution professional managed
the operations of the corporate debtor as a going concern
during the CIRP and that the workmen/employees
concerned of the corporate debtor actually worked during
the CIRP and in such an eventuality, the wages/salaries
of those workmen/employees who actually worked
during the CIRP period when the resolution professional
managed the operations of the corporate debtor as a
going concern, shall be paid treating it and/or
considering it as part of CIRP costs and the same shall
be payable in full first as per Section 53(1)(a) IBC.
25.2. Considering Section 36(4) IBC and when the
provident fund, gratuity fund and pension fund are kept
out of the liquidation estate assets, the share of the
workmen's dues shall be kept outside the liquidation
process and the workmen/employees concerned shall
have to be paid the same out of such provident fund,
gratuity fund and pension fund, if any, available and the
Liquidator shall not have any claim over such funds.”

101. The Corporate Debtor had stopped its airline operations since April

2019 and during CIRP period till the approval of Resolution Plan, Corporate

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Debtor was not a going concern. There is no material on record to indicate

that Corporate Debtor was a going concern during CIRP period. Hon’ble

Supreme Court has clearly laid down in the above case that dues towards

wages and salaries of only those workmen and employees who actually

worked during CIRP are to be included in the CIRP Costs. We, thus, do not

find any error in not including the aforesaid claim of salary and wages of

the workmen and employees after insolvency commencement date.

QUESTION - VIII

102. The Appellants’ contention is that while computing the entitlement

of Secured Financial Creditors under Section 53(1)(b)(ii), only value of their

security interest has to be taken into consideration. Section 53(1)(a) and

(b) is as follows:

“53. Distribution of assets. - (1) Notwithstanding

anything to the contrary contained in any law enacted by
the Parliament or any State Legislature for the time being
in force, the proceeds from the sale of the liquidation
assets shall be distributed in the following order of
priority and within such period as may be specified,
namely: -

(a) the insolvency resolution process costs and the

liquidation costs paid in full;

(b) the following debts which shall rank equally

between and among the following:

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 (i) workmen’s dues for the period of twenty-
four months preceding the liquidation
commencement date; and

(ii) debts owed to a secured creditor in the

event such secured creditor has
relinquished security in the manner set out
in section 52;

103. Section 53(1)(b)(ii) uses the expression “debts owned to a secured

creditor”. The plain meaning of the expression is that debt owned to

secured creditor has to be taken into consideration. The submission of the

Appellant(s), if accepted, shall be adding words to Section 53(1)(b)(ii), i.e.,

by adding word ‘value of security interest of the secured creditors’, which

is impermissible.

104. The learned Counsel for the Appellant has relied on Report of

Insolvency Law Committee (February 2020), which discussed Section 52,

53(1)(b)(ii). We had occasion to examine a similar contention in Company

Appeal (AT) (Insolvency) No. 570 of 2022 – Small Industries

Development Bank of India (SIDBI) vs. Vivek Raheja and Ors., where

the Appellant Financial Creditor claimed that it was entitled for distribution

of proceeds of the Plan as per value of the security interest of the Appellant

and not as per the debt of the Appellant. The said submission was rejected

in the above judgment. In paragraphs 14 and 15, following has been laid

down:

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 “14. Section 53(1)(b)(ii) uses expression “debts owed to a
secured creditor” which is the basis for distribution in the order
of priority as provided in Section 53(1)(ii). The debt owed to a
secured creditor is a debt which is relatable to his claim as
admitted in CIRP Process. The claim/debt of a secured financial
creditor which is admitted in CIRP Process of a secured creditor
is a fixed amount determined in CIRP process as reflected in
Information Memorandum prepared by the Resolution
Professional. The debt owed to a secured creditor is not the
value of security of a secured creditor. The value of security of
secured creditor is not the debt owed to a secured creditor in
the CIRP Process. Section 53(1) does not contemplate
distribution as per value of security of a secured creditor.
Submission of the Appellant that he is entitled to distribution of
the proceeds of the plan value as per value of security
possessed by him is not in accord with the legislative scheme
as delineated in Section 53(1) of the Code. The above issue has
been decided by this Appellate Tribunal in Company Appeal
(AT) Ins. No. 665 of 2022 “Union Bank of India Vs.
Resolution Professional of M/s Kudos Chemie Ltd. &
Ors.”. In the above case also, the Financial Creditor of the
Corporate Debtor has filed an Application seeking direction to
distribute the resolution plan amount as per value of the
security of the Appellant. The CoC has decided to distribute the
amount as per amount accepted by the Resolution Professional.
The CoC decision was challenged before the Adjudicating
Authority who rejected the Application against which the
Appeal was filed. The view of the Adjudicating Authority for
distribution of plan amount as per voting share found approval
by this Tribunal in Paragraph 4 and 5 of the Judgement. This
Tribunal laid down as under:

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 “4. The objection was raised by the Appellant Bank and
it wanted that distribution should be done as per the
Option-3. The CoC by majority having taken decision to
distribute the amount as per Option-1 by 97.61% vote,
we see no reason to take a different view from one which
has been taken by the Adjudicating Authority. The
Adjudicating Authority in paragraph 40 has made
following observations:-
“40. Both these contentions of learned counsel for
the applicant are not tenable because the
distribution of the amount was made by the
Committee of Creditors resting on total dues of
voting share of individual creditors which is
neither whimsical nor arbitrary in any manner.
Although the applicant gave a dissenting vote for
approval of the Plan, based on the reason that
distribution of resolution fund was discriminatory
against it and despite the plea that it was entitled
to the equal share in regard to the distribution of
the resolution fund on the value of the assets of the
corporate debtor as security. However, the
committee of creditors, deciding to go with option
no.1 i.e. distribution of plan amount as per claims
admitted, has approved the resolution plan by
97.61% votes.”
5. The decision of the CoC regarding the distribution of
amount is in its commercial wisdom which we cannot
question or be questioned by the Appellant. The
Adjudicating Authority has rightly referred the judgment
of the Hon’ble Supreme Court in “India Resurgence Arc.
Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr.- Civil

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 Appeal No. 1700 of 2021” where in paragraph 13.1,
the Hon’ble Supreme Court has held that what amount is
to be paid to different classes or sub-classes of creditors
in accordance with provisions of the Code and the related
Regulations, is essentially the commercial wisdom of the
Committee of Creditors and a dissenting secured creditor
like the appellant cannot suggest a higher amount to be
paid to it with reference to the value of the security
interest. Paragraph 13.1 of the judgment is as follows:-
“13.1.Thus, what amount is to be paid to different
classes or sub-classes of creditors in accordance
with provisions of the Code and the related
Regulations, is essentially the commercial wisdom
of the Committee of Creditors and a dissenting
secured creditor like the appellant cannot suggest
a higher amount to be paid to it with reference to
the value of the security interest.””
15. The Judgment of the Hon’ble Supreme Court in Civil
Appeal No. 1700/2021 “India Resurgence” (supra) was
a case where Hon’ble Supreme Court had occasion to
consider where also the Financial Creditor has objected
to distribution contending that distribution should be as
per value of the security interest held by the financial
creditor. Hon’ble Supreme Court after referring to Section
30(2) and submission of the Appellant that distribution
ought to have been as per value of security interest
expressly rejected the submission. In paragraph 13, 13.1
and 14.2, following was laid down:
“13. The repeated submissions on behalf of the
appellant with reference to the value of its security
interest neither carry any meaning nor any

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 substance. What the dissenting financial creditor
is entitled to is specified in the later part of sub-
section (2)(b) of Section 30 of the Code and the
same has been explained by this Court in Essar
Steel as under:-
“128. When it comes to the validity of the
substitution of Section 30(2)(b) by Section 6 of the
Amending Act of 2019, it is clear that the
substituted Section 30(2)(b) gives operational
creditors something more than was given earlier
as it is the higher of the figures mentioned in
subclauses (i) and (ii) of sub-clause (b) that is now
to be paid as a minimum amount to operational
creditors. The same goes for the latter part of sub-
clause (b) which refers to dissentient financial
creditors. Ms Madhavi Divan is correct in her
argument that Section 30(2)(b) is in fact a
beneficial provision in favour of operational
creditors and dissentient financial creditors as
they are now to be paid a certain minimum
amount, the minimum in the case of operational
creditors being the higher of the two figures
calculated under sub-clauses (i) and (ii) of clause
(b), and the minimum in the case of dissentient
financial creditor being a minimum amount that
was not earlier payable. As a matter of fact, pre-
amendment, secured financial creditors may
cram down unsecured financial creditors who
are dissentient, the majority vote of 66% voting to
give them nothing or next to nothing for their
dues. In the earlier regime it may have been

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 possible to have done this but after the
amendment such financial creditors are now to
be paid the minimum amount mentioned in sub-
section (2). Ms Madhavi Divan is also correct in
stating that the order of priority of payment of
creditors mentioned in Section 53 is not engrafted
in sub-section (2)(b) as amended. Section 53 is
only referred to in order that a certain minimum
figure be paid to different classes of operational
and financial creditors. It is only for this purpose
that Section 53(1) is to be looked at as it is clear
that it is the commercial wisdom of the Committee
of Creditors that is free to determine what
amounts be paid to different classes and
subclasses of creditors in accordance with the
provisions of the Code and the Regulations made
thereunder.”
(underlining supplied for emphasis)
13.1. Thus, what amount is to be paid to different
classes or subclasses of creditors in accordance
with provisions of the Code and the related
Regulations, is essentially the commercial wisdom
of the Committee of Creditors; and a dissenting
secured creditor like the appellant cannot suggest
a higher amount to be paid to it with reference to
the value of the security interest.
…………..
14.2. The extent of value receivable by the
appellant is distinctly given out in the resolution
plan i.e., a sum of INR 2.026 crores which is in the
same proportion and percentage as provided to the

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 other secured financial creditors with reference to
their respective admitted claims. Repeated
reference on behalf of the appellant to the value of
security at about INR 12 crores is wholly inapt and
is rather ill-conceived.”

105. In the above judgment, the Report of the Insolvency Law Committee

(February 2020) also was considered, in reference of which, following

observation was made in paragraph 21:

“21. Learned Counsel for the Appellant has also referred

to Report of Insolvency Law Committee (February, 2020)
which report discussed Section 52, 53(1)(b)(ii). The
Committee in paragraph 7.4 opined that provision does
not necessitate any further amendment to the provisions
of the Code. What was said by the Committee was that
priority to secured creditors under Section 53(1)(b)(ii)
should be applicable only to the extent of the value of the
security interest that is relinquished by the secured
creditor. The said observation was for different purpose
i.e. in reference to priority which with respect to debt
owed to secured creditor, in the event secured creditor
relinquishes the security in the manner set out in Section
52. The Committee in its report nowhere even suggested
that secured financial creditor is entitled to distribution
as per value of security. The conclusion of the committee
is that the priority under Section 53(1)(b)(ii) shall be only
to the extent of security interest of the secured creditor.
The secured creditor cannot claim priority under Section
53(1)(b)(ii) of the whole debt where only part of the debt
is secured, the above report of the Committee in no

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 manner helps the appellant to support the submission
which is canvassed before us.

106. The Report of the Insolvency Law Committee (February 2020) has

opined that priority under Section 53(1)(b)(ii) should be only to the extent

of the security interest of the Secured Creditor, but in the earlier part of

the Report, it was opined that provision does not necessitate any further

amendment. When no amendments have been made in the statute, i.e.,

Section 53(1)(b)(ii), the provisions cannot be interpreted in any manner

except the plain and literal reading of the provisions. The Report of

Insolvency Committee (February 2020) can at best be reason for making

any further amendment in the statute, but till amendment is made, the

provision of the statute has to be read as it exists as on the date.

107. We, thus, do not find any substance in the submission of the learned

Counsel that payment to the Secured Financial Creditors under Section

53(1)(b) has to be made as per their value of the security interest and the

Resolution Plan did not take into consideration their debt, which is the debt

of the Financial Creditors while allocating the amount.

QUESTION - IX

108. The Appellant submits that Resolution Plan is conditional and

contingent plan which ought not to have been approved by the Adjudicating

Authority. It is submitted that Resolution Plan lays down certain condition

precedents for the plan to be successful. All condition precedents as on

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the effective dated i.e. 20.05.2020 having not been fulfilled, interference

was warranted by the Adjudicating Authority and by this Tribunal. The

case of the Successful Resolution Applicant is that the condition

precedents are the conditions which are necessary for revival of the

business of the Corporate Debtor. Condition precedent are, in fact,

business pre-requisites. For running the aviation business, several

approvals from DGCA, Ministry of Civil Aviation and other statutory

authorities are required. As per requirement of international traffic license,

the said license is granted only to airlines which has a minimum 20

aircrafts or 20% total capacity in its fleet. The Successful Resolution

Applicant has scheduled the recommencement with only six airplanes for

domestic operations, hence, the said condition is not applicable in the

present case. Learned counsel for the Appellant relied on the judgment of

Hon’ble Supreme Court in “Ebix Singapore Private Limited vs.

Committee of Creditors of Educomp Solutions Limited & Anr., (2022)

2 SCC 401”. We may first notice the judgment of Hon’ble Apex Court in

“Ebix Singapore” (Supra). In the Ebix Case, the NCLT had allowed an

application filed by the Resolution Application to withdraw from the

Resolution Plan which order was set aside by this Appellate Tribunal.

Challenging the order passed by the Appellate Tribunal, an appeal was filed

before the Hon’ble Supreme Court. The Hon’ble Supreme Court dismissed

the Appeal filed by the ‘Ebix’ by maintaining the order passed by this

Tribunal. Hon’ble Supreme Court held that approval by the Adjudicating

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Authority under Section 31(1) of the Code has effect of making the

Resolution Plan binding on all the stakeholders. It has been held that the

Resolution Plan become binding between the CoC and Successful

Resolution Professional after it is approved by the CoC. In Para 166 and

172 following has been laid down:

“166. The binding nature, as between the CoC and

the successful Resolution Applicant, of the
Resolution Plan submitted for approval by the
Adjudicating Authority is further evidenced from
the fact that the CoC issues a LOI to a successful
Resolution Applicant stating that it has been
selected as the successful Resolution Applicant
and its Plan would be submitted to the
Adjudicating Authority for its approval. The
successful Resolution Applicant is typically
required to accept the LOI unconditionally and
submit a PBG. Sequentially, the issuance of an LOI
is followed by its unconditional acceptance by the
successful Resolution Applicant.”

“172. Based on the plain terms of the statute, the

Adjudicating Authority lacks the authority to allow
the withdrawal or modification of the Resolution
Plan by a successful Resolution Applicant or to give
effect to any such clauses in the Resolution Plan.
Unlike Section 18(3)(b) of the erstwhile SICA which
vested the Board for Industrial and Financial
Reconstruction with the power to make
modifications to a draft scheme for sick industrial

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 companies, the Adjudicating Authority under
Section 31(2) of the IBC can only examine the
validity of the plan on the anvil of the grounds
stipulated in Section 30(2) and either approve or
reject the plan. The Adjudicating Authority cannot
compel a CoC to negotiate further with a successful
Resolution Applicant. A rejection by the
Adjudicating Authority is followed by a direction of
mandatory liquidation under Section 33. Section
30(2) does not envisage setting aside of the
Resolution Plan because the Resolution Applicant
is unwilling to execute it, based on terms of its own
Resolution Plan.”

109. When we look into the relevant clauses of the plan which has also

been captured by the Resolution Applicant in Form H. Para 7.6.1 refers

to condition precedents i.e. obligation of the Resolution Applicant to re-

commence operations as an aviation company subject to fulfillment of

conditions after the approval date mentioned therein. Para 7.6.2 deals

with fulfilment of condition precedents and Para 7.6.4 deals with

automatic withdrawal. In view of the judgment of Hon’ble Supreme Court

in “Ebix Singapore” (Supra), as noted above, after approval by the CoC,

the clause for automatic withdrawal becomes redundant and Resolution

Applicant has no jurisdiction to withdraw from the Resolution Plan. The

condition precedents as mentioned in Para 7.6.1 are basically condition

precedents required for aviation business which are must for any company

carrying on aviation business. Enumeration of condition precedent is only

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for purposes of noticing obligations of the Resolution Applicant to

recommence the operations as an aviation company after obtaining

necessary approvals. Such condition precedent cannot be said to be any

hindrance in the approval of the plan by the Adjudicating Authority. We,

thus, do not find any substance in the submission of the Appellant that

the resolution plan ought to have rejected in view of the condition

precedent contained in the resolution plan. The Resolution Applicant has

also completed all necessary condition precedents to the satisfaction of the

Monitoring Committee. We, thus, are of the view that the judgment of

Hon’ble Supreme Court in “Ebix Singapore” does not help the Appellant

to support his contention that the Resolution Plan is liable to be rejected

due to condition precedents.

QUESTION - X

110. Allocation of the amount to the Operational Creditors including the

employees has been challenged by the Appellant. The submission is that

the allocation of amount to employees of the Corporate Debtor and other

Operational Creditors (apart from workmen) is neither fair nor equitable,

hence, clearly violates provisions of Section 30(2) and the plan deserves to

be set aside on this ground alone. We have noticed above that the

Adjudicating Authority has ample jurisdiction to interfere with the

resolution plan which violates, does not comply with, any of the provisions

of Section 30(2). The question to be answered is as to whether the

resolution plan violates Section 30(2) on the ground that Operational

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Creditors including the employees except workmen have been allocated

only an amount of Rs.15,000/- each. Resolution Professional in his

Additional Affidavit dated 25.07.2022 has mentioned in tabular form the

claim admitted of the employees. The claim of employees for 12 months

as per Section 53(1)(c) has been mentioned as amount of Rs.499.1 crore

which include Salary – Rs.466.8 crore, Provident Fund – Rs.6.7 crore,

Leave Encashment – Rs.16.0 crore and Gratuity – Rs.9.6 crore. In Para

10 under the heading ‘Treatment of employees of the Corporate Debtor

under the Resolution Plan’ following has been stated in Para 10.1:

“10.1 I say that as regards the employees of the

Corporate Debtor, their dues are referred to
in Section 53(1)(c) of the Code. Since the
amount allocated under the Resolution Plan
payable towards the workmen and
employees (i.e,. INR 52 crores) is lower than
the liquidation value payable to the
workmen (i.e. approx. INR 103 crores), the
amount payable towards employees dues
which ranks lower in priority (under Section
53(1)(c) of the Code) is nil.”

111. It is categorically mentioned by the Resolution Professional that

amount payable towards employees’ dues being lower in priority is nil.

Similarly with other Operational Creditors, the priority of the other

Operational Creditors is below the employees who are referred in Section

553(1)(c), hence, the liquidation value payable to the other Operational

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Creditors shall also be nil. Under Section 30(2) of the Code, the statutory

requirement is that amount paid to Operational Creditors shall be

minimum which is to be paid in the event of the liquidation of the

Corporate Debtor under Section 53 and when the amount to be distributed

under the resolution plan has been distributed in order of priority under

Sub-section (1) of Section 53 no exception can be taken. From the above

it is clear that the contention of the Appellant that payment to the

employees and other Operational Creditors is not in accordance with

Section 30(2)(b) cannot be accepted.

112. We have noticed the judgment of Hon’ble Supreme Court in “K.

Sashidhar vs. Indian Overseas Bank” (Supra), where it has been held

that the commercial wisdom has been given the paramount status without

any judicial intervention. The limited enquiry which can be made by the

Adjudicating Authority while examining the plan is as to whether the plan

complies with the requirements as contained in Section 30(2). In Para 62

of the judgment following has been mentioned:

“62. …… Be that as it may, the scope of enquiry

and the grounds on which the decision of
“approval” of the resolution plan by the CoC can
be interfered with by the adjudicating authority
(NCLT), has been set out in Section 31(1) read with
Section 30(2) and by the appellate tribunal
(NCLAT) under Section 32 read with Section 61(3)
of the I&B Code. No corresponding provision has
been envisaged by the legislature to empower the

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 resolution professional, the adjudicating authority
(NCLT) or for that matter the appellate authority
(NCLAT), to reverse the “commercial decision” of
the CoC muchless of the dissenting financial
creditors for not supporting the proposed resolution
plan. Whereas, from the legislative history there
is contra indication that the commercial or
business decisions of the financial creditors are
not open to any judicial review by the adjudicating
authority or the appellate authority.”

113. This principle was again reiterated by the Hon’ble Supreme Court in

“Committee of Creditors of Essar Steel India Limited Through

Authorised Signatory vs. Satish Kumar Gupta & Ors.” (Supra). In

Para 70, the Hon’ble Supreme Court has held that minimum value that is

required to be paid by the Operational Creditor is set up under Section

30(2)(b) apart from the minimum value nothing more is required. Para 70

is as follows:

“70. The minimum value that is required to be

paid to operational creditors under a resolution
plan is set out under Section 30(2)(b) of the Code
as being the amount to be paid to such creditors in
the event of a liquidation of the corporate debtor
under Section 53. The Insolvency Committee
constituted by the Government in 2018 was
tasked with studying the major issues that arise
in the working of the Code and to recommend
changes, if any, required to be made to the Code.

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 The Insolvency Committee Report, 2018
(hereinafter referred to as “The Committee Report,
2018”), inter alia, deliberated upon the objections
to Section 30(2)(b) of the Code, inasmuch as it
provided for a minimum payment of a “liquidation
value” to the operational creditors and nothing
more, and concluded as follows:

“18. VALUE GUARANTEED TO

OPERATIONAL CREDITORS UNDER A
RESOLUTION PLAN

18.1 Section 30(2)(b) of the Code requires

the RP to ensure that every resolution
plan provides for payment of at least the
liquidation value to all operational
creditors. Regulation 38(1)(b) of the CIRP
Regulations provides that liquidation
value must be paid to operational
creditors prior in time to all financial
creditors and within thirty days of
approval of resolution plan by the NCLT.
The BLRC Report states that the
guarantee of liquidation value has been
provided to operational creditors since
they are not allowed to be part of the CoC
which determines the fate of the
corporate debtor. (BLRC Report, 2015)

18.2 However, certain public comments

received by the Committee stated that, in
practice, the liquidation value which is
guaranteed to the operational creditors
may be negligible as they fall under the
residual category of creditors under
section 53 of the Code. Particularly, in the
case of unsecured operational creditors,
it was argued that they will have no
incentive to continue supplying goods or
services to the corporate debtor for it to
remain a ‘going concern’ given that their
chances of recovery are abysmally low.

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 18.3 The Committee deliberated on the
status of operational creditors and their
role in the CIRP. It considered the
viability of using ‘fair value’ as the floor
to determine the value to be given to
operational creditors. Fair value is
defined under regulation 2(1)(hb) of the
CIRP Regulations to mean “the estimated
realizable value of the assets of the
corporate debtor, if they were to be
exchanged on the insolvency
commencement date between a willing
buyer and a willing seller in an arm’s
length transaction, after proper
marketing and where the parties had
acted knowledgeably, prudently and
without compulsion.” However, it was
felt that assessment and payment of the
fair value upfront, may be difficult. The
Committee also discussed the possibility
of using 'resolution value' or 'bid value' as
the floor to be guaranteed to operational
creditors but neither of these were
deemed suitable.

18.4 It was stated to the Committee that

liquidation value has been provided as a
floor and in practice, many operational
creditors may get payments above this
value. The Committee appreciated the
need to protect interests of operational
creditors and particularly Micro, Small
and Medium Enterprises (“MSMEs”). In
this regard, the Committee observed that
in practice most of the operational
creditors that are critical to the business
of the corporate debtor are paid out as
part of the resolution plan as they have
the power to choke the corporate debtor
by cutting off supplies. Illustratively, in
the case of Synergies-Dooray Automative
Ltd. (Company Appeal No. 123/2017,
NCLT Hyderabad, Date of decision – 02
August, 2017), the original resolution
plan provided for payment to operational
creditors above the liquidation value but
contemplated that it would be made in a

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 staggered manner after payment to
financial creditors, easing the burden of
the 30-day mandate provided under
regulation 38 of the CIRP Regulations.
However, the same was modified by the
NCLT and operational creditors were
required to be paid prior in time, due to
the quantum of debt and nature of the
creditors. Similarly, the approved
resolution plan in the case of Hotel
Gaudavan Pvt. Ltd. (Company Appeal
No. 37/2017, NCLT Principal Bench,
Date of decision – 13 December, 2017)
provided for payment of all existing dues
of the operational creditors without any
write-off. The Committee felt that the
interests of operational creditors must be
protected, not by tinkering with what
minimum must be guaranteed to them
statutorily, but by improving the quality
of resolution plans overall. This could be
achieved by dedicated efforts of
regulatory bodies including the IBBI and
Indian Banks' Association.

18.5 Finally, the Committee agreed that

presently, most of the resolution plans
are in the process of submission and
there is no empirical evidence to further
the argument that operational creditors
do not receive a fair share in the
resolution process under the current
scheme of the Code. Hence, the
Committee decided to continue with the
present arrangement without making
any amendments to the Code.”
(emphasis supplied)

Ultimately, the Committee decided against any

amendment to be made to the existing scheme of
the Code, thereby retaining the prescription as to
the minimum value that was to be paid to the
operational creditors under a resolution plan.”

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114. It is, thus, clear that in the event of minimum liquidation value

which is payable to the Operational Creditor is paid there shall be

compliance of Section 30(2)(b).

115. The facts of the present case indicate that the Resolution Plan

proposed almost nil amount to the Operational Creditor except the

workmen. According to the Resolution Professional, the liquidation value

of the employees as well as other Operational Creditors is nil, hence, they

are not entitle for any amount under Section 30(2)(b) of the Code. The

facts of the present case depicts that amount paid to the Operation

Creditor except workmen is almost nil. This Tribunal while hearing an

appeal against approval of Resolution Plan where Operational Creditors

were paid negligible amount, after noticing the relevant provisions of the

Code had made observations suggesting consideration for amendment in

the I&B Code so as to fulfil the objective of equitable and fair distribution.

It is useful to extract the observations made by this Tribunal in “Company

Appeal (AT) (Ins.) No. 62 of 2022, Damodar Valley Corporation vs.

Dimension Steel and Alloys & Ors.”, where in Para 31 following

observations have been made:

“31. The Operational Creditors normally had claims

pertaining to supply made to the Corporate Debtor, which
amounts normally as compared to the Financial
Creditors' claim are less. Operational Creditors consist of
various type of industries including MSMEs, public sector
organization and small entities. Altogether denying their

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915 of 2021, 361, 771 & 987 of 2022, 126
 claim or receiving ineligible amount in the Resolution Plan
causes hardship and misery to the Operational
Creditors. Even the statutory dues, which by virtue of
law as it exists today are dealt in the same manner,
resulting in no payment or negligible payment and some
time even less than 1% of the claim. The Operational
Creditors are not part of CoC like Financial Creditors and
they have no control over the CIRP. It is the Financial
Creditors, who control the entire process and take
commercial decision regarding payment to the Financial
Creditors, Operational Creditors and other creditors. Law
gives complete freedom to the Committee of Creditors to
take commercial decision and it is not obligatory that in
the Resolution Plan, if the liquidation value of Operational
Creditor is negligible/ nil to allot any higher amount to
the Operational Creditors. We are consistently receiving
the Plans, where Operational Creditors either not paid
any amount towards their claim or paid negligible
amount, sometime even less than 1%. In the present
case, the Operational Creditors have been given only
miniscule of their admitted claim to the extent of only
0.19%. As the law stand today, no exception can be
taken to such Plans, which provide payment to
Operational Creditor in accordance with Section 30(2)(b)
of the Code. However, the time has come when it should
be examined by the Government and the Board to find
out as to whether there are any grounds for considering
change in the legislative scheme towards the payment to
the Operational Creditors, which also consist of
Government dues and other statutory dues. We make it
clear that our observation is only to facilitate the

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 Government and other competent Authority to consider
this issue and take decision, so as to the objective of
equitable and fair distribution can be fulfilled with clear
parameters to guide the all concerned to arrive at the fair
and equitable distribution.”

116. In the present case, there is material on record to indicate that as

explained by the Resolution Professional in Additional Affidavit dated

25.07.2022 that liquidation value for employees and other Operational

Creditors except workmen is nil. We have already held that the employees

were also entitled to receive their full amount of provident fund to which

they were entitled under 1952 Act and gratuity due till commencement of

insolvency under the Payment of Gratuity Act, 1972, which they were

entitled as per Section 30(2)(e) of the Code. However, the liquidation value

of employees being nil under Section 30(2)(b), they were not entitled to

receive any amount. Similarly, other Operational Creditors whose

liquidation value was nil were not entitled to receive any amount under

Section 30(2)(b). This conclusion is subject to decision with regard to

Operational Creditor, Provident Fund Commissioner whose claim we will

consider hereinafter.

QUESTION - XI

117. In the appeal filed by the Regional Provident Fund Commissioner, it

has been pleaded that the claim was filed by the Appellant for an amount

of Rs.24,40,65,594/- towards damages under Section 14B of Employees'

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Provident Funds & Miscellaneous Provisions Act 1952, as per the order

dated 17.10.2018. It is further mentioned that interest under Section 7Q

was also levied of Rs.12,85,92,763/-, which amount was paid by the

establishment. The amount which was claimed by the Appellant was fully

admitted by the Resolution Professional. List of Creditors mentions the

admitted amount of the Appellant. The Appellant has filed his claim in

Form B, which Form B is at page 102 to 104 of the Appeal. The Appellant’s

claim was not in the nature of workmen dues. The claim was also with

regard to damages imposed under Section 14B of the 1952 Act. The

Appellant was treated as Operational Creditor by the Resolution

Professional, hence, the Appellant was allocated a fixed amount of

Rs.15,000/- which was allocated to all Operational Creditors except the

workmen.

118. Challenge to the Resolution Plan by the Appellant is on the ground

that Section 11 of the 1952 Act requires priority over all other dues and

further Section 36(4)(a)(iii) excludes provident fund dues from the

liquidation estate of the Corporate Debtor. We have already dealt with

provisions of Section 36(4)(a)(iii) in foregoing paras of this judgment. Now,

we, need to look into Section 11 of 1952 Act. The Section 11 of the 1952

Act provides for priority of payment of contributions over other debts.

Learned counsel for the Appellant has relied on judgment of the Hon’ble

Supreme Court in “Maharashtra State Cooperative Bank Limited vs.

Assistant Provident Fund Commissioner & Others, (2009) 10 SCC

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 129
123”. The Hon’ble Supreme Court dealing with Section 11 of 1952 Act

laid down following in Para 67:

“67. The expression "any amount due from an employer"

appearing in sub-section (2) of Section 11 has to be
interpreted keeping in view the object of the Act and other
provisions contained therein including sub-section (1)
of Section 11 and Sections 7A, 7Q, 14B and 15(2)
which provide for determination of the dues payable by
the employer, liability of the employer to pay interest in
case the payment of the amount due is delayed and also
pay damages, if there is default in making contribution
to the Fund. If any amount payable by the employer
becomes due and the same is not paid within the
stipulated time, then the employer is required to pay
interest in terms of the mandate of Section 7Q. Likewise,
default on the employer's part to pay any contribution to
the Fund can visit him with the consequence of levy of
damages.”

119. The above judgment lays down that any amount due from employer

appearing in sub-section (2) of Section 11 also covers the amount

determined under Section 14B and there cannot be any quarrel to the

preposition as laid down by the Hon’ble Supreme Court in the above case.

The priority for payment of debt under Section 11 of the 1952 Act has to

be looked into in view of the mechanism which is specifically provided

under Section 53(1) of the Code. We have already dealt the provision of

Section 36(4)(a)(iii) of the Code and held that provident fund dues are not

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915 of 2021, 361, 771 & 987 of 2022, 130
subject to distribution under Section 53(1) of the Code. The issue is fully

covered by three member bench judgment of this Tribunal in “Tourism

Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors.”

(Supra). In view of foregoing discussion, we hold that provident fund dues

were entitled to be paid in full. In view of the judgment of Supreme Court

in “Maharashtra State Cooperative Bank Limited vs. Assistant

Provident Fund Commissioner & Others” (Supra), the claim of

Appellant was to be satisfied in full, otherwise breach of provision of

Section 30(2)(e) would have occurred. We, thus, are inclined to issue

direction to the Successful Resolution Applicant to make payment of the

admitted claim of the Appellant towards provident fund dues to save the

plan from invalidity.

QUESTION - XII

120. The Department of State Tax has filed an appeal challenging the

approval of resolution plan. The case of the Appellant is that the claim of

the Department of State Tax was admitted by the Resolution Professional

with a note “under disputes which are pending before various authorities

and/or under appeals” and the liability of the Corporate Debtor is subject

to the outcome of these Appeals. The claim for which proof was filed by

the Appellant was total Rs.77,81,53,013/- out of which claim of

Rs.56,49,40,491/- was admitted by Resolution Professional by rejecting

the claim of interest and penalty in the List of Creditors as updated on

03.10.2020. The Appellant in this Appeal has claimed his entitlement to

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 131
make full payment of the claim. Appellant also claimed that in view of the

claim for GST they can be treated as Financial Creditor which issue has

not been decided by the Hon’ble Supreme Court. It has been further

pleaded that Appellant is a secured financial creditor since the recovery of

tax on goods and services has priority over other secured creditors under

the Code. In the reply filed by the Resolution Professional it has been

categorically admitted that claim of the Appellant for Rs.56,85,78,421/-

was admitted.

121. The issue which arise for consideration is as to whether the

Appellant can be treated as secured creditor and there shall be charge on

the assets of the Corporate Debtor. The letter by which the claim was

submitted by the Appellant is filed as Annexure A-3 of the appeal paper

book in which the claim been filed in Form B, which is proof of claim by

Operational Creditor except workmen and employees and now Appellant

is claiming his claim as Financial Creditor, hence, we do not find any error

in admitting the claim by Resolution Professional as an Operational

Creditor. Whether the Appellant will be a secured creditor of the Corporate

Debtor also needs consideration. In the Resolution Plan the allocation to

the Appellant is nil, its liquidation value being nil. We may notice the

provision of Section 82 of Maharashtra GST Act, 2017, which provides as

follows:-

“Tax to be first charge on property. –

Notwithstanding anything to the contrary

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 contained in any law for the time being in force,
save as otherwise provided in the Insolvency
and Bankruptcy Code, 2016 (31 of 2016), any
amount payable by a taxable person or any other
person on account of tax, interest or penalty which
he is liable to pay to the Government shall be a first
charge on the property of such taxable person or
such person.

[Emphasis supplied] ”

122. The first charge on the property which is envisaged by Section 82 is

except as provided under Insolvency and Bankruptcy Code, 2016.

Thus, Section 82 of the Maharashtra GST Act, 2017 shall not give any

precedence to the charge of claim of the Appellant. In this context, we may

refer to a recent judgment of Hon’ble Supreme Court in “Sundaresh

Bhatt, Liquidator of ABG Shipyad vs. Central Board of Indirect Taxes

and Customs, 2022 SCC Online SC 1101”. In the above case, before

the Hon’ble Supreme Court submission was raised relying on Section 142A

of the Customs Act. Section 142A has been extracted in Para 31 of the

judgment, which is to the following effect:

“31. In order to complete the discussion on

the Customs Act, it may be necessary to take note
of Section 142A extracted below:

142A. Liability under Act to be first

charge.— Notwithstanding anything to the
contrary contained in any Central Act or State
Act, any amount of duty, penalty, interest or any
other sum payable by an assesse or any other

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 person under this Act, shall, save as otherwise
provided in section 529A of the Companies Act,
1956 (1 of 1956), the Recovery of Debts Due to
Banks and the Financial Institutions Act, 1993 (51
of 1993), and the Securitisation and
Reconstruction of Financial Assets and
the Enforcement of Security Interest Act, 2002 (54
of 2002) and the Insolvency and Bankruptcy Code,
2016 (31 of 2016) be the first charge on the
property of the assesse or the person, as the case
may be..”

123. Hon’ble Supreme Court considered the provisions of Section 142A

of the Customs Act and similar provisions of I&B Code and ultimately has

held that I&B Code clearly overrides the Customs Act. In para 40 of the

judgment following has been held:

“40. We may note that the IBC, being the more

recent statute, clearly overrides the Customs Act. This
is clearly made out by a reading of Section 142A of
the Customs Act. The aforesaid provision notes that
the Custom Authorities would have first charge on the
assets of an assessee under the Customs Act, except
with respect to cases under Section 529A of
Companies Act 1956, Recovery of Debts Due to Banks
and Financial Institutions Act 1993, Securitisation and
Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 and the IBC, 2016.
Accordingly, such an exception created under
the Customs Act is duly acknowledged under Section
238 of the IBC as well. Additionally, we may note
that Section 238 of the IBC clearly overrides any
provision of law which is inconsistent with the IBC.
Section 238 of IBC provides as under:

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 238. Provisions of this Code to override
other laws -

The provisions of this Code shall have effect,

notwithstanding anything inconsistent therewith
contained in any other law for the time being in
force or any instrument having effect by virtue of
any such law.”

124. The provisions of Section 82 of the Maharashtra GST Act, 2017, as

extracted above, clearly contains an exception with regard to I&B Code,

hence, on the strength of dues under Maharashtra GST Act, 2017, no

charge can be claimed on the assets of the Corporate Debtor.

125. We may also notice a recent judgment of the Hon’ble Supreme Court

in “Civil Appeal No. 1661 of 2020, State Tax Officer vs. Rainbow

Papers Limited”. In the above case, the Hon’ble Supreme Court had

occasion to consider Section 48 of the Gujarat Value Added Tax Act, 2003.

Section 48 was set out in Para 2 of the judgment, which is to the following

effect:

“2. The short question raised by the appellant in this

appeal is, whether the provisions of the IBC and , in
particular, Section 53 thereof, overrides Section 48 of the
GVAT Act which is set out herein below for convenience:

“48. Tax to be first charge on property. –

Notwithstanding anything to the contrary contained
in any law for the time being in force, any amount
payable by a dealer for which he is liable to pay to the
Government shall be a first charge on the property of
such dealer, or as the case may be, such person.””

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915 of 2021, 361, 771 & 987 of 2022, 135
126. The Hon’ble Supreme Court held that Section 48 of the Gujarat

Value Added Tax, 2003 is not contrary to Section 53 of the I&B Code and

the State was held to be secured creditor on the strength of the charge

under Section 48. In Para 55, 56 & 57 of the judgment following has been

laid down:

“55. In our considered view, the NCLAT clearly erred in

its observation that Section 53 of the IBC over-rides
Section 48 of the GVAT Act. Section 53 of the IBC begins
with a non-obstante clause which reads :-

“Not withstanding anything to the contrary

contained in any law enacted by the
Parliament or any State Legislature for the
time being in force, the proceeds from the
sale of the liquidation assets shall be
distributed in the following order of
priority...........”

56. Section 48 of the GVAT Act is not contrary to or

inconsistent with Section 53 or any other provisions of
the IBC. Under Section 53(1)(b)(ii), the debts owed to a
secured creditor, which would include the State under
the GVAT Act, are to rank equally with other specified
debts including debts on account of workman’s dues for
a period of 24 months preceding the liquidation
commencement date.

57. As observed above, the State is a secured creditor

under the GVAT Act. Section 3(30) of the IBC defines
secured creditor to mean a creditor in favour of whom
security interest is credited. Such security interest
could be created by operation of law. The definition of

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915 of 2021, 361, 771 & 987 of 2022, 136
 secured creditor in the IBC does not exclude any
Government or Governmental Authority.”

127. The above judgment of the Hon’ble Supreme Court was passed on

the strength of Section 48 of Gujarat Value Added Tax Act and the reason

for holding the State Tax Officer as secured creditor was clearly mentioned

in Paras 55, 56 and 57, as noted above, which judgment also does not

come to any aid to the Appellant before us in view of the specific exclusion

of I&B Code under Section 82 of the Maharashtra GST Act, 2017, as

noticed above. We, thus, are of the view that Department of State Tax, the

Appellant, is an Operational Creditor and its liquidation value being nil,

on the ground raised by the Appellant, no interference is called for in

approval of the Resolution Plan.

QUESTION – XIII

Reliefs, if any to which Appellant(s) are entitled?

128. In the forgoing discussions, we have noted that the liquidation value

of the workmen as has been referred to in Form-H preferred by the

Resolution Professional is Rs.113 crores and workmen were entitled to

receive at least Rs.113 crores as per Section 30(2)(b) read with Section

53(1)(b) of the Code. Shri Krishnendu Datta, learned Counsel for

Successful Resolution Applicant during his submission, submitted that

Successful Resolution Applicant shall be paying an amount of Rs.113

crores to the workmen as per the Resolution Plan, since it was

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915 of 2021, 361, 771 & 987 of 2022, 137
contemplated that, if liquidation value is more than Rs.52 crores, the

liquidation value shall be payable to the workmen. To clear any doubt, we

deem it fit and proper to issue direction to Successful Resolution Applicant

to make payment to the workmen of Rs.113 crores as per the Resolution

Plan.

129. Now we come to the entitlement of payment of provident fund to the

workmen and employees. We have held that workmen and employees were

entitled for payment of unpaid provident fund dues till the insolvency

commencement date, which was statutory obligation of the Corporate

Debtor to deposit with the EPFO. The Resolution Professional in his

additional affidavit dated 25.07.2022 has stated that last deposit of the

provident fund was made in February 2019. Thus, all workmen are entitled

for payment of their full unpaid provident dues till the insolvency

commencement date, after adjusting the amount of provident fund received

by them under the Resolution Plan. The payment of Rs.113 crores, as per

the case of Resolution Professional also contains the payment towards

provident fund dues. The payment of amount to the workmen regarding

salary of 24 months as well as the provident fund, gratuity etc. were not

paid in full. In view of provisions of Section 53(1)(b), we having held that

payment of provident fund has to be in full, the workmen are entitled to

receive unpaid provident fund dues in full minus the amount which they

have already received under the Resolution Plan towards provident fund

and gratuity dues.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 138
130. Now coming to the employees of the Corporate Debtor, the liquidation

value of the employees having been found “NIL”, no amount has been paid

to them under the Resolution Plan. We having held that employees are

entitled to receive the full amount of provident fund till the insolvency

commencement date. Thus, Successful Resolution Applicant is to make

payment of amount of provident fund payable to the employees till the

insolvency commencement date in full. We make it clear that any amount

towards provident fund dues for workmen and employees, which has been

deposited with the EPFO can be withdrawn by the workmen and employees

and the amount deposited has not to be held to be amount due towards

provident fund to the workmen and employees.

131. While considering the Question No.XI, we have found that Regional

Provident Fund Commissioner was entitled for payment of provident fund

dues as per admitted claim and the Appeal field by Regional Provident Fund

Commissioner being Company Appeal (AT) (Insolvency) No. 987 of 2022

deserve to be allowed. We have already held that workmen and employees

were not entitled for payment of the salary and other dues during the CIRP

period, since except 50 workmen and employees, who were part of the Asset

Protection Team, the salary and other dues of the workmen and employees

have not been rightly treated to be CIRP costs.

132. With regard to payment of gratuity to the workmen and employees,

we are of the view that workmen and employees are entitled to gratuity

payments, due to them before the insolvency commencement date. Any

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 139
claim towards gratuity payment after insolvency commencement date is

not admissible, since the workmen and employees having demerged into

AGSL and their services were not deemed to have been terminated. Thus,

gratuity payment under the provisions of Payment of Gratuity Act, 1972 is

confined only to the date of insolvency commencement date and Successful

Resolution Applicant is also liable to make the said payment. It goes

without saying that with regard to payment of gratuity to workmen, any

amount towards gratuity paid under the Resolution Plan is liable to be

deducted and adjusted.

133. In view of forgoing discussions, we have found that non-payment of

full provident fund amount to the workmen and employees and the gratuity

payment till the insolvency commencement date amounts to non-

compliance of provisions of Section 30(2)(e) of the Code. However, in the

facts of the present case, all other parts of the Resolution Plan have not

been found to infirm in any manner, we do not find any case for interfering

with the order approving the Resolution Plan. The ends of justice will be

served in issuing direction to Successful Resolution Applicant to make

payment of provident fund and gratuity to the workmen and the employees

as directed above.

134. In result, the Appeal(s) are decided in following manner:

(I) The Appeal(s) of workmen and employees being Company

Appeal (AT) (Insolvency) Nos. 643 of 2021, 752 of 2021, 801 of

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 140
 2021, 915 of 2021, 771 of 2022 are partly allowed with

following directions:

(a) Successful Resolution Applicant is directed to make

payment of unpaid provident fund to the workmen till

date of insolvency commencement, after deducting the

amount already paid towards provident fund in the

Resolution Plan to the workmen.

(b) The workmen are also entitled for payment of their

gratuity dues as on insolvency commencement date,

after adjusting any amount towards gratuity paid under

the Resolution Plan.

It is made clear that entitlement of those employees and

workmen, who were demerged into AGSL shall not be

there, since demerger has not been treated as

termination of their services.

(c) The employees are also entitled for the payment of their

full provident fund, unpaid up to the date of insolvency

commencement date. It is made clear that full payment

of provident fund would be of that unpaid part of

provident fund, which has not been deposited by the

Corporate Debtor in the EPFO.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 141
 (d) Employees shall also be entitled for the gratuity, which

fell due up to insolvency commencement date.

(e) The rest of the prayers of the workmen and employees

are denied.

(f) The Chairman of the Monitoring Committee, erstwhile

Resolution Professional is directed to compute the

payments to be made to workmen and employees within

one month from today and communicate the same to the

Successful Resolution Applicant to take steps for

payment.

(II) Company Appeal (AT) (Insolvency) No. 987 of 2022 - Regional

P.F. Commissioner vs. Ashish Chhawchharia, Resolution

Professional for Jet Airways (India) Ltd. & Anr. – is allowed. The

Successful Resolution Applicant is directed to make payment

to the Appellant of provident fund dues as admitted by the

Resolution Professional.

(III) Company Appeal (AT) (Insolvency) No. 792 of 2021 and

Company Appeal (AT) (Insolvency) No. 361 of 2022 are

dismissed.

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 142
 (IV) The order of the Adjudicating Authority dated 22.06.2021

approving the Resolution Plan is upheld subject to orders as

above.

135. Before we close, we record our deep appreciation to learned Counsel

for the parties, who have rendered valuable assistance to the Court in

deciding somewhat complicated issues, which had arisen in this group of

Appeals. No costs.

[Justice Ashok Bhushan]

Chairperson

[Barun Mitra]
Member (Technical)

NEW DELHI

21st October, 2022

Archana/Ashwani

Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801

915 of 2021, 361, 771 & 987 of 2022, 143