Matter: Sikander Singh Jamuwal v. Vinay Talwar & Ors.
Order date: 11 March 2022
CIRP was initiated against Applied Electromagnetics Pvt. Ltd. (Corporate Debtor) by an employee. The resolution professional appointed by the CoC verified the liabilities of the Corporate Debtor to be INR 685 million. The resolution applicant proposed an amount of INR 129.9 million towards settlement of all past dues and liabilities of the Corporate Debtor. The amount computed for payment of provident fund by the relevant authority was INR 13 million approximately, whereas the resolution applicant had proposed INR 7.8 million for the same under the resolution plan. The resolution plan was approved by the NCLT. An appeal was made by an employee challenging the approval of the resolution plan before the NCLAT.
It was contended by the employee that (a) the resolution plan has not provided for payment of the entire provident fund dues, (b) financial creditors have been paid much more than the operational creditors, and (c) the resolution plan is discriminatory and violates provisions of the employees’ provident fund law. On the other hand, the financial creditors contended that it is the CoC’s prerogative to decide the quantum of payment to each class of creditors. Further, dues of workman and employees were proposed at 7.5% but, however, on the request of the operational creditor’s representative, it was enhanced 12.67%.
The NCLAT analyzed the relevant provisions of the Code relating to the approval of a resolution plan by the CoC, the factors to be considered during such approval and the provisions of the employees’ provident fund law. The NCLAT observed that the resolution
plan must not contravene any provisions of the law for the time being in force. Further from the employees’ provident fund law, the resolution applicant is liable to pay the contribution and other sums due from the employer. The NCLAT also noted that (a) this is not a commercial wisdom of the CoC as compliance of law must be ensured and (b) provident fund dues are not assets of the Corporate Debtor.
Accordingly, the NCLAT directed the resolution applicant to release full provident fund dues in terms of the provisions of the provident fund law immediately by releasing the balance amount that is not considered under the resolution plan.