Claims of various stakeholders to be considered by Resolution Professional in accordance with law; NCLT, Chandigarh emphasizes


NATIONAL COMPANY LAW TRIBUNAL, CHANDIGARH: In a case filed by way of interlocutory applications, wherein various stakeholders prayed for setting aside the resolution plan as it was against the settled law, for the reconsideration of the Committee of Creditors (‘CoC’) as per the law laid down by the Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, a Division Bench of Harnam Singh Thakur, Member (Judicial) and Subrata Kumar Dash, Member (Technical), held that wherever directed, the claims of various stakeholders are to be considered by the Resolution Professional under the relevant provisions of the IBC and in accordance with law and the same should be placed before Committee of Creditors for approval.


The Applicants alleges that the resolution plan did not provide for the payment of debt of the workmen and employees according to the provision laid down in Section 53 of the Insolvency and Bankruptcy Code, 2016 (‘Code’)

They further pointed out that the payment of the debt of the operational creditor should not be less than the amount paid to the creditor in the process of liquidation under Section 53 IBC. It was stated that the resolution plan approved by Coc does not satiate the test under section 30(2)(b) read with regulations 38(1) of the Insolvency and Bankruptcy Board of India (‘IBBI’)

On the other hand, the applicant/ex-employees prayed to include the claims of employees according to Form-D and Form-E and to include the amount of Provident Fund (‘PF’), Employee Provident Fund (‘EPF’), General Provident Fund (‘GPF’), Employees’ State Insurance (‘ESI’) and leave encashment due to the employees. It was further prayed to deposit TDS and reconsider the resolution plan. It was stated that the PF and ESI were such dues that they could not be a part of the liquidation estate.


While referring to the decision of Jet Aircraft Maintenance Engineers Welfare Association v. Ashish Chhawchharia RP of Jet Airways (India) Ltd. Company Appeal (AT) (Insolvency) Nos. 752 of 2022 dated 21-10-2022, in which NCLAT had observed that by virtue of Section 18 (f)(i), funds like PF, pension fund, and gratuity fund, even though maintained by the Corporate Debtor does not have ownership rights as they have to be utilisied fully towards the dues of the workmen and employees. Hence, such assets cannot be included in the Information Memorandum while inviting the Resolution Plan.

In the present case, a bench comprising of Harnam Singh Thakur, J. (Judicial Member) and Subrata Kumar Dash, J. (Technical Member) clarified that the PF, pension, and gratuity maintained by the corporate debtor will be fully released in terms of the provisions of the relevant acts. If no such fund is maintained, the PF, pension, gratuity, and leave encashment dues which are filed before the Resolution Professional (‘RP’) and admitted by him, must be paid as per Section 30(2) read with Section 53(1) of the Code.

The Court directed the RP to make payments to workmen and employees as per their entitlement under Section 20(2)(b) read with Section 53(1) of the Code.

The Court further directed the RP to deposit the Tax Deducted at Source (TDS) with the Income Tax Department which was already deducted from the Workmen/Employees as the same does not belong to the Corporate Debtor.


By way of an application, the applicant prayed for payment of total PF in terms of the judgement Tourism Finance Corporation of India Ltd. v. Rainbow Papers Ltd., Company Appeal (AT) (Insolvency) No. 354 of 2019 against the RP under section 60(5) of IBC stating that Employees Provident & Misc. Provisions Act, 1952 has an overriding effect.

They further prayed for enabling Employees’ Provident Fund Organisation (‘EPFO’) to proceed with finalizing of assessment of dues by passing order under section 7-A of Employees’ Provident Funds & Miscellaneous Provisions Act (‘EPF & MP Act, 1952’)


The Court, relying on the Jet Aircraft Maintenance Engineers Welfare Association (Supra), held that the claims of the EPF Authorities are to be satisfied failing which there will be breach of Section 30(2)(e) of the Code. The RP, was thus, directed to consider the matter afresh


Many unsecured creditors sought a claim against the Insolvency Professional (‘IP’) praying to declare the approved resolution plan was void under section 60(5) of IBC stating that the applicants were not included in the CoC. They emphasized that the approved resolution plan seeks to extinguish all liabilities of claims related to unsecured financial dues. Therefore, the plan was contrary to the provision of Section 30(2)(b) & (e) read with Section 53 of the Code


The Court directed the RP to provide the applicant with 15 days to review the provisions of the said plan and come up with their objection for consideration of CoC.


By way of an application filed by CGST against the RP under section 60(5) of IBC, they prayed for calling/reviewing order wherein application filed by RP were allowed to file regular returns in accordance with provisions of GST Act and to pay taxes collected by invoice registration portals (‘IRP’)

The applicant further prayed for clearance of liability of GST of the pre- corporate insolvency resolution process (‘CIRP’) period by utilizing in and out tax credit and making payment of the remaining amount.


The Court held that, corporate debtor undergoing CIRP is to be treated as a distinct person who shall be liable to take registration in each State or Union Territory where corporate debtor was earlier registered. Under the provisions of the Code IRP/RP has an obligation to comply with all legal requirements for the period after the Insolvency Commencement date.

Therefore, CGST department was directed to follow the instructions in the Circulars/Notifications issued by the CGST department regarding allotment of new GST registration, filing of return and regarding utilisation of Input Tax Credit.

RP was directed to move an application under relevant provisions of CGST Act, 2017 before CGST department.


By way of an application, RP prayed to consider the amount due and unpaid in respect of

i) PF Department amounting to Rs. 73,42,423/- for the period from November 2018 to February 2019;

ii) GST Department amounting to Rs. 97,59,368/- for the period from August 2019 to March 2019; total outstanding due is Rs. 25,00,000/-;

iii) The Electricity Department amounting to Rs. 25,15,484/-


The Court held that the amounts pertaining to the post-CIRP period should be treated as a part of the CIRP cost and would be payable to the recipients in priority as per the waterfall mechanism in the Resolution Plan. For the pre CIRP period, the authorities i.e., PF, Electricity and GST Department are free to file their claims before the Resolution Professional and the same be allowed as per the waterfall mechanism under Section 53 of the Code.

The Court thus held that various stakeholders are to be considered by the RP under the relevant provisions of IBC and and in accordance with law and the same should be placed before for approval. Thus, the resolution plan was sent back for approval by the CoC.

[Hind Tradex Limited v. Lakshmi Precisions Screws Ltd., 2022 SCC OnLine NCLT 295, decided on 01-12-2022]

Mr. Manish Jain, Mr. Shekhar Raj Sharma & Ms. Divya Sharma, Advocates for the applicant in CA No. 351/2019 & 797/2019.
Mr. Savar Mahajan with Ms. Swati Saluja, Advocates for respondent- Resolution Professional in CA Nos.351/2019, 130/2019, 328/2019, 329/2019, 330/2019, 331/2019, 332/2019, 333/2019, 334/2019, 335/2019, 336/2019, 337/2019, 338/2019, 352/2019, 441/2019&605/2019 and for respondent No.1-Resolution Professionalin CANos.797/2019, IANos. 45/20220, 46/2020 & CA No. 570/2020 and for applicant-Resolution Professional in CA Nos. 244/2019, IA No. 255/2021 Mr.Rakesh Gupta with Mr. Rakshit Gupta, Advocates for respondent Committee of Creditors and for Canara Bank in CANo.351/2019 and for respondent No.2 in CA No. 353/2019 and for respondent No. 2 in CA No. 570/2020.

Mr. Nahush Jain, Advocate for the applicant in CA No. 352/2019.Mr.SourabhGoel, Senior Standing Counsel, CBIC for CGST Rohtak in CA Nos. 130/2019&441/2019 and for respondent No.2-GST Department in CA Nos.244/2019 & 797/2019.

Mr. Ashish Chaudhary Advocate forRespondent No.3- EPFO in CA No. 244/2019 and for applicant- EPFO in CA Nos. 570/2020 & 605/2019. None for respondent No. 1 in CA No. 244/2019.

Mr.Abhinav Sood,Advocate with Ms.Anmol Sood, Advocate for the applicant in CA No. 328/2019.

Mr. Baldev Singh Badhran, Advocate for the applicant in CA Nos. 329/2019, 330/2019, 331/2019, 332/2019, 333/2019,334/2019,335/2019,336/2019,337/2019 & 338/2019.

Mr. Krishan Vrind Jain, Practising Chartered Accountant for the applicant in CA Nos. 353/2019 & 597/2019.

Mr. Yogesh Putney, Senior Standing Counsel with Mr. Harveet Singh Sehgaland Mr. Yatin Chadha, Advocates for respondent No.4-Income Tax Department in CA Nos. 353/2019 & 597/2019.

Mr. Swarnendu Chatterjee with Ms. Deepakshi Garg and Mr. Yashwardhan Singh, Advocates for applicant in IA Nos. 45/2020 & 46/2020.

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