Summary of Opinion — Company Appeal (AT) (Insolvency) No. 605 of 2019

Factual and Procedural Background

The Appellants, 272 workmen and employees, filed this appeal against part of the Adjudicating Authority's order dated 25 April 2019. The impugned order did not grant the Appellants relief with respect to salary claims for the period during the Corporate Insolvency Resolution Process (CIRP) and for an earlier period. Counsel for the Appellants contended that these workmen had actually performed duties during the CIRP and had not been paid; they also alleged unpaid salary for an earlier period while other similarly situated workmen had been paid.

The Adjudicating Authority had earlier disposed of an interlocutory application by directing the Resolution Professional to deposit Rs. 2.75 crores (out of approximately Rs. 9.55 crores) with the Registrar of the NCLT by way of a fixed deposit. The Appellants argued that salaries due for the period they had worked should have been paid from that deposited amount.

On hearing, the appellate bench noted that an order of liquidation had already been passed. The bench therefore addressed whether the Adjudicating Authority should be interfered with and how the Appellants' claims should be processed in light of the liquidation.

Legal Issues Presented

1. Whether the Appellants (workmen and employees) are entitled to be paid unpaid salaries for work performed during the Corporate Insolvency Resolution Process and for a prior period.
2. Whether the amount deposited by the Resolution Professional (Rs. 2.75 crores out of approx. Rs. 9.55 crores) should be applied to clear the Appellants' salary claims.
3. Whether Gratuity and Provident Fund amounts constitute assets of the Corporate Debtor or must be disbursed directly to entitled employees/workmen.

Arguments of the Parties

Appellants' Arguments

• The Adjudicating Authority failed to decide the Appellants' claims for unpaid salaries even though the Appellants had actually performed duties during the CIRP and remained unpaid.
• Salary for an earlier period had also not been released to the Appellants, while other similarly situated workmen had received payment.
• Following the Adjudicating Authority's order dated 25 April 2019, the Resolution Professional was directed to deposit Rs. 2.75 crores with the Registrar; the Appellants contended that salaries for the period they worked should have been paid out of that deposited sum.

The opinion does not contain a detailed account of the Liquidator's or Resolution Professional's counter-arguments in the written text provided.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis proceeded on the following basis, as stated in the opinion:

1. The court noted that an order of liquidation had already been passed in respect of the corporate debtor. This factual posture affected how outstanding claims should be processed.
2. The court treated the factual question of whether the Appellants actually worked during the CIRP (or the earlier period) as a disputed question of fact that the Adjudicating Authority could not finally decide at that stage without information from the Resolution Professional or until the claim is adjudicated by the Liquidator.
3. Given the liquidation and the disputed factual status, the appellate court was not inclined to interfere with the Adjudicating Authority's order dated 25 April 2019.
4. Instead of granting the relief sought by the Appellants, the court directed a procedural course: all 272 workmen and employees were permitted to file individual claims before the Liquidator. The Liquidator is to examine the record and the pleadings and determine each claim. If any claim is rejected by the Liquidator, the concerned workman/employee may approach the Adjudicating Authority, which may then decide the matter according to law.
5. Regarding Gratuity and Provident Fund, the court stated succinctly that these sums cannot be treated as assets of the Corporate Debtor and are to be disbursed among employees/workmen who are entitled to them.

Holding and Implications

Holding: The bench declined to interfere with the impugned order dated 25 April 2019 and disposed of the appeal with the directions summarized below. The Appeal stands disposed of with the aforesaid observations. No costs.

Direct Consequences for the Parties

• The Appellants (all 272 workmen and employees) are permitted to file individual claims before the Liquidator for unpaid salaries; the Liquidator will determine those claims after reviewing the record and pleadings.
• If the Liquidator rejects any claim, the affected workman/employee may move the Adjudicating Authority, which may then decide the matter in accordance with law.
• Gratuity and Provident Fund amounts are not to be treated as assets of the Corporate Debtor and must be disbursed to entitled employees/workmen.
• No costs were awarded in the appeal.

Broader implications or the establishment of a new precedent are not discussed in the opinion; the decision addresses the dispute between the parties by directing claim filing before the Liquidator and confirming the treatment of gratuity and provident fund sums as not being assets of the Corporate Debtor.