State Bank Of India And Ors. vs Manoj Kumar Das & Ors.

“17. The interests of workmen, employees, and financial creditors must be balanced in a manner that neither prejudices pending claims nor paralyses the liquidation process. In this context, the Tribunal holds that the liquidation process cannot be brought to a standstill merely because issues of priority and exclusion are pending before it. The Liquidator should therefore proceed with distribution strictly in accordance with the waterfall mechanism under Section 53 of the Code, while ensuring adequate safeguards to protect the interests of workmen and employees who are claiming priority in IA 3426 of 2025 and IA 4627 of 2025 which are pending for orders. Accordingly, the liquidator is directed to distribute the proceeds of liquidation, unless there is a restraint on distribution of proceeds from Hon’ble NCLAT or Supreme Court on such distribution.”

“20. In view of the above, we pass the following orders:

a. the liquidator is liable to pay the provident fund and gratuity dues to the workmen and employees as are payable to them in terms of provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972 and such dues shall not form part of the liquidation estate;

b. the liquidator shall determine and adjudicate the claim under recovery certificate on its merit on the basis of judicial principles and provisions of the code;

c. the exclusion of time for determination of liquidation commencement date for the purpose of section 53(1)(b) cannot be allowed by this Tribunal in terms of its inherent powers;

d. The forfeited amount of Rs. 350 crores has been distributed by SBI. It is clarified that the applicant had sought usage of said sum, hence, we refrain from adjudicating whether such appropriation was within the provisions of IBC.

21.

In terms of above, IA 3426 of 2025 in CP (IB) No. 2205 of 2019 is partly allowed and IA 4627 of 2025 is allowed. Both the applications are disposed of accordingly.”

“i. Take the present application on record and into consideration; and ii. Direct the exclusion of Applicants' statutory dues (Provident Fund and Gratuity) from the liquidation estate, in terms of Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016; and iii. Direct that the Recovery Certificate issued by the Deputy Labour Commissioner for salary dues (January-March 2019) be honoured and kept out of the liquidation estate; and iv. Direct that 1,656 days (time spent in legal proceedings, in excess of 330 days) be excluded from the computation of the Liquidation Commencement date, and that 20.05.2020 be deemed the effective commencement date of liquidation and not 26.11.2024 for the purpose of determining 24 months’ dues under Section 53(1)(b) of the IBC; and v. Pass such other further orders and directions as may be deemed fit and proper by this Hon’ble Tribunal under the facts and circumstances of the present case.”

“a. Direct the Respondent Liquidator to ensure that Provident Fund and Gratuity dues are paid to the workmen and employees of Jet Airways (India) Ltd. in full with statutory damages, penalties and interest, before any waterfall distribution under Section 53 IBC, as these amounts fall outside the liquidation estate and must be paid in full;

b. Direct the Liquidator to ensure that no funds are distributed to any of the SCC members until the Provident Fund and gratuity dues of the workmen and employees are paid in full;

c. Direct the Liquidator to bring on record what use has been attributed to the forfeited funds of Rs. 350 Crore; d. Pass such other or further orders as this Hon'ble Tribunal may deem fit in the interests of justice.”

“20. In view of the above, we pass the following orders: a. the liquidator is liable to pay the provident fund and gratuity dues to the workmen and employees as are payable to them in terms of provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972 and such dues shall not form part of the liquidation estate;

b. the liquidator shall determine and adjudicate the claim under recovery certificate on its merit on the basis of judicial principles and provisions of the code; c. the exclusion of time for determination of liquidation commencement date for the purpose of section 53(1)(b) cannot be allowed by this Tribunal in terms of its inherent powers;

d. The forfeited amount of Rs. 350 crores has been distributed by SBI. It is clarified that the applicant had sought usage of said sum, hence, we refrain from adjudicating whether such appropriation was within the provisions of IBC.

21.

In terms of above, IA 3426 of 2025 in CP (IB) No. 2205 of 2019 is partly allowed and IA 4627 of 2025 is allowed. Both the applications are disposed of accordingly.”

“35. Powers and duties of liquidator. - (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: -

(j)

to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code;

(m)

to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator”

“36. Liquidation estate. - (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;

(iv)

other contractual arrangements which do not stipulate transfer of title but only use of the assets; and

(v)

such other assets as may be notified by the Central Government in consultation with any financial sector regulator;

(b)

assets in security collateral held by financial services providers and are subject to netting and set-off in multi-lateral trading or clearing transactions;

(c)

personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;

(d)

assets of any Indian or foreign subsidiary of the corporate debtor; or

(e)

any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor.”

““36. Liquidation estate. - (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 – (iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund”

“11. Priority of payment of contributions over other debts.— [Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due—

(a)

from the employer in relation to 10[an establishment] to which any [Scheme or the Insurance Scheme] applies in respect of any contribution payable to the Fund [or, as the case may be, the Insurance Fund], damages recoverable under section 14B, accumulations required to be transferred under sub-section (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the [Scheme or the Insurance Scheme]; or

(b)

from the employer in relation to an exempted [establishment] in respect of any contribution to [the Provident Fund or any Insurance Fund] (in so far it relates to exempted employees), under the the rules of [the Provident Fund or any Insurance Fund], [any contribution payable by him towards the Family Pension Fund under sub-section (6) of section 17,] damages recoverable under section 14B or any charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17.

shall, where the liability thereof has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), or under 5 [section 530 of the Companies Act, 1956 (1 of 1956)], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be. 6 [Explanation.—In this sub-section and in section 17,

“insurance fund” means any fund established by an employer under any scheme for providing benefits in the nature of life insurance to employees, whether linked to their deposits in provident fund or not, without payment by the employees of any separate contribution or premium in that behalf.]

[(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer 8 [whether in respect of the employee’s contribution (deducted from the wages of the employee) or the employer’s contribution], the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts.]”

“4. Payment of Gratuity.- (1) 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, or

(b)

on his retirement or resignation,

(c)

on his death or disablement due to accident or disease:

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:

Provided further that in case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is minor, the share of such minor, shall be deposited with the Controlling Authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority].

Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.”

“529. APPLICATION OF INSOLVENCY RULES IN WINDING UP OF INSOLVENT COMPANIES- (3) For the purposes of this section, section 529A and section 530, - (b) "workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely :

(iv)

all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company”

“529A. OVERRIDING PREFERENTIAL PAYMENTS-(1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company –

(a)

workmen's dues ; and

(b)

debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2)

The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.”

“529. APPLICATION OF INSOLVENCY RULES IN WINDING UP OF INSOLVENT COMPANIES- (3) For the purposes of this section, section 529A and section 530, -

(b)

"workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely ”

““529. APPLICATION OF INSOLVENCY RULES IN WINDING UP OF INSOLVENT COMPANIES- (3) For the purposes of this section, section 529A and section 530, -

(b)

"workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely :

(iv)

all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company”

“15. In Balbir Kaur v. Steel Authority of India Ltd. [(2000) 6 SCC 493 : 2000 SCC (L&S) 767] this Court opined: (SCC p. 502, para 14)

“As regards the provisions of the Payment of Gratuity Act, 1972 (as amended from time to time) it is no longer in the realm of charity but a statutory right provided in favour of the employee.”

16.

Interpreting Section 4(1) of the Act, it was held: (SCC p. 503, para 15)

“We shall come back to the deposit of the provident fund but as regards the gratuity amount, be it noted that there is a mandate of the statute that gratuity is to be paid to the employee on his retirement or to his dependants in the event of his early death — the introduction of the Family Pension Scheme by which the employee is compelled to deposit the gratuity amount, as a matter of fact runs counter to this beneficial piece of legislation (Act of 1972). The statutory mandate is unequivocal and unambiguous in nature and runs to the effect that the gratuity is payable to the heirs of the nominees of the employees concerned but by the introduction of the Family Pension Scheme, this mandate stands violated and as such the same cannot but be termed to be illegal in nature. We do find some substance in the contention as raised, a mandatory statutory obligation cannot be trifled with by adaptation of a method which runs counter to the statute. It does not take long to appreciate the purpose for which this particular Family Pension Scheme has been introduced by deposit of the provident fund and the gratuity amount and we are not expressing any opinion in regard thereto but the fact remains that statutory obligation cannot be left high and dry on the whims of the employer irrespective of the factum of the employer being an authority within the meaning of Article 12 or not.”

“8. It is an accepted position that gratuity and pension are not bounties. An employee earns these benefits by dint of his long, continuous, faithful and unblemished service. Conceptually it is so lucidly described in D.S. Nakara v. Union of India [(1983) 1 SCC 305 : 1983 SCC (L&S) 145] by D.A. Desai, J. who spoke for the Bench, in his inimitable style, in the following words: (SCC pp. 319-20, paras 18-20)

“18. The approach of the respondents raises a vital and none too easy of answer, question as to why pension is paid. And why was it required to be liberalised? Is the employer, which expression will include even the State, bound to pay pension? Is there any obligation on the employer to provide for the erstwhile employee even after the contract of employment has come to an end and the employee has ceased to render service?

19.

What is a pension? What are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some public purpose, is it thwarted by such artificial division of retirement pre and post a certain date? We need seek answer to these and incidental questions so as to render just justice between parties to this petition.

20.

The antiquated notion of pension being a bounty a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : 1971 Supp SCR 634] wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab v. Iqbal Singh [(1976) 2 SCC 1 : 1976 SCC (L&S) 172 : (1976) 2 LLJ 377] .”

It is thus a hard earned benefit which accrues to an employee and is in the nature of “property”. This right to property cannot be taken away without the due process of law as per the provisions of Article 300-A of the Constitution of India.”

“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 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.”

“NOTE 40: EMPLOYEE BENEFITS The Company contributes to the following post-employment defined benefit plans in India

I. Defined Contribution Plans The Company makes contributions towards provident fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the appropriate government authorities.

Expenses recognised for defined contribution plans are summarised below:

“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."

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;

(ii)

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 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 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 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).”

“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).”

“16. In terms of sub-section (4) (a) (iii) of Section 36, as all sums due to any workman or employees from the provident fund, the pension fund and the gratuity fund, do not form part of the liquidation estate/ liquidation assets of the ‘Corporate Debtor’, the question of distribution of the provident fund or the pension fund or the gratuity fund in order of priority and within such period as prescribed under Section 53(1), does not arise.

17.

The ‘workmen’s dues’ is mentioned in clause (b) (i) of Section 53(1), which are the dues for the period of twenty-four months preceding the liquidation commencement date.

18.

In view of the aforesaid specific provisions, the Explanation (iii) below Section 53, for the purpose of meaning of ‘workmen’s dues’, the Appellant cannot derive the meaning as assigned to it in Section 326 of the Companies Act, 2013, including the Explanation below it.”

“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.

The appeal is accordingly, dismissed. No costs.”

“1. The Present Application is filed by the ex-employees of the Corporate Debtor seeking for direction to the liquidator to treat the gratuity dues of the Applicants as highest priority, by not treating it as part of the liquidation estate of the Corporate Debtor.”

“11. 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. However, Liquidator has made it clear that payment of gratuity is not treated as Liquidation Estate. Therefore, the only direction which can be given to the Liquidator is to make necessary arrangements for payments of gratuity to the Applicants. According to their eligibility and it should be given priority. With these observations, the Application is disposed of.

12.

In the result, Application is allowed directing the Liquidator to make necessary arrangements for payment of gratuity to the Applicants according to their eligibility and the amount payable shall not be treated as Liquidation Estate and payment to be made accordingly.”

“17. Based on the judgment of this Appellate Tribunal in case of the State Bank of India v. Moser Baer Karamchari Union, 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.

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 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”.

19.

It is pertinent to mention that the Annual Report of 2016-17 of the ‘Corporate Debtor’ shows that there was the provision of Gratuity for the employees and 9.77 crores were proposed for payment of Gratuity in the Financial Year ending 2017 and 11.53 Crore was proposed for Gratuity payment to the employee in the financial ending year 2016.

20.

It is stated that in para 40 of the Annual Report that “the Company has a defined benefit Gratuity plan. Every employee, who has completed 5 years or more, gets a Gratuity on departure, i.e. 15 days salary for each completed year of service, subject to a maximum of Rs. 0.15 crores. The plan for the same is unfunded.”

21.

It is further noticed in the report that “In respect of defined contribution plan (Provident Fund), an amount of Rs. 6.72 (31^st March, 2016 and Rs. 6.85 crores have been recognised as expenditure in the statement of Profit and loss.”

22.

The annual cash flow statement for the ending 31^st March, 2017 show that Gratuity Fund was proposed. However, it is noticed that no such fund was created. In the circumstances, the Liquidator should not have been directed to make provision for the payment of gratuity to the workmen as per their entitlement.

23.

Therefore, this Appellate Tribunal is of the considered opinion that the Adjudicating Authority erred in directing the Liquidator to make provision for payment of Gratuity to workers, as per their entitlement. Thus, Appeal is allowed and the impugned direction to ‘Liquidator’ to make provision for payment of Gratuity, without their being a separate fund in this regard, is set aside.”

“CIVIL APPEAL No. 2520 OF 2020

By order of even date passed in Civil Appeal No.258 of 2020, we have dismissed the appeal, thereby affirming the judgment and order dated 19th August, 2019 passed by the National Company Law Appellate Tribunal ("NCLAT" for short) in Company Appeal No.396 of 2019.

The order impugned in the present appeal passed by the learned NCLAT is in ignorance of its earlier order dated 19th August, 2019 which is affirmed by us in Civil Appeal No.258 of 2020.

In that view of the matter, this appeal deserves to be allowed. The impugned order passed by the learned NCLAT is quashed and set aside, and the order passed by the National Company Law Tribunal is restored.”

“29. It is clear from the discussion above that even if no separate fund is available for provident fund, gratuity fund and pension fund they have to be paid out of existing funds of the CD.

30.

The decision of this Tribunal in the aforesaid matter means that in the case of Provident Fund, the employees contribution, employers contribution, the interest if any to be paid by the employer in case of delay in payment and damages as provided in Sections 11 and Section 7A, 7Q, 14B and 15(2) of Employees Provident Funds and Miscellaneous Provision Act, 1952 [Act 19 of 1952] are covered under the provisions of Section 36(4)(a)(iii) of the Code and are not part of the liquidation estate and hence are not subject to distribution under Section 53(1) of the code. The aforesaid decision of the Tribunal was a case of CIRP and its resolution and the payment for PF dues had to be made by successful resolution applicant. However, the ratio is equally applicable in case of liquidation as the principles relating to components of PF dues not forming part of the liquidation estate has been decided in this case.”

“This Appeal has been preferred by the Appellant-workmen against part of the order dated 25^th April, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahemdabad, whereby, no relief has been granted to the Appellants with regard to their claim relating to salary, which they claimed for the period involving ‘Corporate Insolvency Resolution Process’ and the prior period.”

“4. On hearing Counsel for the Appellants and the Counsel for the Liquidator, we find that an order of liquidation has already been passed. This apart, the disputed question of fact, as to whether the Appellants have actually worked during the ‘Corporate Insolvency Resolution Process’ or the earlier period, cannot be dealt with by the Adjudicating Authority till such information could have been obtained from the ‘Resolution Professional’ or claim is decided by the Liquidator.

5.

In view of the aforesaid fact, we are not inclined to interfere with the impugned order dated 25th April, 2019, but allow the Appellants-all 272 workmen and employees to file individual claims before the Liquidator, who after going through the record and taking into consideration the pleadings made by workmen/ employees will determine the claim. If claim of one or other workmen/ employee is rejected, it will be open to them to move before the Adjudicating Authority, who may decide the same in accordance with law.

6.

So far as, the Gratuity and Provident Funds are concerned, it is sufficient to say that the same cannot be treated to be the asset of the ‘Corporate Debtor’. They are to be disbursed among the employees/ workmen who are entitled for the same. The Appeal stands disposed of with aforesaid observation. No cost.”

“24. 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) IBC. Section 36(4)(iii) IBC 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) IBC 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) IBC has clearly given outright protection to 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 workmen/employees concerned 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) IBC, they are not to be used for recovery in the liquidation.”

“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.”

“Feeling aggrieved and dissatisfied with the impugned order dated 31-5-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLAT 259] passed by the National Company Law Appellate Tribunal, New Delhi (hereinafter referred to as “the Appellate Tribunal”) in Company Appeal (AT) (Insolvency) No. 605 of 2019, by which the Appellate Tribunal has dismissed the said appeal preferred by the appellants herein — workmen/employees of M/s ABG Shipyard Ltd. (hereinafter referred to as “the corporate debtor”), working at Dahej and Mumbai, which was filed against the order passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (hereinafter referred to as “the adjudicating authority”) dated 25-4-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931] not granting any relief to them with regard to their claim relating to salary, which they claimed for the period involving “corporate insolvency resolution process” (hereinafter referred to as “CIRP”) and the prior period, original applicants — workers/employees have preferred the present appeal.

2.

That the corporate debtor was a private sector ship building yard with its manufacturing activities at Dahej Yard and Surat Yard in Gujarat and having its corporate office at Mumbai. That prior to the initiation of CIRP, the corporate debtor had 562 workmen and 93 employees at Dahej; 291 workmen and 99 employees at Surat and 101 employees at its Mumbai Head Office. The appellants herein are the 272 employees and workmen employed at Mumbai Head Office and Dahej Yard of the corporate debtor. None of the 201 employees and workmen at Surat Yard are the appellants herein.

3.

Vide its order dated 1-8-2017 [ICICI Bank Ltd. v. ABG Shipyard Ltd., 2017 SCC OnLine NCLT 554] , the adjudicating authority admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the IB Code”) and the CIRP was initiated. The adjudicating authority also appointed the interim resolution professional of the corporate debtor who was thereafter confirmed as the resolution professional (for short “RP”) by the Committee of Creditors (for short

“CoC”) of the corporate debtor on 7-9-2017. First meeting of the CoC was held on 4-9-2017.

3.1.

On 23-10-2017, Company Application No. 348 of 2017 was filed before the adjudicating authority, praying inter alia to direct the resolution professional to make payment to the employees and the workmen. On 9-3-2018, the appellants herein filed Company Application No. 78 of 2018 in Company Application No. 348 of 2017 before the adjudicating authority, praying inter alia to direct the RP to utilise the amount of Rs 9,75,33,236 to be received from the Indian Coast Guard solely for employees/workmen.

3.2.

Vide order dated 25-4-2018 [Sunil Kumar Jain v. ABG Shipyard Ltd., 2018 SCC OnLine NCLT 14366] passed in Company Application No. 78 of 2018, the adjudicating authority directed the RP to deposit Rs 2,75,00,000 in the Registry of the adjudicating authority, subject to the outcome of Company Application No. 348 of 2017. In the meantime, in the 4th meeting of the CoC held on 8-12-2017, the issue with respect to the payment of salaries/wages of the employees/workers respectively was discussed in view of the directions passed by the adjudicating authority vide its order dated 1-12-2017 [Sunil Kumar Jain v. ABG Shipyard Ltd., 2017 SCC OnLine NCLT 20216] . However, the issue was not resolved and thereafter the appellants herein filed the aforesaid IA No. 78 of 2018 in which the adjudicating authority directed to deposit Rs 2.75 crores out of the total amount of Rs 9,75,33,236 with the Registry of NCLT towards disbursement of the outstanding salaries/wages to the appellants, subject to the final outcome of IA No. 348 of 2017 and the adjudicating authority accordingly disposed of Company Application No. 78 of 2018.

3.3.

It appears that thereafter since no agreed resolution plan could be adopted of the corporate debtor, the RP filed IA No. 113 of 2019 before the adjudicating authority praying for an order of liquidation of corporate debtor. The adjudicating authority by order dated 25-4-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931] , after deciding various other applications including the application of the appellants being Company Application No. 348 of 2017 passed an order of liquidation of the corporate debtor and appointed Respondent 1 herein as liquidator of the corporate debtor. While passing the order of liquidation, the adjudicating authority also disposed of Company Application No. 348 of 2017 in view of the order passed in Company Application No. 78 of 2018 by which the adjudicating authority earlier directed to deposit Rs 2.75 crores towards the dues of the appellants which as such was subject to the final outcome of Company Application No. 348 of 2017. Therefore, as such, the adjudicating authority while disposing of Company Application No. 348 of 2017 did not grant the relief claimed by the appellants — 272 workers/employees working at Dahej Yard and Mumbai Head Office for their claim relating to salary for the period involving CIRP and the prior period.

4.

Feeling aggrieved and dissatisfied with the order passed by the adjudicating authority, not granting the relief to the appellants herein with regard to their claim relating to salary/wages, which they claimed for the period involving CIRP and prior period, the appellant workmen/employees working at Dahej Yard and Mumbai Head Office preferred Company Appeal No. 605 of 2019 before the Appellate Tribunal. By the impugned order [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLAT 259] , the Appellate Tribunal has disposed of the said appeal declining to interfere with the order passed by the adjudicating authority, however, allowed the appellants — 272 workmen/employees to file their individual claims before the liquidator, who after going through the record and taking into consideration the pleadings made by the workmen/employees will determine the claim. The Appellate Tribunal has also further observed that if claim of one or other workmen/employee is rejected, it will be open to them to move before the adjudicating authority, which may decide the same in accordance with law. The Appellate Tribunal has also observed that so far as the gratuity and provident funds are concerned, the same cannot be treated to be the asset of the corporate debtor and they are to be disbursed amongst the employees/workmen who are entitled for the same.”

“6.11. It is submitted that Rs 2.75 crores are earmarked and kept apart towards the dues of the workmen/employees. It is submitted that therefore the said sum of Rs 2.75 crores which is deposited for the benefit of the workmen/employees is liable to be disbursed in terms of Section 53(1)(a) read with Section 5(13)(c) IBC. It is submitted that the amount in the sum of Rs 16.8 crores (approximately) payable towards the provident fund, gratuity and pension in terms of Section 36(4) to all the employees and workmen of the corporate debtor including the appellants and therefore is required to be paid in priority over the disbursement to be made under Sections 53(1)(b) and (c).”

Question No.(IV)

“iv. Direct that 1,656 days (time spent in legal proceedings, in excess of 330 days) be excluded from the computation of the Liquidation Commencement date, and that 20.05.2020 be deemed the effective commencement date of liquidation and not 26.11.2024 for the purpose of determining 24 months’ dues under Section 53(1)(b) of the IBC;”

“18. That the Hon'ble Supreme Court in Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors., 2018 SCC OnLine SC 1733, has held that although the outer limit of 330 days for completion of the Corporate Insolvency Resolution Process is mandatory, the time spent in bona fide legal proceedings may be excluded from this period, especially where the resolution plan is ultimately upheld by an appellate authority.

19.

That in the present case, it is respectfully submitted that a period of 1,656 days, in excess of 330 days, representing time lost due to prolonged litigation between the financial creditors and the IRP, may be excluded for the limited purpose of computing the 24-month lookback period under Section 53(1)(b) of the Code. Such exclusion is essential to ensure the correct determination of workmen’s dues preceding the liquidation commencement date. If this period is not excluded, it would have the unjust consequence of artificially reflecting ‘zero’ dues for workmen in the final stakeholder list—solely due to the passage of time caused by prolonged litigation beyond the statutory CIRP limit. It is further submitted that such an outcome would defeat the very object of Section 53(1)(b), which is designed to safeguard the interests of workmen and ensure equitable treatment during liquidation. A copy of the workmen creditors’ list, which reflects the current position, is annexed herewith and marked as Annexure A2.”

“8. It is the case of the Applicants that since 1,656 days were lost in prolonged litigation involving implementation of the resolution plan approved by this Hon’ble Tribunal on June 22, 2021, the same must be excluded for the limited purpose of computing the 24-month lookback period under Section 53(1 )(b) of the Code.”

“36.With reference to paragraphs 17 to 19 of the Application, the Applicants have submitted that a period of 1656 days in excess of 330 days representing time lost due to prolonged litigation between the financial creditors and interim resolution professional may be excluded for the limited purpose of calculating the 24 (twenty four) months lookback period under Section 53(l)(b) of the Code.

37.1

say that there is no provision in the Code for exclusion of any time period for the purpose of calculation of liquidation commencement date. Reference is drawn to Section 5(17) of the Code, which defines liquidation commencement date as “the date on which proceedings for liquidation commence in accordance with section 33 or section 59, as the case may be". There is no scope for any kind of exclusion of any time period for the computation of the liquidation commencement date for any single class of creditors.”

“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 and in such manner as may be specified, namely: -

(b)

the following debts which shall rank equally between and among the following:

(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;”

“12. Time-limit for completion of insolvency resolution process. - (1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.

(2)

The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 1 [sixty-six] per cent. of the voting shares.

(3)

On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once:

[Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor:

Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.]”

“5. Definitions. – (17) “liquidation commencement date” means the date on which proceedings for liquidation commence in accordance with section 33 or section 59, as the case may be”

“86. Given the fact that both the NCLT and N^CLAT are to decide matters arising under the Code as soon as possible, we cannot shut our eyes to the fact that a large volume of litigation has now to be handled by both the aforesaid Tribunals. What happens in a case where the NCLT or the N^CLAT decide a matter arising out of Section 31 of the Code beyond the time-limit of 180 days or the extended time-limit of 270 days? Actus curiae neminem gravabit — the act of the court shall harm no man — is a maxim firmly rooted in our jurisprudence (see Jang Singh v. Brij Lal [Jang Singh v. Brij Lal, (1964) 2 SCR 145 : AIR 1966 SC 1631] , SCR at p. 149 and A.R. Antulay v. R.S. Nayak [A.R. Antulay v. R.S. Nayak, (1988) 2 SCC 602 : 1988 SCC (Cri) 372 : 1988 Supp (1) SCR 1] , SCR at p. 71). It is also true that the time taken by a Tribunal should not set at naught the time-limits within which the corporate insolvency resolution process must take place. However, we cannot forget that the consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the corporate insolvency resolution process, and the corporate debtor otherwise being put into liquidation. We must not forget that the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. [ Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.] A reasonable and balanced construction of this statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. This is not to say that the NCLT and N^CLAT will be tardy in decision-making. This is only to say that in the event of the NCLT, or the N^CLAT, or this Court taking time to decide an application beyond the period of 270 days, the time taken in legal proceedings to decide the matter cannot possibly be excluded, as otherwise a good resolution plan may have to be shelved, resulting in corporate death, and the consequent displacement of employees and workers.”

“ What is the ambit of the State's claim to priority in relation to revenues, taxes, cesses and rates, due from a company in liquidation, is the question which stands posed in this appeal by certificate, granted by the High Court of Gujarat, in O.J. Appeal No. 2 of 1975. The question arises on the frame of Section 530(1)(a) of the Companies Act, 1956, as it stood at the relevant time, which is set out below:

“530. Preferential payments.— (1) In a winding up, there shall be paid in priority to all other debts—

(a)

all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before that date;”

2.

And sub-section (8)(c) of Section 530 says:

“530.(8)(c) the expression ‘the relevant date’ means (i) in the case of a company ordered to be wound-up compulsorily, the date of appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding-up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company.”

The appellant-company was ordered to be wound up by an order of court made on June 26, 1967. The liquidator after obtaining directions of the court invited the creditors of the company to prove their debts or claims and simultaneously to establish any title they may have to priority under Section 530. Pursuant to this invitation the Sales Tax Officer, Petlad submitted a comprehensive claim in the sum of Rs 70,945.60 as the amount of sales tax plus penalty payable by the company and claimed priority for the whole amount. The liquidator rejected the claim for priority in its entirety, but admitted claim to the tune of Rs 42,143.63 payable as debt pari passu with other unsecured creditors of the company.”

“13. Both benches of the High Court, with due respect, gave to the provision a very wide and varied interpretation and that too on literality and grammaticals seemingly overlooking the legal philosophy which permeates the provision, the same being that the debts due and payable, so as to claim priority, must be appropriated to the period within 12 months next before the relevant date and their liability for payment must be founded during that period and no other. To put it in simpler words, the State has a priority over debts, liability and obligation of which was born within the time frame of those twelve months and as such due and becoming due and payable within those twelve months next before the relevant date, ascertainable if necessary later, if not already ascertained. We are in respectful agreement with the interpretation put by the Court of Appeal to Section 264 of the English Companies Act in Airedale Garage case [(1932) 2 Comp Cas 570 : 1933 Ch D 64 (CA)] , analogous as it is to the provision in hand, warranting the same interpretation; more so when any other interpretation would lead to the results feared by the Company Law Committee extracted above. In such view of the matter, we need not elaborately comment, discuss or demolish, sentence by sentence, the reasoning given by the Single Bench as also the Division Bench of the High Court towards interpreting the provision. The words ‘having become due and payable within 12 months next before the relevant date’ need be understood to mean putting a restriction or cordoning off the amount for which priority is claimable and not in respect of each and every debt on account of taxes, rates and cesses etc. which may be outstanding at that time and payable. And further that such priority is in respect only of debts those of which become due and payable because the liability to those is rooted, founded and belonging to that period of twelve months prior to the relevant date and none other; both the conditions existing.”

“16. As regards prayer for exclusion of the time for determination of liquidation commencement date, it is noted that the applicant is seeking such exclusion on account of time spent in legal proceedings, in excess of 330 days. We find no provision in the code contemplating for such exclusion. The Liquidation commencement date is defined under Section 5(17) of the Code, to mean "the date on which proceedings for liquidation commence in accordance with section 33 or section 59, as the case may be". The applicant has sought such exclusion on ground of correct determination of workmen's dues preceding the liquidation commencement date in terms of Section 53(l)(b) of the Code. It is noted that the resolution plan was approved in this case on 22.6.2021 and the liquidation order was passed on 26.11.2024 in view of failure of the SRA to implement the approved resolution plan.

17.

The scope of inherent powers of the sub-ordinate courts was explained by Hon'ble Supreme Court in case of GLAS Trust Company LLC v. BYJU Raveendran and Ors., (2024) ibc:law.in 275 SC. wherein it was held that:

"70. When a procedure has been prescribed for a particular purpose exhaustively, no power shall be exercised otherwise than in the manner prescribed by the said provisions. In such cases, the court must be circumspect in invoking its 'inherent powers' to deviate from the prescribed procedure. If such deviation is made, the court must justify why this was necessmy to "prevent the abuse of the process of the Court".

71.

The need to be circumspect while invoking "inherent powers", when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. vs. Educomp Solutions Ltd. (Co C), 49 a two-judge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows:

"Any claim seeking an exercise of the adjudicating authority's residuary powers under Section 60(5)(c) IBC, NCLT's inherent powers under Rule 11 of the NCLT Rules or even the powers of this Court under Article 142 of the Constitution must be closely scrutinized for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other allied parties who are statutorily bound by the impact of a resolution or liquidation of a Corporate Debtor."

18.

Section 5(17) defines the liquidation commencement date and does not provide for any circumstances in which such date can be altered. Further, there is no provision permitting this tribunal to grant any relief on equitable considerations also. Hence, we do not find any' reason to allow the exclusion as prayed by the applicant.”

“Prayer made by the workmen in IA No.3426 of 2025 to exclude the period of 1656 days (time spent in litigation) need to be excluded from the CIRP period and the Adjudicating Authority committed error in not accepting the above prayer.”

Question No.(V)

“iii. Direct that the Recovery Certificate issued by the Deputy Labour Commissioner for salary dues (January-March 2019) be honoured and kept out of the liquidation estate;”

“Workmen were not entitled to Recovery Certificate issued by the Deputy Labour Commissioner for salary dues of January to March 2019 to be kept out of the liquidation estate.”

Question No.(VI)

“Workman dues for the period of 24 months preceding the liquidation commencement dated (26.11.2024) cannot be treated as nil.”

“17. The interests of workmen, employees, and financial creditors must be balanced in a manner that neither prejudices pending claims nor paralyses the liquidation process. In this context, the Tribunal holds that the liquidation process cannot be brought to a standstill merely because issues of priority and exclusion are pending before it. The Liquidator should therefore proceed with distribution strictly in accordance with the waterfall mechanism under Section 53 of the Code, while ensuring adequate safeguards to protect the interests of workmen and employees who are claiming priority in IA 3426 of 2025 and IA 4627 of 2025 which are pending for orders. Accordingly, the liquidator is directed to distribute the proceeds of liquidation, unless there is a restraint on distribution of proceeds from Hon’ble NCLAT or Supreme Court on such distribution.”

“Direct that 1,656 days (time spent in legal proceedings, in excess of 330 days) be excluded from the computation of the Liquidation Commencement date, and that 20.05.2020 be deemed the effective commencement date of liquidation and not 26.11.2024 for the purpose of determining 24 months’ dues under Section 53(1)(b) of the IBC” which prayer is allowed.

Parties shall bear their own costs.