Status as on- 30/06/2022
Introduction:
An important judgment was passed by the Hon’ble Supreme Court of India in the matter titled “Sunil Kumar Jain Versus Sundaresh Bhatt” in Civil Appeal No.5910 of 2019 on 19.04.2022, wherein the Supreme Court clarifies that the operations of the Corporate Debtor as a going concern during the CIRP period and the concerned workmen/employees actually worked during CIRP period, then their wages and salaries are considered and included in CIRP costs as per under Section 53(1)(a) of the IB Code.
Brief Background:
Initially, workmen/employees filed a petition under Section 7 of I&B Code, 2016 before the Hon’ble NCLT, and the same was allowed by the Hon’ble Tribunal. Then, the said order was challenged before the Hon’ble NCLAT and the Hon’ble NCLAT dismissed the Appeal and did not grant any relief to them with regard to their claims relating to salary, which they claimed for the period involving CIRP.
Issue
The issue(s) came before the Hon’ble Supreme Court, with respect to whether wages/salaries of the workmen/employees during the CIRP Period are to be qualified as CIRP cost or not.
Contentions
Workmen/ employees contended that as defined per Section 5(13) of IBC, the salaries/wages of such workmen/employees are to be included in the CIRP cost and they are liable to pay such wages/salaries as part of the CIRP costs in full before making any payment as per priorities mentioned in Section 53(1) of I&B Code.
On the other hand, the respondent contended that the dues towards the wages and salaries of only those employees/workmen who actually worked during the CIRP period and assisted the Resolution Professional/Liquidator are to be included in the CIRP cost only.
Observations by the Hon’ble Supreme Court
- The wages/salaries of only those workmen/employees of the Corporate Debtor who actually worked during the CIRP period can be included as the CIRP costs provided it is established and proved that the Resolution Professional managed the operations of the Corporate Debtor as a going concern and such workmen/employees of the Corporate Debtor actually worked during the CIRP Period, shall be paid and considering it as part of the CIRP costs as per section 53(1)(a) of the I&B Code.
- The concerned about such Provident Fund, Gratuity Fund and Pension Fund of the workmen/employees shall have to paid if any available and the Liquidator shall not have any right to claim over such funds as per Section 36(4) of I&B Code.
Conclusion: –
In the present judgment, the Hon’ble Supreme Court clarifies and settled law regarding the claims of Employees/Workmen during the CIRP period are to be qualified as CIRP cost, when the IRP/Resolution Professional/Liquidator managed the operations of the Corporate Debtor as a Going Concern during the CIRP period and those workmen/employees actually worked during the CIRP are to be paid only and not otherwise as per section 53 of the I&B Code, 2016.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at rera@centrik.in
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