Gratuity and provident fund claims of employees are not part of the liquidation estate under the IBC, 2016 and must be prioritized for payment.

ORDER

1. The present Application has been filed by Shri K.R. Murthy, in his capacity as a representative of 131 workmen and ex-employees of the Corporate Debtor, namely Siddhartha Tubes Limited, challenging the action of the Respondent/Liquidator in not accepting the claims towards Gratuity and Provident Fund of the said ex-employees.

Facts of the Case:

2. It is stated that the Corporate Debtor was admitted into Corporate Insolvency Resolution Process in CP (IB) No. 67/AHM/7/2018, and thereafter an order of liquidation came to be passed. Upon commencement of liquidation, the Respondent was appointed as the Liquidator of the Corporate Debtor and entrusted with the control of its assets and liabilities in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 .

3. It is further stated that pursuant to the order of liquidation of the Corporate Debtor, the Applicant along with other workmen and ex-employees of the Corporate Debtor submitted their respective claims towards Gratuity and Provident Fund with the Respondent/Liquidator, for which provisions had been made in the books of accounts of the Corporate Debtor.

4. It is stated that thereafter the Respondent mentioned the claims of the Applicant along with other workmen and ex-employees in the List of Stakeholders prepared under Regulation 31 of the IBBI (Liquidation Process) Regulations, 2016, which was filed by the Respondent on 31.08.2020. A copy of the List of Stakeholders of the Corporate Debtor is annexed as Annexure A-2.

5. It is stated that by email dated 24.08.2020, the Respondent nominated the Applicant as a representative of the workmen and ex-employees in the Consultation Committee, on the ground that the stakeholders had failed to nominate their representative and that the Applicant was having the highest claim amount. A copy of the email dated 24.08.2020 issued by the Respondent is annexed as Annexure A-1.

6. It is stated that in the second meeting of the Consultation Committee held on 07.12.2020, the Respondent apprised the members that the claims of workmen and employees admitted as on 02.12.2020 were to the tune of ₹1,21,10,200/-. It is further stated that thereafter the Respondent circulated a list of admitted claims pertaining to Gratuity and Provident Fund of employees, wherein the claims of 114 employees were accepted to the tune of Rs.1,13,44,822/-. The minutes of the said meeting along with the list of admitted claims are annexed as Annexure A-3 (Colly).

7. It is stated that in the meeting of the Consultation Committee held on 09.01.2021, the Respondent noted the claims of Gratuity and Provident Fund of the employees. However, in the subsequent meeting of the Consultation Committee held on 11.01.2021, the Respondent recorded that the claims of Gratuity and Provident Fund need not be paid, placing reliance upon the order passed by the Hon’ble NCLAT in Mr. Savan Godiwala, Liquidator of Lanco Infra Tech Limited vs. Mr. Apalla Shiva Kumar, Company Appeal (AT) (Insolvency) No. 1229 of 2019 The minutes of the meeting dated 11.01.2021 are annexed as Annexure A-4.

8. It is the case of the Applicant that the Respondent, without properly applying the correct legal position and without examining the merits of the claims, mechanically relied upon the aforesaid order of the Hon’ble NCLAT and arbitrarily denied the payment of Gratuity and Provident Fund to the workmen and ex-employees of the Corporate Debtor.

9. It is further stated that the reliance placed by the Respondent on the aforesaid NCLAT judgment is misplaced, as the said judgment arose from the