The IBC, 2016, provides a complete code for distribution of assets; previous settlement agreements or labour court awards do not grant an automatic security interest or priority status that overrides the waterfall mechanism prescribed under Section 53 of the IBC.

ORDER

1. The present application has been filed by the Applicant, Ms. Vijayalakshmi V K, under Section 60(5) of IBC, 2016, read with Rules 11 of the NCLT Rules, 2016, against the Liquidator of M/s. Vysali Pharmaceuticals Limited ("Corporate Debtor") for the following reliefs;

a) Direct the Liquidator to exclude the claim amount eligible for the applicant from the liquidation asset.

b) Pass such other order or direction that this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case.

2. Brief facts of the Applicant's case

a) The Applicant is a former employee of Corporate Debtor and has filed the present Application both in her individual capacity and in a representative capacity on behalf of 82 other former employees of the Corporate Debtor. Most of these employees worked as operators and were receiving an average monthly salary of approximately Rs. 4,000/.

b) The Applicants contend that they have been denied their lawful dues, including unpaid wages, dearness allowance, gratuity, and retrenchment compensation. The majority of the employees had rendered long and continuous service to the Corporate Debtor for nearly 25 to 30 years. Despite dedicating a substantial part of their working lives to the Corporate Debtor for modest remuneration, they have allegedly not received their statutory and employment-related benefits.

c) The Applicant represents 83 former employees whose claims were submitted before the Liquidator. According to the Applicant, the claims were either partially admitted or completely rejected by the Liquidator. The Liquidator rejected the claims, either wholly or partly, without assigning adequate reasons.

d) Applicant stated that the employees were discharged from service pursuant to a settlement entered into with the Corporate Debtor. On 26.03.2011, a settlement was arrived at before the Regional Joint Labour Commissioner, Ernakulam, under the provisions of the Industrial Disputes Act, 1947. Under the said settlement, the employees agreed to their discharge from service, while the Corporate Debtor undertook to pay all their dues, including wages and gratuity. The Corporate Debtor failed to honour the terms of the settlement and did not make payment of the agreed amounts. Consequently, the employees approached the Hon'ble High Court of Kerala by filing W.P.(C) No. 36197 of 2017. By judgment dated 29.01.2018, the Hon'ble High Court recorded that the Corporate Debtor was unable to comply with the settlement as the Kerala State Industrial Development Corporation (KSIDC) held a charge over its sole immovable property, thereby preventing its sale for settlement of employee dues. The Hon'ble High Court further directed the parties to convene a joint meeting for resolving the issue.

e) Pursuant to the directions issued by the Hon'ble High Court of Kerala, a joint meeting of the stakeholders, including representatives of KSIDC, was convened on 16.05.2018. During the meeting, KSIDC requested the Corporate Debtor to submit a business plan within one month.

f) As no effective action was taken thereafter either by the Corporate Debtor or KSIDC, the employees' union addressed a representation to the Managing Director of KSIDC requesting intervention to ensure payment of the dues payable to the employees. Relying upon the settlement and subsequent proceedings, the Applicant contends that the employees have a superior right to payment from the assets of the Corporate Debtor and that their dues ought to be satisfied in priority to the claims of other creditors, including KSIDC.

g) The Applicant further submits that one of the employees had approached the Kerala