SUNIL KUMAR JAIN AND OTHERS versus SUNDARESH BHATT AND OTHERS

Citation: [2022] 17 S.C.R. 318 · Decided: 19-04-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Case Partly allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 17 S.C.R.
SUNIL KUMAR JAIN AND OTHERS
v.
SUNDARESH BHATT AND OTHERS
(Civil Appeal No. 5910 of 2019)
APRIL 19, 2022
[M. R. SHAH AND ANIRUDDHA BOSE, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss.5(13), 36(4),
53(1)(b) & (c) – Claim of the appellants-workmen/employees of
Corporate Debtor, working at Dahej Yard and Mumbai, relating to
wages/salary for the period involving Corporate Insolvency
Resolution Process (CIRP) and the amount due and payable to the
respective workmen/employees towards Pension Fund, Gratuity Fund
and Provident Fund – Held: On a fair reading of s.5(13) of the IB
code which defines “insolvency resolution process costs”, the dues
towards the wages/salaries of only those workmen/employees who
actually worked during the CIRP are to be included in the CIRP
costs – Rest of the claims towards the wages/salaries of the workmen/
employees shall be governed by ss.53(1)(b) & (c) of the IB Code –
Further, considering s.36(4) of the IB code and when the provident
fund, gratuity fund and pension fund are kept out of the liquidation
estate assets, the share of the workmen dues shall be kept outside
the liquidation process and the concerned workmen/employees 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 – In the present case, there are
disputed questions, whether in fact the IRP/RP managed the
operations of the corporate debtor as a going concern during the
CIRP and there is a serious dispute whether Dahej Yard was
operational during the CIRP or not and the concerned workmen/
employees of the Dahej Yard and the Mumbai Head Office actually
worked during the CIRP or not – Appellants to submit their claims
before the Liquidator and establish and prove that during CIRP,
IRP/RP managed the operations of the corporate debtor as a going
concern and that they actually worked during the CIRP – Liquidator
to adjudicate such claims in accordance with law and on its own
merits and on the basis of the evidence, independently.
[2022] 17 S.C.R. 318
318
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Insolvency and Bankruptcy Code, 2016 – ss. 3 (36), 5 (13) &
(14), 17, 20, 25, 33 (7), 36 (4), 53(1)(a), (b) & (c) – Companies Act,
1956 – ss.59 A, 529A (1) (c), 530– Companies Act, 2013 – ss.326,
327 – Legislative History with respect to workmen/employee’s dues
towards the wages/salaries including the amount due and payable
towards provident fund, gratuity and pension fund – Discussed.
Insolvency and Bankruptcy Code, 2016 – ss.36(4), 53 – Held:
Under the IB Code, the workmen dues have been duly protected
and the provident fund, gratuity and pension fund have been
excluded from the liquidation estate assets [s.36(4)] – Furthermore,
as per s.53 of the IB Code, the workmen dues are given the top
priority in the waterfall mechanism.
Insolvency and Bankruptcy Code, 2016 – ss.5(13), 20,
53(1)(a) – Held: It cannot be disputed that as per s.5(13), “insolvency
resolution process costs” shall include any costs incurred by the
resolution professional in running the business of the corporate
debtor as a going concern – It is also true that s.20 mandates that
the interim resolution professional/resolution professional is to
manage the operations of the corporate debtor as a going concern
and in case during the CIRP the corporate debtor was a going
concern, the wages/salaries of such workmen/employees who
actually worked, shall be included in the CIRP costs and in case of
liquidation of the corporate debtor, dues towards the wages and
salaries of such workmen/employees who actually worked when
the corporate debtor was a going concern during the CIRP, being
a part of the CIRP costs are entitled to have the first priority and
they have to be paid in full first as per s.53(1)(a)– Therefore, while
considering the claims of the concerned workmen/employees
towards the wages/salaries payable during CIRP, first of all it has
to be established and proved that during CIRP, the corporate debtor
was a going concern and that the concerned workmen/employees
actually worked while the corporate debtor was a going concern
during the CIRP – Plea of the appellants that as the RP is under
mandate to manage the operations of the corporate debtor as a
going concern u/s.20 and therefore it is to be presumed that the RP
managed the operations of the Corporate Debtor as a going
concern and thus, the workmen/employees are entitled 

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