NCLT Mumbai (12.09.2018) in Precision Fasteners Ltd. Vs. Employees Provident Fund Organisation [MA 576 & 752 of 2018 in CP No. (IB) 1339 (MB) /2017] held as under;
# 30. . . the right of all other creditors over the assets of the company is a property right, whereas workmen dues, more specially PF dues of workmen, are interwoven with Right to Life because the workmen all through their life save some portion of the hard earnings for their later life after retirement, if Such sums are being interlinked on par with debts of the creditors of the company, secured or unsecured as the case may be, then it is nothing but diluting most valuable and inalienable right of a person on par with a property right subordinate to right to life.
# 31 … . It makes no difference as to whether it has been released from the Corporate Debtor or not, once deduction has been made from the workman's wages, it is to be deemed as the asset of the workmen and not as an asset of the Corporate Debtor or the company as the case may be.
# 33. Now in alignment with the provisions of EPF Act, in section 36(4)(1)(3), the Code has gone ahead saying that the dues in respect to Provident Fund/Pension Fund/Gratuity Fund shall not be treated as part of the liquidation estate, as long as such dues are not treated as part of liquidation estate, the provisions of IBC will not be applicable for realisation of such dues from the asset of the Corporate Debtor. The intriguing aspect lying in this scenario is that though it is a due payable by the Corporate Debtor, as to provident Fund/Pension Fund/Gratuity Fund dues are considered, the Code has treated it as an asset of the workmen lying with the Corporate Debtor.
# 42. Therefore, for the reasons stated above, the Petitioner is directed to pay the Provident Fund dues from the liquidation estate before distributing the liquidation estate of the Corporate Debtor to the claimants, to which, Since the Liquidator has to sell the asset of the Corporate Debtor, the respondents are directed to allow this Liquidator to sell the assets Of the Corporate Debtor and pay Off the Provident Fund dues in priority to all other claims payable by the Corporate Debtor in liquidation.
Excerpts of the order;
# 20. If we come to clause (a) of this sub section — 4, it includes five kinds of assets as (i) (ii)(iii) (iv) (v) sub-clauses under the head of assets owned by a third party which are in possession of the Corporate Debtor, let us examine clause by clause to know the implications of each of the clauses and find out the commonality in bringing these five clauses under the head of assets possessed by the debtor without title over it.
# 21 On examination of sub section 4 (a) (i), it is evident that if any asset is lying in trust with corporate debtor for the benefit of third party, that asset shall be excluded from the liquidation estate, likewise regarding subsection — 4 (a) (ii), in bailment contracts, if goods have been in possession of corporate debtor for a specific purpose, corporate debtor being bailee not having title over such asset, that asset as per this sub clause shall not be included in the liquidation estate.
# 22 When it comes to sums due to any workmen or employees from the provident fund, the pension fund and the gratuity fund under sub clause (iii), they shall not be included in the liquidation estate. Similarly, another exhaustive definition has been given to sub clause (iv) saying that contractual arrangements not transferring title to corporate debtor except use of the assets will become an asset not falling within the ambit of liquidation asset, such assets shall not also be included and used for recovery in the liquidation. Lastly in sub-clause (v), any asset notified by the Central Government in consultation with any financial sector regulator shall not be included in the liquidation estate assets.
# 23 Now we are concerned with sub-clause (iii) of clause (a) of sub-section 4 of Section 36 because this sub-clause deals with dues payable to workmen or employees from the provident fund, the pension fund and the gratuity fund, which is relevant to the issue for consideration before this Bench.
# 24. In this clause (a) of sub-section 4, the assets belonging to a third party remaining in the possession of the corporate debtor have been included in this clause (a), since it is an inclusive definition, it is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense, therefore, it is inappropriate to put a restrictive interpretation upon the terms of wider denotation. (vide Oswal Fats and Oils Ltd. vs. Additional Commissioner (Administration), Bareilly Division, Bareilly and ors.) [MANU/SC/0216/2010 - para 25]
# 25. Out of these five sub-clauses, regarding (i), (ii) and (iv), these three clauses deal with the assets in the possession of the corporate debtor without any title over such assets, as to sub- clause (iii) and sub-clause (v), it need not be seen as to whether title is vested with the corporate debtor or not, it is an operation of law that says when provident fund is payable to the workmen or employees, such payment dues have to be deemed as an asset of the workmen or the employees, it makes no difference whether it has been maintained in a separate account or not, in view of this deeming fiction, the workmen/employees need not prove that whether any sum (interest) has been explicitly vested with them or not. So is the case when an asset of the corporate debtor is notified by the Central Government in consultation with any financial sector regulator. By including subclauses (iii) and (v) along with sub- clauses (i), (ii) and (iv) of clause (a) of sub-section 4, an overarching interest and title has been created in favour of the workmen in respect to provident fund, etc. and in favour of the government in respect to the asset notified treating these two assets under sub-clauses (iii) & (v) as not included in the liquidation estate.
# 30. I believe that the right of all other creditors over the assets of the company is a property right, whereas workmen dues, more specially PF dues of workmen, are interwoven with Right to Life because the workmen all through their life save some portion of the hard earnings for their later life after retirement, if Such sums are being interlinked on par with debts of the creditors of the company, secured or unsecured as the case may be, then it is nothing but diluting most valuable and inalienable right of a person on par with a property right subordinate to right to life. Workmen normally fall back on their earnings after retirement, if realisation of such dues also put in jeopardy, how could they Survive and Sustain in their old age, they can't do anything in life, life becomes by that time already vestigial, can they rally around courts to realise these sums, 1 believe it can't be so and law cannot be so, and the law is also not so. May be for this reason alone, EPF Act has been strengthened from time to time, in addition to it, now under IBC, PF/Pension/Gratuity fund dues have been taken out from the spectrum of liquidation estate asset by giving a mandate that the PF/pension/Gratuity fund dues to the workman/employee shall be treated as an asset of the workman lying in the possession of corporate debtor. so, it is not treated as a claim on par with other creditors, it is in fact treated as an asset of the workmen lying with corporate debtor.
# 31 ……… It makes no difference as to whether it has been released from the Corporate Debtor or not, once deduction has been made from the workman's wages, it is to be deemed as the asset of the workmen and not as an asset of the Corporate Debtor or the company as the case may be. Therefore, we have not found any merit in the argument of the Liquidator counsel canvassing that sub-clause (iii) of clause (a) of subsection 4 of section 36 denotes in respect to the provident fund already released and lying with the EPFO, henceforth, the said argument of the Liquidator counsel is rejected.
# 33.Now in alignment with the provisions of EPF Act, in section 36(4)(1)(3), the Code has gone ahead saying that the dues in respect to Provident Fund/Pension Fund/Gratuity Fund shall not be treated as part of the liquidation estate, as long as such dues are not treated as part of liquidation estate, the provisions of IBC will not be applicable for realisation of such dues from the asset of the Corporate Debtor. The intriguing aspect lying in this scenario is that though it is a due payable by the Corporate Debtor, as to provident Fund/Pension Fund/Gratuity Fund dues are considered, the Code has treated it as an asset of the workmen lying with the Corporate Debtor.
# 34. In view thereof, the overriding effect of section 238 of this Code will not have any bearing over the asset of the workmen lying in the possession of the Corporate Debtor because that asset is not considered as the part of the liquidation estate, moreover, to apply section 238 over any other law for the time being in force, the other law must be inconsistent with the provisions of the Code, since section has excluded the PF dues of the workmen from the liquidation estate assets treating it as an asset of the workmen lying with the corporate debtor, section 53 is not applicable to say that these dues fall within the ambit of liquidation estate. Therefore, this argument of inconsistency raised by the Liquidator counsel has no merit, hence the same is rejected.
# 42. Therefore, for the reasons stated above, the Petitioner is directed to pay the Provident Fund dues from the liquidation estate before distributing the liquidation estate of the Corporate Debtor to the claimants, to which, Since the Liquidator has to sell the asset of the Corporate Debtor, the respondents are directed to allow this Liquidator to sell the assets Of the Corporate Debtor and pay Off the Provident Fund dues in priority to all other claims payable by the Corporate Debtor in liquidation.
------------------------------------------------
No comments:
Post a Comment