Allowed

In the matter of International Mega Food Park Limited Ia No. 300,586 & 942-2020 in Cp (Ib) No.174-Chd-Chd-2018

NCLT13 Oct 2022

Case brief

AI extract

What is this about?

The Tribunal addressed three applications regarding the Corporate Insolvency Resolution Process of International Mega Food Park Limited. It held that no gratuity is payable due to lack of a specific fund, but salary and leave encashment during CIRP are payable as costs. It also ordered the return of corporate vehicles, distinguishing precedent as no judicial determination of ownership was required

What did the court decide?

Resolution Professional directed to pay salary and leave encashment as CIRP costs; directed to handover possession of two vehicles within 15 days; claim for rental compensation dismissed as beyond jur

In the matter of International Mega Food Park Limited Ia… — Insolvency and Bankruptcy | NCLT (2022)

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THE NATIONAL COMPANY LAW TRIBUNAL CHANDIGARH BENCH, CHANDIGARH (Exercising powers of Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016) (through web-based video conferencing platform)

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IA No. 300/2020, IA No. 586/20 IA No.942/2020,

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In CP (IB) No.174/Chd/Chd/2018 (admitted)

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In the matter of:

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Small Industries Development Bank of India (SIDBI)

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.…Petitioner-Financial Creditor

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Versus

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International Mega Food Park Limited .…Respondent-Corporate Debtor

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And in the matter of:- IA No.300/2020 Under Section 60(5) of the IBC, 2016 Rakesh Sharma registered office at Flat No. 439, Trishla Plus Home Society, Peer Muchalla, District Mohali, Punjab …Applicant

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Vs.

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Mr. Sumat Gupta, Resolution Professional of M/s International Mega Food Park Limited Registered office at C/O, 2581/3, B-1, Near Zoom Hotel Building Industrial Area-A, Transport Nagar, Ludhiana-141003 ….Respondent

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And in the matter of:- IA No.586/2020 Under Section 60(5) of the IBC, 2016 Mr. Sumat Gupta, Resolution Professional of M/s International Mega Food Park Limited Registered office at C/O, 2581/3, B-1, Near Zoom Hotel Building Industrial Area-A, Transport Nagar, Ludhiana-141003 …Applicant Vs.

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Mr. Sukhinder Singh, Suspended Director IMFPL registered office at House No. 3, Sector 5, Chandigarh-160001

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2 Mr. Simarinder Singh, Suspended Director IMFPL,

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020,

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In CP (IB) No.174/Chd/Chd/2018 (admitted)

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Page 2 of 15

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registered office at House No. 3, Sector 5, Chandigarh-160001

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….Respondents

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And in the matter of:- IA No.942/2020 Under Section 60(5) of the IBC, 2016 Mr. Sumat Gupta, Resolution Professional of M/s International Mega Food Park Limited Registered office at C/O, 2581/3, B-1, Near Zoom Hotel Building Industrial Area-A, Transport Nagar, Ludhiana-141003 …Applicant

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Vs M/s. International Fresh Farm Products India Limited Registered Office at H No. 3, Sector 5, Chandigarh 160001 …Respondent

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Order delivered on: 13.10.2022

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Coram: HON’BLE MR. HARNAM SINGH THAKUR, MEMBER (JUDICIAL) HON’BLE MR. SUBRATA KUMAR DASH, MEMBER (TECHNICAL)

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Present through video-conferencing:

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For the Applicant in :Dr. Rajansh Thukral, Advocate IA No.942/2020, 586/2020, For Applicant in IA No. 300/2020 :Mr. Nitin Kant Setia, Advocate For the Respondents in IA No. 942/2020, 586/2020 :Mr. Manuj Nagrath, Advocate For the Respondents in IA No. 300/2021 :Dr. Rajansh Thukral, Advocate

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Per: Subrata Kumar Dash, Member (Technical)

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ORDER

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IA No.300/2020

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In the present application, the applicant is seeking direction against Resolution Professional to release the amount due towards Gratuity, Leave Encashment and salary during the CIRP of the corporate debtor as the same

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does not form part of the liquidation estate of the corporate debtor. In the IA No. 300/2020, IA No. 586/20 ,IA No.942/2020,

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In CP (IB) No.174/Chd/Chd/2018 (admitted)

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present matter, this Adjudicating Authority has admitted the petition i.e. CP (IB) No.174/Chd/CHD/2018 and initiated Corporate Insolvency Resolution Process(CIRP) in respect of the corporate debtor vide order dated 28.02.2019. 2) The brief facts submitted by the applicant in the instant application are as follows:

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2.1 It is submitted that the applicant has worked in the corporate debtor as AGM Accounts and Finance for 7 years. The HR Department of the corporate debtor served the applicant a notice for termination of services vide email dated 19.04.2019. The applicant replied to the email of the respondent and requested full and final clearance of pending dues viz. Gratuity, Leave Encashment and pending salary. Copy of emails dated 13.05.2019, 17.05.2019 and 18.05.2019 are attached as Annexure A-2.

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2.2 It is stated that the respondent-Resolution Professional sent a reply dated 18.05.2019 to the applicant stating that only the current month salary would be dispersed and the rest of the dues would be dispersed as per available cash flow. Further, the applicant filed an application vide CA No. 411/2019 challenging his termination. The above said application was dismissed by this Adjudicating Authority on 11.12.2019 with liberty to prefer any claim with regard to any of his employment dues, in accordance with law. Pursuant to that the applicant preferred his claim vide email dated 03.01.2020.

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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1. The respondent-Resolution Professional has filed its reply vide Diary No. 00480/01 dated 21.09.2020, whereby made the following submissions.

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3.1 It is submitted that the present application is barred by res judicata as the facts relating to emails dated 19.04.2019, 13.05.2019, 17.05.2019 and 18.05.2019 already considered before Adjudicating Authority before dismissing CA 411/2019. Though, liberty was granted to the applicant to file his claim with Resolution Professional.

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3.2 It is further submitted that the applicant has not filed any claim in Form D of Schedule to the Insolvency Regulations, 2016. As per the books of accounts of corporate debtor, there is no Gratuity fund created by the company and therefore, there are no funds available for payment of Gratuity in respect of services rendered by the applicant during the period prior to commencement of CIRP. There is no record of Leave encashment and the applicant has not furnished any details with respect to number of leaves, period of leave encashment and there is no fund created by the corporate debtor with respect to leave encashment.

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3.3 The respondent has relied on the decision of Hon’ble NCLAT in Company Appeal (AT) (Insolvency) No. 1229 of 2019 in the matter of Mr. Savan Godiwala the liquidator of Lanco Infratech Limited Versus Mr. Apalla Siva Kumar In representative capacity on behalf of 66 Ex-employees of the Corporate Debtor decided on 11.02.2020 held as under:

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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"25………………In this case, we are not concerned with determination about the entitlement of Gratuity by the employees of the Corporate Debtor' Payment of Gratuity to employees depends on their entitlement of Gratuity, subject to the fulfilment of the conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard.

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3.4 It is further stated that Gratuity liability, if any, cannot be part of liquidation estate since only assets can be part of liquidation estate. The respondent contends that had there been any gratuity fund of the corporate debtor as contemplated u/s 36(4)(a)(iii) of IBC or section 4A of the Payment of Gratuity Act, 1972, only then the issue of inclusion or non-inclusion in liquidation estate would arise. In this case the corporate debtor has not created a fund for payment of gratuity.

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We have heard the learned counsel for the applicant and respondent-Resolution Professional.

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In the present case, the CIRP was initiated on 28.02.2019 and the applicant was terminated on 18.05.2019 after a decision in this regard taken by the CoC, subsequently an application was moved by applicant i.e.,CA No. 411/2019 before this Bench against the said termination, and the same was dismissed with liberty to the applicant to prefer any claim with regard to his employment dues, in accordance with Law. The contention of the Respondent that the email mentioned in Para 3.1 have been considered by this Bench, is not factually correct. The fact that the applicant worked for the corporate debtor during the CIRP is not disputed by any of the parties and thus the expenses incurred on behalf of the applicant will come under the Insolvency Resolution Process cost as defined in Section 5 (13)(c) as under:

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020,

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In CP (IB) No.174/Chd/Chd/2018 (admitted)

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5(13) “ insolvency resolution process costs” means—

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(c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern;

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The applicant has prayed for release of Rs. 4.97 Lac (1. Salary for the month of January 2019;-Rs. 0.79 lac, 2. Gratuity;- Rs. 2.12 lac, 3. Leave encashment;- Rs. 2.06 lac. That even the respondent has sent a reply to the applicant on 18.05.2019 stating that only the current month’s salary would be dispersed and the rest of the dues would be dispersed as per available cash flow.

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In the present case no fund has been created by the corporate debtor for payment of gratuity to the employees.The issue at hand is whether Gratuity is payable when no Gratuity fund is created. In this connection, a reference is made to the decision of the Hon’ble NCLAT in Mr Savan Godiwala(the

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liquidator of Lanco Infratech Limited) Vs. Mr. Apalla Siva Kumar [2020] ibclaw.in 191 NCLAT , wherein it is held that;

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Thus it is the settled position of law, that the provident fund, the pension fund and the gratuity fund, do not come within the purview of liquidation estate‘ for the purpose of distribution of assets under Section 53 of the Code. Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund can‘t be utilised, attached or distributed by the liquidator, to satisfy the claim of other creditors. Sec 36(2) of the I&B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate.

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I n a case, where no fund is created by a company, in violation of the Statutory provision of the Sec 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not part of the liquidation estate. ( emphasis supplied)

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In view of the aforementioned decision we hold that in the instant matter, the Resolution Professional cannot be directed to make payment of gratuity to the applicant as there is no gratuity fund created by the corporate debtor. As regards the salary and leave encashment during the period of CIRP, the same pertains to the amounts payable to an employee for services rendered during the CIRP. In this connection, these expenses clearly fall within the definition of insolvency resolution process cost as defined in section 5(13)(c) of the IBC, 2016. In this case,a reference is made to the decision of the Hon'ble Supreme Court in the case of Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others (2022) ibclaw.in 23 SC holding that the Wages/Salaries of the Workmen/Employees for the period during CIRP can only be included in the CIRP costs if it is established that the IRP/Resolution Professional managed the operations of the Corporate Debtor as a going concern during the CIRP and that the concerned workmen/employees actually worked during the CIRP. The Resolution Professional is mandated to make provisions to meet such expenses under the code. It is also seen that In this connection a reference is made to the provision under section 30(2) of the IBC, which is extracted herein below;

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(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—

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(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the [payment ] of other debts of the corporate debtor;

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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In view of the above, the Resolution Professional is directed to make provisions for payment of salary and leave encashment after taking on record the necessary information from the applicant and as per his entitlement and modify the resolution plan to that extent with the approval of CoC. The Resolution Professional is further directed to report the above compliance at the time of consideration of the Resolution Plan before us. Thus, the present application is allowed and disposed of accordingly.

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IA No. 586/2020

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The present application has been filed by Resolution Professional seeking direction against respondent to pay car rental of Rs. 15,000/- per month/ per car or part thereof up to the date of delivery of the cars to the applicant for using the car for personal purposes and further direction to respondent to hand over the custody of the cars belonging to corporate debtor to the Resolution Professional in view of provisions of Section 18 (f) read with Section 23(2) and read with Section 25(2)(a) of IBC, 2016.

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The brief facts of a present application as stated by Resolution Professional are as follows:

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2.1 It is stated that the respondents are the suspended directors of the Suspended Board of Directors of the corporate debtor and the cars, registered in the name of corporate debtor, namely Toyota Innova having registration No. CH01AK0645 and Ssangyong Rexton having registration No. CH01BC3341 are in the possession of respondents and they are not returning the same despite repeated requests made in this regard.

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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2.2 It is submitted that the respondents are in continuous possession of the above mentioned vehicle of 28.02.2019 i.e. the date of moratorium till date of present application.

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The respondent has filed its reply vide Diary No. 00965/2 dated 04.03.2022, whereby the following avermnents have been made:

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3.1 It is submitted that the Toyota Innova having registration No. CH01AK0645 has already been handed over to the applicant-Resolution Professional and Ssangyong Rexton having registration No. CH01BC3341 is with suspended director of the company namely Mr. Sukhinder Singh and he has been performing various duties of a director and he has also been drawing salary from the company and the respondents are not liable to return the said vehicle to the company. Further, it is stated that the vehicle in question was not in a working condition and till date it is not in working condition and the respondent has never objected to the Resolution Professional to take possession vehicle in possession however the same is not taken due to non-working condition.

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3.2 It is further submitted that the present application is not maintainable as recovery of rent, eviction of tenants are outside the domain of this Adjudicating Authority. For the above, reliance

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has been made on the decision of Hon’ble NCLT Mumbai Bench in case titled as “Asset Reconstruction Company (India)

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Limited V. Precision Fasteners Limited bearing CP(IB) No.

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1339/NCLT/MB/2017 and further reliance has been made on the

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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decision taken by Hon’ble Supreme Court in the case of Embassy Property Developments Private Limited V. State of karnataka and Others reported as 2019 SCC.OnLine SC1542

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3.3 It is submitted that in the matter of K.L. Jute Products Private Limited V. Tirupti Jute Industries Limited and Others (Company Appeal (AT) (INS) No. 277 of 2019, where the Hon’ble NCLAT held as follows:

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“Insofar as, the eviction of 2nd respondent is concerned to pass an order of eviction and it is for on ‘Aggrieved party’ to move the appropriate forum for redressal of its grievances in accordance with Law…”

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It is further averred that the Hon’ble NCLAT in the above matter held that recovery of rent from the tenant and the eviction of tenant from the property of corporate debtor is in the exclusive domain of the Civil Court and cannot be dealt with by the Adjudicating Authority under Section 60(5) of the IBC.

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We have heard the learned counsels for the parties and perused the records.

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In the instant matter, the corporate debtor’s ownership of the two vehicles mentioned in the application is not under dispute. In this context, the duties of Interim Resolution Professional as outlined in the provisions under Section 18 (f) are extracted below:

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18. The interim resolution professional shall perform the following duties, namely:—

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(f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including—

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(i) assets over which the corporate debtor has ownership rights which may be located in a foreign country;

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CP (IB) No.174/Chd/Chd/2018 (admitted)

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In

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(ii) assets that may or may not be in possession of the corporate debtor ;

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(iii) tangible assets, whether movable or immovable;

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(iv) intangible assets including intellectual property;

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(v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority;

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(Emphasis Supplied)

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Section 25(1) & (2) (a), extracted below, also mandates the Resolution Professional as below:

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Section 25: Duties of resolution professional.

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(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor.

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(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:—

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(a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor;

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Under the provisions of the Code, the Resolution Professional is clearly mandated to take possession and to preserve and protect the assets of the corporate debtor. In the present case, the two vehicles should have been in the custody of the Resolution Professional right after the initiation of the CIRP. Furthermore, the respondent’s reliance on the decision of the Hon’ble Supreme Court in the case of Embassy Property Developments Private Limited (supra) does not further his case. For the sake of clarity, the relevant part of the said decision is extracted below:

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" If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(F)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority…Section 25(1) and 25(2)(b) reads as follows: 25. Duties of

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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resolution professional - (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor (2) For the purposes of Sub-section (1), the resolution professional shallundertake the following actions: (a)... (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5)".

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A perusal of the abovementioned extract clarifies that only with respect to those properties on which the corporate debtor has to “exercise rights in judicial and quasi-judicial proceedings”, the Resolution Professional cannot bring a claim before the NCLT. This situation however, does not apply to the present case as there is no dispute over the ownership of the vehicles in question and hence, the respondent's reliance on the aforementioned decisions of the Hon’ble Supreme Court is clearly misplaced. Therefore, the respondent is directed to handover the possession of above mentioned vehicles to the applicant-resolution professional within 15 days of the date of this order.

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As regards the payment of car rental upto the date of delivery we are of the view that this issue does not pertain to our jurisdiction as it is not directly related to the insolvency proceedings of the corporate debtor. The aggrieved party is, however, at liberty to move an appropriate forum for redressal of its grievances in accordance with the Law.

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The present application i.e., IA No. 586/2020 is allowed and disposed of accordingly.

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020, In CP (IB) No.174/Chd/Chd/2018 (admitted)

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IA No. 942/2020

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The present application has been filed by Resolution Professional seeking direction against the respondent to deliver the Refrigeration Vehicle bearing Registration no. PB22G9523 in good condition to the Respondent along with insurance, Registration documents and other tools and tackles and further direction to the Respondent to make payment of Rs.9,94,372/- as per calculation shown in Annexure A-8 with further directions to make payment of rent from 01-12-2020 up to the date of delivery of Refrigeration vehicle @ Rs.25,000/- per month plus GST (total Rs.29,500/- P.M) plus interest thereon @15% p.a. up to the date of payment.

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In the instant application, the applicant is seeking possession of the above mentioned vehicle, the proof of ownership of the refrigerated vehicle as per the website of Government of India “Vahan” is in the name of corporate debtor, the same is attached as Annexure A-3 of the application.

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The respondent has filed its reply vide Diary No. 01990/5 dated 03.03.2022, whereby the similar averments have been made as in above mentioned IA. No. 586/2020 and it is further stated that the present vehicle was not deliberately taken into possession by Resolution Professional since the same was not in working condition. The Resolution Professional has filed its rejoinder, whereby the submissions made in reply have been reiterated.

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We have heard the learned counsels for the parties and perused the records.

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In view of the observations made above in IA No. 586/2020, the respondent is directed to deliver the Refrigeration Vehicle bearing Registration no. PB22G9523 to the Respondent along with insurance, Registration documents and

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IA No. 300/2020, IA No. 586/20 ,IA No.942/2020,

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In CP (IB) No.174/Chd/Chd/2018 (admitted)

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other tools. As regards the payment of car rental/payments upto the date of delivery we hold that this issue does not pertain to our jurisdiction as it is not directly related to the insolvency proceedings of the corporate debtor. The aggrieved party is, however, at liberty to move an appropriate forum for redressal of its grievances in accordance with the Law.

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