No Liability On Successful Resolution Applicant Post Plan Approval If Not Identified In Corporate Debtor's Financial Records: NCLT Mumbai
Rajesh Kumar
2 Aug 2024 9:30 AM IST
The National Company Law Tribunal Mumbai bench of Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Judicial Member) has held that no liability can be imposed on the Successful Resolution Applicant after the approval of the plan by the Committee of Creditors if such liability is not identifiable from the financial records of the Corporate...
The National Company Law Tribunal Mumbai bench of Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Judicial Member) has held that no liability can be imposed on the Successful Resolution Applicant after the approval of the plan by the Committee of Creditors if such liability is not identifiable from the financial records of the Corporate Debtor.
Brief Facts:
The Central Board of Trustees, EPFO (Employees Provident Fund Organisation), Applicant, requested that the NCLT address both the legal and factual aspects of the case and direct the Respondents to release a provident fund amounting to Rs 1,24,05,644. Additionally, the Applicant sought damages and interest totaling Rs. 2,18,66,328/- and Rs. 2,17,554/- for short remittance.
The Applicant contended that before the approval of the Resolution Plan by the NCLT, it forwarded a claim amounting to Rs 1,24,05,644/- to the Resolution Professional after becoming aware of the Insolvency Resolution Process. The Resolution Professional rejected this claim approximately six months after the approval of the Resolution Plan by the NCLT. The Applicant argued that there was no opportunity to approach NCLT prior to the approval of the Resolution Plan due to this timing. The Applicant further submitted that the letter which communicated the rejection of the claim didn't provide evidence that the Resolution Professional fulfilled all statutory duties under Section 25 including the handling of provident fund, pension fund, and gratuity fund.
Observations by the NCLT:
The NCLT noted that the last date for submitting claims was set as July 26, 2017. The Applicant, however, only submitted its claim on January 2, 2019. The Resolution Professional responded to this claim with a rejection letter. The rejection was based on the grounds that the Human Resources Department of the Company already filed consolidated claims for the employees and workers covering dues such as salaries, wages, provident fund (PF), Employee State Insurance Corporation (ESIC) contributions, and Tax Deducted at Source (TDS) up to June 2017 just prior to the commencement of the CIRP. Additionally, it noted that some employees individually filed their claims which were accepted and incorporated into the Approved Resolution Plan.
The NCLT held after the approval of the Resolution Plan by the Committee of Creditors, no additional liability can be imposed on the Successful Resolution Applicant unless such liability is clearly identifiable from the financial records of the Corporate Debtor. The bench noted that the previous Resolution Professional communicated to the Applicant that the claims related to the Provident Fund has already been considered based on inputs from the HR Department and were included in the Plan.
The NCLT found that the claims for Provident Fund and other employee dues were appropriately considered in the Resolution Plan according to the financial records of the Corporate Debtor. It held that once the Resolution Plan has been implemented, no additional obligations can be imposed beyond what was settled in the approved plan.
Moreover, the NCLT observed that the claim by the Applicant was rejected by the Resolution Professional back in September 2019. The Application before the NCLT was filed after a delay of over four and a half years. Given these circumstances, the NCLT decided not to interfere with the Approved Resolution Plan.
Case Title: State Bank Of India V/S Jyoti Structures Ltd
Case Number: IA 1217/2024 IA 1835/2024 in C.P. (IB)/1137(MB)2017
