Case Note & Summary
The dispute arose from the dismissal of an appeal by workmen/employees of a Corporate Debtor, ABG Shipyard Limited, regarding their claims for unpaid salaries during the Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor, a shipbuilding company, underwent CIRP initiated on 01.08.2017, with the Adjudicating Authority appointing a Resolution Professional (RP) to manage its affairs. The workmen, employed at the Corporate Debtor's Mumbai Head Office and Dahej Yard, sought relief for unpaid salaries for the CIRP period and prior. The Adjudicating Authority and subsequently the Appellate Tribunal denied their claims, leading to the present appeal. The appellants argued that they were on the payroll during the CIRP and entitled to wages as the Corporate Debtor was managed as a going concern. They contended that the RP's instructions to report for work and the lack of termination of their contracts supported their claims. The Liquidator opposed the appeal, asserting that the appellants did not perform any work during the CIRP and thus their claims did not qualify as CIRP costs. The court analyzed the relevant provisions of the Insolvency and Bankruptcy Code, particularly regarding the classification of costs and the priority of workmen's dues. It concluded that the appellants failed to establish their entitlement to salaries during the CIRP, as they did not assist in running the Corporate Debtor. The court upheld the Appellate Tribunal's decision, allowing the workmen to submit individual claims to the Liquidator for verification. The court emphasized the need for proof of actual work done during the CIRP period and reiterated the application of the waterfall mechanism for the distribution of assets under Section 53 of the IB Code.
Headnote
A) Insolvency Law - Workmen's Dues - Entitlement to Salaries During CIRP - Insolvency and Bankruptcy Code, 2016, Sections 5(13), 36(4), 53 - The court held that the workmen/employees did not assist in running the Corporate Debtor as a going concern during the CIRP period, thus their claims for salaries were not classified as CIRP costs and were subject to the waterfall mechanism under Section 53. The court emphasized that the workmen must prove their claims before the Liquidator (Paras 8-8.1).
Issue of Consideration
Whether the workmen/employees are entitled to wages/salaries during the Corporate Insolvency Resolution Process (CIRP) period.
Final Decision
The Supreme Court dismissed the appeal, affirming the Appellate Tribunal's decision that the workmen/employees were not entitled to salaries during the CIRP period as they did not assist in running the Corporate Debtor. The court allowed the workmen to submit individual claims to the Liquidator for verification.
Law Points
- Insolvency Resolution Process
- Workmen's Dues
- Liquidation
- Corporate Debtor
- CIRP Costs
