Friday 23 August 2019

Fate of Provident Fund ,Pension and Gratuity Fund under IBC


The question for consideration before NCLAT was whether the Provident Fund , Pension Fund and Gratuity Fund come within the meaning of Assets of the Corporate Debtor for distribution under section 53 of the I & B Code?.
The said question arose when an application was filed on behalf of the workmen of the Moser Baer India Limited which was under liquidation. As per the liquidator explanation section 53 of IBC defines “workmen dues” as having the same meaning as that assigned under section 326 of the Companies Act, 2013 and hence as per the liquidator  gratuity was to  be included in the liquidation estate assets thus making it an asset of the corporate debtor.
However, NCLAT was of the view that there has been a flaw in the reasoning provided by the liquidator and quoted that under section 36(4) (a)(iii) the expression liquidation estate is defined and  it is clarified  that all sums due to any workman or employee from the provident fund, pension fund and gratuity fund were not to constitute and included in the expression  ‘Liquidation Estate Assets ’.
The Tribunal further expressed that since a sum due to workmen or employee from provident fund pension fund gratuity fund does not constitute a part of liquidation estate assets the Tribunal fails to understand how section 53 can be invoked along with its explanation .( Section 53 states the manner of distribution of the proceeds from sale of liquidation assets ). Hence all sums due to any workman employee from the Provident Fund, the Pension Fund and the Gratuity Fund are excluded from the Liquidation Estate .
The Tribunal also cited example of NCLT Mumbai Bench in Asset Reconstruction Company ( India ) Limited Vs Precision Fateners Limited wherein a similar view was taken and it was  clarified that where there would be any deficiency in  the Provident Fund , Pension Fund and Gratuity Fund then the liquidator must ensure that the fund is made available in the aforesaid accounts even if their employer has not diverted the said amount .

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