The Supreme Court on April 19, 2022 in the matter of Sunil Kumar Jain v. Sundaresh Bhatt held that the dues towards the wages/salaries of only those workmen/employees who actually worked during the CIRP are to be included in the CIRP costs.

In this case, National Company Law Appellate Tribunal dismissed the appeal preferred by the workmen/employees of M/s ABG Shipyard Limited (“Corporate Debtor”) against National Company Law Tribunal order denying any relief to them with regard to their claim relating to salary, which they claimed for the period involving ‘Corporate Insolvency Resolution Process’ (”CIRP”) and the prior period. The workmen/employees therefore approached the Apex Court in appeal.

The Court observed-

“Even if it is found that the Corporate Debtor was not a going concern during the CIRP despite best efforts by the resolution professional, it cannot be presumed that still the Corporate Debtor was a going concern during the CIRP period. It depends on the facts of each case”

The bench therefore partly allowed the appeal by concluding as follows:

• That the wages/salaries of the workmen/employees of the Corporate Debtor for the period during CIRP can be included in the CIRP costs the same shall be payable in full first as per Section 53(1)(a) of the IBC, provided it is established and proved that the Interim Resolution Professional/Resolution Professional managed the operations of the corporate debtor as a going concern during the CIRP and that the concerned workmen/employees of the corporate debtor actually worked during the CIRP.
• Considering Section 36(4) of the IBC and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds.