Insolvency Code : Payment of gratuity dues is not separate or additional to the Employee Payment Amount

NCLAT Upholds Resolution Plan for Vadraj Cement; Gratuity Dues to Be Covered Within Approved Employee Payout.. Tribunal dismisses appeal against resolution plan, confirms gratuity dues included in employee payout of Rs. 6.3 crore

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) dismissed an appeal challenging the approval of the resolution plan for M/s Vadraj Cement Limited. The appeal, filed by Jadeja Ravirajsinh Juvansinh, an employee and authorized representative of the company's employees, contended that the payment of gratuity dues should be in addition to the Rs. 6.3 crore earmarked for employee payments. However, the NCLAT upheld the resolution plan, confirming that the employee payout includes gratuity dues.

The case stems from the commencement of the Corporate Insolvency Resolution Process (CIRP) against Vadraj Cement on February 2, 2024, following an application by the Oriental Bank of Commerce, now Punjab National Bank. The resolution professional (RP) appointed verified the claims filed by the employees, admitting approximately 73% of them.

The resolution plan, which had been approved by the Committee of Creditors (CoC) with a 100% majority, proposed a total payout of Rs. 6,30,10,916/- for the employees, including unpaid gratuity dues. Despite the appellant's argument that the gratuity should be paid separately, the NCLAT found no inconsistency or illegality in the approved plan. The tribunal noted that the resolution plan clearly stipulated that the employee payout of Rs. 6.3 crore encompassed all claims, including gratuity dues.

Justice Ashok Bhushan, Chairperson, and Barun Mitra, Member (Technical), delivered the judgment, emphasizing that the resolution plan complied with Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The tribunal also clarified that the liquidation value for the employees was nil, yet the plan provided for their payment, underscoring its compliance with the Code.

The ruling further highlighted that any additional dues arising from judicial pronouncements would be adjusted from the secured financial creditors' payout, as per the resolution plan's provisions. The tribunal dismissed any claims of inconsistency, reinforcing that the resolution plan's implementation was lawful and aligned with the CoC's approval.

The appeal's dismissal reaffirms the NCLAT's stance on adhering to the resolution plan's terms and the CoC's decisions, providing clarity on the distribution of employee dues in insolvency proceedings.

Bottom Line:

Resolution Plan for Corporate Debtor (CD) - Payment of Employee Dues - Gratuity dues are included within the Employee Payment Amount earmarked in the Resolution Plan and are not additional to the payout specified for employees.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 30(2)

Jadeja Ravirajsinh Juvansinh v. Nuvoco Vistas Corporation Ltd., (NCLAT)(Principal Bench)(New Delhi) : Law Finder Doc Id # 2766621