State Bank Of India vs Adhunik Metaliks Ltd.

Per: Shri Satya Ranjan Prasad, Member (T)

This application has been filed under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 ('IBC' in short) read with other applicable provisions of IBC, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Rule 11 of the NCLT Rules 2016.

The applicant herein, is the Liquidator of the Corporate Debtor Company and was so appointed when the liquidation order was passed on 8th of July 2019 by this Bench. Vide the aforesaid application, the applicant has sought clarity about the treatment of claims received on and from the period between 18th July 2018 till 7th July 2019 when the company was supposed to be revived under the resolution plan approved on 17th July, 2018.

At the instance of State Bank of India/Financial Creditor, Corporate Insolvency Resolution Process (CIRP) of Adhunik Metaliks Limited/Corporate Debtor was initiated by an order dated 03.08.2017 as passed by the concerned Adjudicating Authority, Kolkata Bench. Pursuant thereto, in accordance with the Code, the Resolution Plan of the successful Resolution Applicant was approved by the Committee of Creditors (CoC) and the same was approved by the Kolkata Bench of the Tribunal vide Order dated 17th July 2018. Liberty House Group Pte Ltd., therein was the Successful Resolution Applicant. Subsequently, a Monitoring Committee was formed and constituted in accordance with the Resolution Plan as approved under Section 31 of IBC.

The Applicant submits that, Liberty House Group Pte Ltd., the Successful Resolution Applicant, herein had failed to implement the Resolution Plan and a period of almost one year had elapsed from the date of approval of the resolution plan and that there are various costs which have accrued during the aforesaid period when the Monitoring Committee was in charge of the Corporate Debtor, which includes costs incurred and accrued for salary of workmen/employee, admin costs, unpaid costs to security personnel and other professional fees of auditors etc. although the plant and business operations was shut from May 2018.

Applicant further submits that such costs were accrued in view of the hope of the revival of the Corporate Debtor as a going concern but the successful resolution applicant allegedly failed to implement the resolution plan which was binding on it and other stakeholders for almost a year after which the Liquidation of the Corporate Debtor has commenced.

Accordingly, by order dated 8th July 2019 of this Adjudicating Authority, the Company was sent to liquidation and thereafter the present applicant was appointed as the Liquidator. The liquidation order dated 8th July 2019 was challenged and an interim order of stay of the operation of the said order was passed on 17th July 2019 which was eventually set aside on 28th August 2019. On and from that date, the liquidation process is being carried out.

The applicant states that several claims as on the liquidation commencement date have been received by the applicant which includes amount accrued and under for the period between 18th July 2018 till 7th July 2019 (hereinafter referred to as “the non-implementation period”).

As per the averments, while submitting their claims for the aforesaid period, there have been verbal enquiries to the applicant specially from workmen and employees as to the treatment of their dues accrued during the aforesaid non implementation period in the distribution pattern laid down under Section 53 of IBC and whether the same should be treated as priority over other dues.

The applicant states that for the period between 18th July 2018 till 7th July 2019 i.e. the period after the lapse of Corporate Insolvency Resolution Process and before the commencement of liquidation, the Monitoring Committee was in charge and has incurred costs. Details of such costs have also been provided as Annexure-A to the application.

The present application is for clarification in regard to treatment of aforesaid claims of work men and employees and such other claims which have accrued during the non-implementation period and that whether the same should have priority over other dues.

In this regard, it has been noted that the distribution pattern of the assets and the order of priority have been specified under Section 53 of IBC. Further, the “insolvency resolution process costs” and “liquidation costs” have been defined in the following manner:

In furtherance to the aforesaid provisions, Regulation 2(1) (ea) and regulation 7(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, state as under:

In view of the above proposition, the claims received during the period between 18^th July 2018 till 7^th July 2019 can neither be treated as a part of “insolvency resolution process costs” nor do they fall within the ambit of “liquidation cost” and hence, cannot be accorded priority over other dues in terms of the provisions of the law

However, in respect of the aforesaid claims received during the period between 18th July 2018 till 7th July 2019 applicant may rely on the statutory treatment of claims as laid down in Section 53 of IBC, which reads as follows:

Accordingly, CA No. 118/CTB /2019 is disposed of.