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Jaivish Patwa   16 May 2023

Employee's claim in nclt

I have put my claim for pending dues which includes Salary, Bonus, Pending PF to be deposited at PF authority and Gratuity. My query is that up how much amount should I get by RP of the company.  Will  I get full amount or in proportionate base ? please guide

Is there any clarity in IBC law  ?



Learning

 2 Replies

T. Kalaiselvan, Advocate (Advocate)     17 May 2023

 the IBC  recognizes the employee as an operational creditor who can make an application for unpaid salary in the NCLT

the IBC is silent on the treatment of various components of the salary and wages of employees and workmen and does not provide much guidance on how provident fund and gratuity dues should be treated during Corporate Insolvency Resolution Process (CIRP) under IBC

The Employees & Provident Funds and Miscellaneous Provisions Act, 1952, provides for the establishment of a provident fund, pension fund, and deposit-linked insurance fund for the benefit of employees. 

However, when a company is undergoing a CIRP under the IBC, the priority of EPF dues takes on a different significance

Section 36 of the Insolvency and Bankruptcy Code (IBC) contains provisions that exclude the outstanding amounts owed to workers or employees, specifically those amounts related to their provident fund, pension fund, and gratuity fund. Section 36(4)(a)(iii) specifically states that all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation, the exclusion of amounts owed to employees from these specific funds is an important one that ensures that workers’ hard-earned savings are not put at risk during the insolvency proceedings of their employer.

This means that these funds are not part of the assets available for distribution to the creditors of the company in liquidation.

Dr J C Vashista (Advocate)     17 May 2023

The Code (IBC) significantly changes the priority waterfall for distribution of liquidation proceeds.

After the costs of insolvency resolution (including any interim finance), secured debt together with workmen dues for the preceding 24 months rank highest in priority.


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