20 Apr , 2022 By : monika singh
The Supreme Court on Tuesday held that wages and salaries of workmen and employees of a company undergoing insolvency should be paid first in full, provided they worked when the resolution professional was managing the company as a going concern.
“This helps the workmen/ employee as salaries/ wages would now get precedence over other debts of the company,” SC lawyer Shikhil Suri said.
A bench comprising Justices MR Shah and Aniruddha Bose held that the wages/ salaries can be included in the corporate insolvency resolution process (CIRP) costs, provided the workers/ employees worked during the CIRP period and it is established that the resolution professional managed the operations of the corporate debtor as a going concern. The apex court said the wages/ salaries shall be payable in full first as per Section 53(1)(a) of the Insolvency and Bankruptcy Code (IBC).
The judges said when the provident fund, gratuity fund and pension fund have been kept out of the liquidation estate assets, the share of the workmen’s dues shall also be kept outside the liquidation process and the liquidator shall not have any claim over such funds.
The judgment came on an appeal where a serious dispute was on whether Dahej Yard was operational — and if its workmen/ employees worked — during the CIRP.
The top court directed these workmen to submit their claims before the liquidator and establish that the IRP/RP managed the operations of the corporate debtor as a going concern and that they worked during the CIRP. The liquidator was directed to decide such claims in accordance with law on the basis of the evidence produced. Till then, the liquidator will have to to keep aside the amount exclusively to be used for the workmen/ employees’ dues.
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