Authority: National Company Law Tribunal Allahabad Bench Prayagraj

Order Date: 9th June, 2026

Case Overview

This proceeding involves IA No.241/2022 filed by 25 employees of Lakshmi Cotsyn Ltd (Corporate Debtor) seeking payment of salaries for the period during the Corporate Insolvency Resolution Process (CIRP) when the company was being run as a going concern. The application is part of CP (IB) No.142/ALD/2018 initiated by Union Bank of India under Section 7 of the Insolvency and Bankruptcy Code, with the company currently in liquidation.

The Liquidator (Respondent) filed a reply admitting in Paragraph 14 that between the end of the 180+90 days period (24.02.2019) until the liquidation order date (01.07.2020), the Malwan Unit and Abhaypur Unit remained closed, but some employees at Kanpur and Noida Offices continued working to maintain accounting, finance, and compliance functions. The Liquidator attached a list of 36 employees (Annexure-4, Page 96 of paper book) who were deemed entitled to salaries during this period.

Applicant's counsel argued that despite this clear admission of entitlement, salaries were not paid while disbursements were made to other creditors and stakeholders. The Liquidator's counsel stated that disbursement has already occurred, and only realization from certain non-readily realizable assets remains pending, with proceeds from these assets potentially being added to the liquidation estate for salary payments.

The Tribunal noted it was inexplicable why salaries admitted as payable were not disbursed when funds were available prior to the distribution of proceeds. Reference was made to an earlier order dated 17th November, 2021, where an IA filed by the Financial Creditor was allowed for treating employees in accordance with law.

Final Outcome

The Tribunal directed the Liquidator to file an affidavit within two weeks detailing the availability of funds during the relevant period when the employees were working, particularly in the context of Section 53(1)(a) of the IBC which governs priority of payments in liquidation. The affidavit must address expenditure requirements during the CIRP when the company was run as a going concern. The Liquidator is required to be physically present at the next hearing scheduled for 5th August, 2026. All other connected applications (IA No.252/2024, IA No.568/2024, IA No.569/2024) were adjourned to the same date.

Topics: Employee Claims, Liquidation Process, CIRP Expenses