SCI (2026.07.28) in Employees Provident Fund Organisation Vs. Rachna Jhunjhunwala & Anr. [Civil Appeal No(s). 9768/2026 @ Diary No. 18254/2026 ] held that;
This court is further of the view that no resolution plan can succeed if uncertain or unquantified claims are permitted to linger and resurface against the successful resolution applicant years after approval. Such a situation would be akin to a hydra headed recurrence and is antithetical to the ‘clean slate’ principle.
In our view, though PF dues are excluded from the liquidation estate under Section 36(4)(iii) of IBC, liability of CD towards interest and damages payable under Section 7Q and 14B of the 1952 Act, if not determined and finalized before CIRP commencement, would fall in the category of a contingent liability. To assuage the concern of all stakeholders, the COC, in its commercial wisdom, may provide for a lump sum amount to meet contingent liabilities arising from uncrystallized claims. However, if the COC, in its commercial wisdom, has not provided for such contingent liabilities in the resolution plan, its decision cannot be faulted because the underlying object of CIRP is to adhere to fixed timelines.
Besides, approval of a resolution plan duly approved by the COC can be declined by the Adjudicating Authority on limited grounds, inter alia, that it does not fulfill the mandate of sub-section (2) of Section 30 of IBC.
Here the resolution plan provides for payment of PF dues even though it does not provide for uncrystallized claims of interest and damages regarding which proceedings were not initiated by the CIRP commencement date. Therefore, in our view, there is no blatant violation of the statutory mandate of IBC.
Blogger’s Comments; This ruling of the Hon'ble Supreme Court has far reaching consequences for settlement of PF dues under Section 7Q & 14B of the PF Act. during liquidation process. With the recent amendments in the Code & Regulation the reference date for proving of the claims during liquidation process, stands shifted to “as on insolvency commencement date” instead of “as on liquidation commencement date” as was the position prior to the amendment in the Code. Concept of contingent liability is missing in liquidation process.
Insolvency and Bankruptcy Code, 2016. [As on the 2nd July, 2026]
# Section 35. Powers and duties of liquidator. - (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:—
(a) to maintain an updated list of claims of creditors in such manner as may be specified;
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(j) to 1*** settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code;
Explanation.—For the purposes of this Chapter, it is hereby declared that the provisions of clauses (a) and (j) of this sub-section and sections 38 to 42 as amended by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, shall not apply to the liquidation process and voluntary liquidation process initiated on and before the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2026.]
# Section 38 to 42 stands omitted in the amended Code.
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. [AMENDED UPTO 02-06-2026]
# Regulation 16. Submission of claim.
(1) A person, who claims to be a stakeholder, shall submit its claim where not submitted during the corporate insolvency resolution process as on insolvency commencement date, within fourteen days of the liquidation commencement date.
(2) A person shall prove its claim for debt or dues to him, for the newly submitted claims, if any, as on the insolvency commencement date.
(3) A stakeholder shall update its claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date.
Excerpts of the Order;
# 1. Refiling delay condoned.
# 2. Aggrieved by exclusion of unadjudicated claims of the appellant qua interest and damages payable under Section 7Q and Section 14B, respectively, of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (for short, the 1952 Act) in the approved resolution plan, the appellant filed an appeal before the National Company Law Appellate Tribunal (NCLAT) against the order of the Adjudicating Authority approving such plan. The said appeal stood dismissed by the impugned order.
# 3. The Corporate Debtor (CD) was admitted into Corporate Insolvency Resolution Process (CIRP) vide order of the Adjudicating Authority dated 01.05.2023. Pursuant to public announcement inviting claims, the Appellant submitted a claim of Rs.22,49,956/- comprising provident fund (PF) dues including interest and damages payable under Sections 7Q and 14B of the 1952 Act. During CIRP, the Committee of Creditors (COC) with 100% voting share approved the resolution plan and submitted it for approval of the Adjudicating Authority. The Adjudicating Authority approved it vide order dated 17.05.2024.
# 4. Under the Resolution Plan, Rs.73,120/- was proposed to be paid towards PF dues of the CD as against the claim of Rs.22,49,956/-. Notably, the claim of Rs.22,49,956 included
(a) Rs.73,120/- towards PF dues under Section 7A;
(b) Rs.9,32,805/- towards interest leviable under Section 7Q; and
(c) Rs.12,44,031/- towards damages under Section 14B.
# 5. The argument on behalf of the Appellant was that PF dues are excluded from liquidation estate under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016 (for short, IBC) and, therefore, could not have been subjected to reduction, or haircut, under the resolution plan.
# 6. Per contra, in support of the resolution plan, the argument was that prior to commencement of CIRP, the appellant had not passed any order of determination under either Section 7A or Section 14B of the 1952 Act, and therefore, those dues had not crystallized. In so far as employer’s (CD’s) PF contribution is concerned, the same was provided for in the resolution plan. It was submitted that resolution plan was passed by COC with 100% voting share and has been approved by the Adjudicating Authority; therefore, in absence of any statutory violations, the plan so approved is not liable to be interfered with.
# 7. The NCLAT found that proceedings relating to interest and damages claimed under the 1952 Act were initiated on 10.05.2023 whereas CIRP had commenced on 01.05.2023; therefore, the claim under the heads of interest and damages was neither crystallized nor could be adjudicated upon in view of the moratorium. Thus, the protection of Section 36(4)(a)(iii) of IBC to those claims was not available. Based on that reasoning, the NCLAT declined to interfere with the approval of the resolution plan by the Adjudicating Authority.
# 8. We have heard learned counsel for the appellant. He pressed the same arguments as were urged on behalf of the appellant before the NCLAT.
# 9. In Tata Steel Ltd. versus Varsha & Anr., 2026 SCC OnLine SC 1349, this Court while directing quashing of arbitral proceedings qua claims not provided for in the resolution plan observed as under:
# 10. The rationale behind the above view is spelt out in Essar Steel (India) Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531, where this Court held:
# 11. In our view, though PF dues are excluded from the liquidation estate under Section 36(4)(iii) of IBC, liability of CD towards interest and damages payable under Section 7Q and 14B of the 1952 Act, if not determined and finalized before CIRP commencement, would fall in the category of a contingent liability. To assuage the concern of all stakeholders, the COC, in its commercial wisdom, may provide for a lump sum amount to meet contingent liabilities arising from uncrystallized claims. However, if the COC, in its commercial wisdom, has not provided for such contingent liabilities in the resolution plan, its decision cannot be faulted because the underlying object of CIRP is to adhere to fixed timelines. If the prospective resolution applicant is kept guessing as to what he would have to pay to take over and run the business of the CD, it may not enter the fray thereby defeating the underlying object of IBC. Besides, approval of a resolution plan duly approved by the COC can be declined by the Adjudicating Authority on limited grounds, inter alia, that it does not fulfill the mandate of sub-section (2) of Section 30 of IBC.
# 12. Here the resolution plan provides for payment of PF dues even though it does not provide for uncrystallized claims of interest and damages regarding which proceedings were not initiated by the CIRP commencement date. Therefore, in our view, there is no blatant violation of the statutory mandate of IBC.
# 13. For all the reasons above, we do not find any justification to interfere with the impugned order which affirms the order of the Adjudicating Authority approving the resolution plan. The appeal is, accordingly, dismissed. Pending application(s), if any, shall stand disposed of.
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