Monday, 19 January 2026

Regional Provident Fund Commissioner-II Vs. Harshavardhan Cotton and Synthetic Mills Pvt. Ltd. and Anr. - a part of ‘all sums due to the workmen/employee’ will be within the meaning of Section 36(4)(a)(iii) and accordingly will have to be treated as a third-party asset under Section 36(4)(a)(iii) to be kept outside the liquidation estate.

 NCLAT (2026.01.13) in Regional Provident Fund Commissioner-II Vs. Harshavardhan Cotton and Synthetic Mills Pvt. Ltd. and Anr. [(2026) ibclaw.in 41 NCLAT, Company Appeal (AT) (CH) (Ins.) No. 455/2023 (IA Nos. 1421 and 1422/2023)] held that; 

  • The implications of the above ratio as propounded are very clear; that is, Section 36(4) of the I & B Code, 2016, will take precedence over Section 53, as far as the distribution of assets of the liquidation estate is concerned.

  • First, the Liquidator will identify the assets of the CD and take charge of them, then he will exclude assets that falls under Section 36(4) of the I & B Code, 2016, including third-party assets falling under Section 36(4)(a) and thereafter, form the liquidation estate which he then proceeds to realise and distribute among the stakeholders as per the formula prescribed under Section 53 of the code. Thus, it is clear that distribution under Section 53 of the I & B Code, 2016, will have to be done subject to Section 36(4) of the code.

  • In view of the above ratios, it has to be accepted that the issue is no more Res Integra and that all sums due from provident fund will include within it the amounts determined under Section 7Q and 14B as well.

  • Thus, if an enterprise has not been permitted to maintain separate provident fund/pension fund/gratuity fund, it has to remit the dues to be paid into the respective funds maintained by EPFO by law and even if it has not done so, which is the case on hand, then the said amount will be deemed to be a part of the said funds and consequently, a part of ‘all sums due to the workmen/employee’ will be within the meaning of Section 36(4)(a)(iii) and accordingly will have to be treated as a third-party asset under Section 36(4)(a)(iii) to be kept outside the liquidation estate.


Blogger’s Comments; Observations of the Hon’ble NCLAT are quite baffling. How come the PFdues (a liability) can be a part of assets under ”Liquidation Estate”. The issue has been clarified by Hon’ble HC Bombay (2025.04.29) in Dalmia Cement (Bharat) Limited & Ors. Vs. The Central Board of Trustees, EPFO, [2025:BHC-NAG:4461-DB, Writ Petition No. 693 /2022] as under;

  • As discussed above the Provident Fund of an employee, which includes both the components (a) employee contribution and (b) employers contribution, cannot be held to be ‘assets’, over which the corporate debtor can be held to have any rights of ownership or  dominion and would, even in case it is not deposited in the Provident Fund account, by the employer would continue to be property owned by the employee, held in trust by the employer, on behalf of the employee for being deposited in the provident fund account and thus would be outside the scope and ambit of the duties of the IRP as specified in sec.18 of the IB Code.

  • Not only this, sec.10, even directs that neither the Official assignee appointed under the Presidency Towns Insolvency Act, nor any received appointed under the Provincial Insolvency Act, shall be entitled to or have any claim on such provident fund amount of an employee, thereby indicating that it is to be preserved sacrosanct, by granting it immunity even in respect of insolvency proceedings, which may be initiated, even against such employee.

  • It would thus be apparent that since the employers provident fund contribution, cannot be included in the definition of ‘assets’, in view of Explanation (a) to Sec.18(1) of the IB Code, there would be no obligation upon the provident fund department to lodge a claim for the dues, in that regard with the IRP and get such claim verified so as to be included in the Resolution Plan.


Excerpts of the Order;

This appeal arises from the Impugned Order dated 17.11.2023, issued by the National Company Law Tribunal, Division Bench-I, Chennai, in IA(IBC)/116(CHE)/2022 in MA/623/2018 as it was preferred in CP/104/IB/2018. The said application, IA(IBC)/116 (CHE) /2022, had been filed invoking Section 54 of the I & B Code, 2016, by the Liquidator of the corporate debtor (CD) M/s. Harshavardhan Cotton and Synthetic Private Limited, seeking an order for dissolution of the CD. The said application was allowed by the Ld. Adjudicating Authority, against which the present appeal has been filed.


Brief facts of the case:-

# 2. The Corporate debtor, M/s Harshavardhan Cotton and Synthetics Pvt. Ltd., is an establishment, which stands covered under the provisions of Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, with Code Numbers MD/MDU/41334 and MD/41334-A. The establishment employed 181 workers. On an application that, was instituted by the Operational Creditor, Bhadresh Trading Corporation, the Ld. Adjudicating Authority, directed commencement of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor by an order dated 12.03.2018 in CP/104/IB/CB/2018. During this process, the Hon’ble NCLT declared a moratorium and appointed Mr. Raghuram Mani as the Interim Resolution Professional (IRP). Since no resolution plans were received, the committee of creditors (COC) resolved to liquidate the Corporate Debtor during its 3rd meeting on 14.03.2018 and to file an appropriate application to that effect before the Ld. Adjudicating Authority. Consequently, vide the order dated 03.12.2018, the adjudicating authority allowed the said application and ordered liquidation of the CD.


# 3. Following his appointment, the Liquidator made a public announcement on 7th December 2018 inviting claims those the creditors and the stakeholders, verified the claims those were received, prepared the list of stakeholders and filed it before the NCLT on 15.02.2019. Further, the Liquidator admitted claims to the tune of Rs.16,79,16,396.49 and initiated steps for realising the assets of the CD, so as to enable him to settle such claims. There were no left over immovable/movable assets of the CD as they had already been sold even before the commencement of CIRP. As recorded in the impugned order by NCLT, the only asset that was available with the CD were financial assets in form of receivables, which the Liquidator took steps to realise from various debtors, including the related parties of the CD. In the process, he realised a total sum of Rs. 9,20,57,356.00 in the liquidation account. After this, the Liquidator submitted the Asset memorandum before Ld. NCLT and then proceeded to distribute the amount amongst the stakeholders in accordance with Regulation 42 of the liquidation regulations, 2016, to be read with Section 53(1) of the I & B Code, 2016. After the said distribution, the Liquidator filed the dissolution application before the Ld. NCLT, which was allowed by Ld. NCLT vide the impugned order.


# 4. The Appellant herein had also submitted a claim of Rs. 6,34,816/- in the shape of Form-C on 01.01.2019, which consisted of payment of interest and damages on account of default in paying the EPF contributions in time, for the period 2007 to 2015. The Liquidator had admitted the said claims in full, under Section 40(1) I & B Code and communicated the same vide his letter dated 01.02.2019. In the same letter, the Liquidator had also stated that the liquidation proceeds will be distributed as per the provision of Section 53 of the I & B Code, 2016, as and when it is realised from the assets of the CD. The Appellant had insisted through his letter dated 08.01.2020, that priority may be assigned to EPF dues, as they have the first charge over the assets of the establishment as per Section 11(2) of the EPF and MP Act, 1952, and therefore the same may be paid in priority to all other debts. The Liquidator by his letter dated 23.01.2020 informed the Appellant, that the claim of EPFO consists of penal damages and interest, and it has already been included for consideration under Section 53(1)(e) of I & B, Code 2016, for the purpose of distribution of liquidation proceeds.


# 5. The Appellant through his letter dated 27.10.2020 informed the Liquidator, that as per Section 36(4)(a)(iii) of the code, PF dues shall not form the liquidation estate and is bound to be treated as third-party assets in the hands of the Liquidator and therefore the PF dues may be released before initiating the process of distribution of the proceeds in accordance with the waterfall mechanism prescribed under Section 53 of the code. To this, the Liquidator replied on 02.11.2020, thereby contending that only PF contribution of the employee and of the employer are to be treated as the sum due to the workmen / employees from the provident fund, pension fund and gratuity fund and consequently, as third-party assets in the hands of the Liquidator as per provision of Section 36(4)(a)(iii) of the Code and that the claim of the Appellant towards penal damages and interest have been categorised and placed under Section 53(1)(e) of the code and same would be paid depending upon the realisation of the assets of the CD, as per the provisions of the code. The Appellant EPFO sent another detailed letter to the Liquidator on 19.11.2020, contending that the question of according priority to the PF dues, including interest and penal damages payable on it, is the ratio that has been already settled by Hon’ble Apex Court in the matter of Maharashtra State cooperative bank Limited Vs. Kannad Sahakari Sakhar Karkhana Ltd and others, as decided in SLP no. 14772-14773/2010 and Hon’ble High Court of Madras too, in the matters of EPF Commissioner V. Official Liquidator of M/s. ESSKAY Pharmaceutical Ltd and also in CA/899/12 in CP/230/2001 in the matter of Murugan Mills(P) limited, where Hon’ble Supreme Court has held that priority is to be given to EPF dues, and that EPF dues will include within itself not only the amount assessed under Section 7A but also interest under Section 7Q and damages contemplated under Section 14B of the EPF Act. To this, the Liquidator replied on 28.11.2020 that the said judgements pertains to a period prior to enactment of I & B Code 2016 and that, as the Liquidator, is strictly bound to follow the provisions of the Code, which will prevail over any other conflicting laws or instruments in force, including case laws by virtue of the implications of Section 238 of the code. Stating the same, he reiterated his position that he has categorised the claim of EPFO (which consisted of penal damages and interest) as govt. dues under Section 53(1)(e) of the code and will pay the same, depending on the realisation of the assets.


# 6. Accordingly, the Liquidator proceeded to categorise the claim of EPFO to the tune of Rs.6,34,816/- as government dues instead of treating it as a third-party asset and placed the same under Section 53(1)(e) of the code. He went on to realize a total of Rs. 9,20,57,356/- from various stakeholders and related parties towards the liquidation estate and distributed the same in accordance with the provisions of Section 53(1). In the process, EPFO, i.e., the Appellant, got nil amount.


# 7. Thereafter, the Liquidator, on completion of the distribution of liquidation estate among the creditors and stakeholders, filed the application IA/116/2022 before NCLT praying for the dissolution of the Corporate Debtor. NCLT, after observing that since no applications are pending for avoidance, preferential, undervalued, or fraudulent transactions and that the final report & the compliance certificate in the shape of Form-H have been filed, which indicated that the corporate debtor has been completely liquidated, passed the impugned order ordering dissolution of the corporate debtor on 17.11.2023. The Liquidator intimated the same to the Appellant through his letter dated 22.11.2023, enclosing a copy of the impugned order. Aggrieved by the said order, which dissolved the CD, without settling his claim, the Appellant herein has preferred the instant appeal.


Appellant’s submissions:

# 8. It is the case of the Appellant that the Liquidator has incorrectly concluded that only the contribution of the workmen, and the contribution of the employer towards PF will be covered by the provisions of Section 36(4)(a)(iii) of the Code and that the interest computed under 7Q and damages computed under 14B of EPF Act are in the nature of government dues and will come under Section 53(1)(e) instead of Section 36(4)(a)(iii). The Appellant has submitted that, the Liquidator has erred in law by placing the claim of the Appellant under Section 53(1)(e) of the code, in complete disregard of the settled position of law regarding distribution of assets of the CD under liquidation which has been laid down by Hon’ble Supreme Court in its judgement dated 02.05.2023 in the matter of Moser Baer Karamchari Union vs. Union of India and Others reported in (2023)238Compcas 458(SC).


# 9. He has further submitted that the issue; of whether the PF dues is expressly excluded from the assets of the CD as per the provisions of Section 36(4)(a)(iii) of the I & B Code, 2016, has already been dealt with by this Appellate Tribunal in in its judgement dated 19.08.2019 in the matter of SBI versus Moser Baer Karamchari Union and another in company Appeal (AT)(Ins) No. 396/2019 and it has been expressly declared therein that all sums due to workmen and employees from provident fund, the pension fund and the gratuity fund cannot be included in the liquidation estate for the purpose of distribution of assets under Section 53(1) of the code. He has been contended that the said order has attained finality with the dismissal of the appeal filed by SBI in Civil Appeal No. 258/2020 against the said order before the Hon’ble Apex Court. He has further placed reliance on yet another judgment dated 02.11.2022 that was rendered by this Appellate Tribunal in the matter of Assam Tea Employees Provident Fund Organization Vs. Madhur Agrawal, RP of Hail Tea Limited and Others in Company appeal (AT)(Ins) No. 262/2022 to assert that, any amount due from the employer under Section 11(2) of EPF Act also covers the amount that has been determined under Section 14B and that the provident fund dues are not subject to distribution under Section 53(1) of the code and that they are liable to be paid in full in view of the judgement of Hon’ble Supreme Court in Maharashtra State Cooperative Bank Limited Vs. Assistant PF Commissioner and Others. The Appellant has also relied upon the judgement of Hon’ble Supreme Court dated 19.04.2022 in Civil Appeal No. 5910/2020 in the matter of Sunil Kumar Jain and others Vs. Sundaresh Bhatt, which declares that the concerned workmen/employees shall be entitled to the provident fund, gratuity fund, and the pension fund which are specifically kept out of liquidation estate and as per Section 36(4) of the code, they are not to be used for recovery in the liquidation. Finally, the Appellant has cited the decision rendered by this Appellate Tribunal in the matter of Anuj Bajpai Vs. Regional PF Commissioner, Coimbatore to support his argument that Section 53(1) cannot be made applicable to the dues coming under provident fund, pension fund, and gratuity fund and that the PF dues should have been paid before commencing distribution of liquidation proceeds under Section 53(1) of the I & B Code, 2016.

10. The Appellant has further contended that the financial creditor, the City Union Bank, has been the beneficiary of distribution of the assets of the CD and therefore it has to return the amount equivalent to his claim in view of specific provision under Regulation 43 of IBBI (liquidation process) regulations 2016. Accordingly, it was prayed that the impugned order of Ld. NCLT maybe set aside and the Respondent may be directed to re-distribute the claim amount of Rs.6,34,816/- due to EPFO on first priority from and out of the liquidation assets of the CD.


Case of the Respondent

# 11. On the contrary, the Respondent/Liquidator has submitted that, it had discharged its duties as contemplated under the code including publication of the notice, inviting claims, verification and admission of the claims, preparation of the list of stakeholders, preparing and completing the audit of the books of accounts for the entire period, appreciation, and preparation of the asset memorandum, realization of Rs.9,20,57,356/- in the liquidation account from various customers, including related parties, distribution of the same to the stakeholders as per the intention of Section 53 of the code, and preparation of the final report containing the details of liquidation of the assets and that the Liquidator had filed the application in IA No. 116/2022 seeking for an order of dissolution of the CD, which was allowed by Ld. NCLT by the impugned order.


# 12. He has contended that the amount realised by him, will have to be treated as part of the liquidation estate, which will have to be distributed under Section 53 of the code because of the non-obstante clause attached to it and therefore, he has not violated any of the provision of the code. He has further contended that, the true meaning of Section 36(4)(a)(iii) will be that if there are any funds of the corporate debtor that are specifically segregated or classified as provident fund, pension fund, and gratuity fund, the same shall not be used for settling the dues of other creditors in terms of Section 53 of the I & B Code, 2016, and that the same cannot be interpreted to mean that the dues payable towards provident fund, pension, and gratuity shall be paid from the liquidation estate in priority over other classes of creditors or at par with secured financial creditors. He has stated that since the corporate debtor did not have a separate account/fund to pay pension, provident fund and gratuity, no amount could be set apart and kept outside of the liquidation estate as per the provisions of Section 36(4)(a)(iii) of the code. He has relied upon the observations made in paragraph 25.2 of the judgment of the Hon’ble Supreme Court, in the matter of Sunil Kumar Jain Vs. Sundaresh Bhatt (supra) to support his argument that since there are no such dedicated fund, no amount could have been set apart to pay the provident fund dues in priority before commencing distribution of the proceeds of liquidation among the stakeholders / claimants as per the provisions of Section 53 of the Code. Accordingly, he has submitted that the prayer of the Appellant is in contravention to the provisions of Section 53 of the code and therefore it is liable to be dismissed as baseless.


# 13. We have heard the arguments extended by the respective counsels and gone through the submissions and records submitted by both the parties. The wider issues to be decided are threefold;

a) Whether, in the event of process of settlement of claims during liquidation, Section 36(4)(a)(iii) will take precedence over Section 53 of the I & B Code, 2016.

b) Whether ‘all sums due to any workmen or employee from the provident fund, the pension fund and the gratuity fund’ as described in Section 36(4)(a)(iii) of the Code, will also include interest under Section 7Q and damages under Section 14B as determined under the relevant provisions of EPF Act and claimed by EPFO as due from the CD?

c) Whether the sums as described above will have to be held in a dedicated fund in the CD so as qualify to be a third-party asset to remain outside the liquidation estate?


# 14. The first issue has already been conclusively decided by a series of judgements pronounced by Supreme Court and NCLAT. Supreme Court in its judgement dated 02.05.2023 in the matter of Moser Baer Karamchari union versus Union of India and Others reported in (2023)238Compcas458(SC) categorically has held that in case of liquidation of a company under the I & B Code, 2016, the distribution of the assets shall have to be done as per Section 53 of the I & B Code, 2016, subject to Section 36(4) of the I & B Code, 2016. The relevant paragraph is extracted below.

  • “18 …. In case of the liquidation of a company under the IBC, the distribution of the assets shall have to be made as per Section 53 of the IBC subject to Section 36( 4) of the IBC, in case of liquidation of company under IBC.

  • …. 8. For the purpose of the present decision, we are not interpreting Sub-clause (iii) to Clause (a) of SubSection (4) to Section 36 of the Code as this is an issue of some debate and pending consideration in other matters. The legal effect of exclusion is that, the amount of sums due to any workmen or employee from the provident fund, the pension fund or the gratuity fund cannot be made subject matter of reduction or dilution even in a rehabilitation or revival plan. They are excluded from the waterfall mechanism and would not be used in recovery on liquidation, and they cannot be shared …. ”


The implications of the above ratio as propounded are very clear; that is, Section 36(4) of the I & B Code, 2016, will take precedence over Section 53, as far as the distribution of assets of the liquidation estate is concerned. Intuitively too it also, this makes eminent sense. First, the Liquidator will identify the assets of the CD and take charge of them, then he will exclude assets that falls under Section 36(4) of the I & B Code, 2016, including third-party assets falling under Section 36(4)(a) and thereafter, form the liquidation estate which he then proceeds to realise and distribute among the stakeholders as per the formula prescribed under Section 53 of the code. Thus, it is clear that distribution under Section 53 of the I & B Code, 2016, will have to be done subject to Section 36(4) of the code.


# 15. The second issue of, whether amount determined under Section 7Q and 14B of the EPF Act, will come within the meaning of ‘all sums due to workmen/employee from Provident fund’ has also been settled by a series of judgements of this Appellate Tribunal. The Appellant has referred to the judgement dated 10.07.2024 that was rendered in the matters of Anuj Bajpai vs. Employee Provident Fund organisations (2024) to support his contention that the provident fund dues will fall within the meaning of Section 36(4)(a)(iii) of the I & B Code, 2016, will consist of not only the amount determined under Section 7A, but also the amounts to be determined under Section 7Q and Section 14B as well. The relevant paragraphs of the said judgement is extracted below:-

  • “..,51.The Hon’ble Supreme Court laid down that there is no reason to give restrictive meaning of expression ..any amount due from the employer,, and to confine to only amount determined under Section 7A of the EPF Act, The Hon’ble supreme Court further held that interest payable.by the employee under Section 7Q and the damages levied under Section; 148 of the EPF Act will also be covered as dues from the employers for the purpose of Section 11(2) of the EPF Act.

  • 52. we note that in the present appeal the amount which has been claimed by the employer are covered under Section 7A, 7Q and 14B of the EPF Act and therefore are fully governed by the judgement Maharashtra state Cooperative Bank (Supra).

  • 53. In view of this clear judgement of the Hon’ble Supreme Court of India the contention of the Appellant are not tenable and stand rejected.

  • 54. we also note that the Hon’ble supreme court of India in Sunil Kumar Jain v, Sundaresh Bhatt [(2022) 7 SCC 540] held that the dues of the gratuity and pension shall be governed by Section 36(4) of the Code. It is reiterated that Section 36(4)(ii) of the code specifically excludes “all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund”, from the ambit of liquidation estate assets, Therefore, Section 53(l) of the code cannot be made applicable to such dues, which are to be treated outside the liquidation estate assets under the code. Section 36(4) of the code has clearly gives protection to workmen’s dues under provident fund, gratuity fund and pension fund which are not to be treated as liquidation estate assets and the Liquidator cannot claim over such dues,..,”


# 16. We find that this Appellate Tribunal had also delivered a judgement dated 21.10.2022 in the matters of Jet Aircraft Maintenance Engineers Welfare Association vs. Ashish Chhwachharia, RP of Jet Airways (India) Limited and others in which it had deliberated on the same issue in a substantial manner and came to the conclusion that the PF dues will also include within it the amount determined under Section 7Q and 14B. The relevant paragraphs are reproduced here under:

  • “118. Challenge to the Resolution Plan by the Appellant is on the ground that Section 11 of the 1952 Act requires priority over all other dues and further Section 36(4)(a)(iii) excludes provident fund dues from the liquidation estate of the Corporate Debtor. We have already dealt with provisions of Section 36(4)(a)(iii) in foregoing paras of this judgment. Now, we, need to look into Section 11 of 1952 Act. The Section 11 of the 1952 Act provides for priority of payment of contributions over other debts. Learned counsel for the Appellant has relied on judgment of the Hon’ble Supreme Court in “Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others, (2009) 10 SCC 123”. The Hon’ble Supreme Court dealing with Section 11 of 1952 Act laid down following in Para 67:

  • “67. The expression “any amount due from an employer” appearing in sub-Section (2) of Section 11 has to be interpreted keeping in view the object of the Act and other provisions contained therein including sub-Section (1) of Section 11 and Sections 7A, 7Q, 14B and 15(2) which provide for determination of the dues payable by the employer, liability of the employer to pay interest in case the payment of the amount due is delayed and also pay damages, if there is default in making contribution to the Fund. If any amount payable by the employer becomes due and the same is not paid within the stipulated time, then the employer is required to pay interest in terms of the mandate of Section 7Q. Likewise, default on the employer’s part to pay any contribution to the Fund can visit him with the consequence of levy of damages.”

  • 119. The above judgment lays down that any amount due from employer appearing in sub-Section (2) of Section 11 also covers the amount determined under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon’ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in “Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors.” (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in “Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others” (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.”


# 17. Similar views have also been expressed by other coordinate benches of this Appellate Tribunal in the matters of Truvisory insolvency professionals Private Limited (IPE) versus EPFO in CA(AT)(Ins) No. 580/2023; and also in the matter of SBI versus Moser Baer employees union in Company Appeal (AT) (Insolvency) No. 396 of 2019. All the judgments draw their inspiration from the findings recorded in the judgment of the Honourable Supreme Court in the matter of Maharashtra State Cooperative Bank versus Assistant Provident Fund Commissioner. In view of the above ratios, it has to be accepted that the issue is no more Res Integra and that all sums due from provident fund will include within it the amounts determined under Section 7Q and 14B as well.


# 18. Now we will proceed to answer the third issue framed by us, i.e., whether the sums due to workmen/employee from provident fund, pension fund, and the gratuity fund are to be held in a dedicated fund so as to qualify for being treated as a third party asset, to be kept outside the liquidation estate? The Respondent argues that, as per the ratio laid down in the matter of Sunil Kumar Jain (Supra), there has to be a dedicated fund for such sums, failing which, the said amounts will be included in the liquidation estate. The relevant paragraph which is cited by the Respondent. is extracted below:-

  • “25.2 considering Section 36(4) of IBC and when provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen’s dues shall be kept outside the liquidation process and the workmen/employees concerned shall have to be paid the same out of such provident fund, gratuity fund, and pension fund, if any, available and the Liquidator shall not have any claim over such funds.”


# 19. The Respondent relies on a cursory reading of the paragraph as above to contend that workmen/employees will be paid out of the provident fund, gratuity fund, and the pension fund, if any, available and if such funds are not available, then the dues of the employees in form of PF, pension, and gratuity will have to be paid in accordance with the provisions of Section 53 of the code. This is not a correct interpretation which can be assigned to the issue. If the entire judgement is taken into consideration, it will be apparently clear that the provident fund, gratuity fund and the pension fund will have to be kept outside the liquidation estate by treating it as third party asset. It is not material whether this funds are maintained in a dedicated account as long as such amounts are held by the CD. Even if they are not classified in a dedicated account, then too it has to be presumed that, the CD is holding these amounts and will have to pay the said amount to the workmen/employee at an appropriate time. It needs to be mentioned here that certain enterprises have been given the latitude to open their own provident funds/pension funds/gratuity funds by giving exemption under EPF Act, and these enterprises maintain separate funds. The rest of the enterprises who come under EPF Act are mandated to remit the dues to EPFO promptly, failing which they have to pay the same with interest and damages computed under Section 7Q and 14B respectively. Thus, if an enterprise has not been permitted to maintain separate provident fund/pension fund/gratuity fund, it has to remit the dues to be paid into the respective funds maintained by EPFO by law and even if it has not done so, which is the case on hand, then the said amount will be deemed to be a part of the said funds and consequently, a part of ‘all sums due to the workmen/employee’ will be within the meaning of Section 36(4)(a)(iii) and accordingly will have to be treated as a third-party asset under Section 36(4)(a)(iii) to be kept outside the liquidation estate. The third issue is answered accordingly.


# 20. From the above, we come to the conclusion that the Liquidator has erroneously placed the claim of the Appellant EPFO under Section 53(1)(e) of the code instead of treating it as a third-party asset under Section 36(4)(a), that the amount Rs. 6,34,816/-ought to have paid to the Appellant before the distribution under Section 53 was resorted to by the Liquidator and therefore, the said amount should be recovered from the financial creditor City Union Bank Respondent-2 herein under Regulation 43 of IBBI liquidation process regulations 2016 and paid to the Appellant.


# 21. We find that NCLT has already passed the order of dissolution. The right course would have been to set aside the order of dissolution, and to direct the Liquidator. to rectify this error and then to apply for dissolution of the CD. However, in the interest of cutting short the litigation, we are of the view that the interest of justice will be served, in case the financial creditor, Respondent-2, is directed to remit the amount Rs. 6,34,816/-to the Appellant herein within 30 days and report the same to NCLT, which will then direct for making the necessary entries in the liquidation records to the effect.


# 22. The appeal will be closed accordingly. Interlocutory applications, if any, will stand closed.

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Sunday, 11 January 2026

Employees Provident Fund Organisation Vs. Subhlaxmi Investment Advisory Pvt. Ltd. and Anr. - More so, when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP.

  NCLAT (2026.01.09) in Employees Provident Fund Organisation Vs. Subhlaxmi Investment Advisory Pvt. Ltd. and Anr. [(2026) ibclaw.in 25 NCLAT, Company Appeal (AT) (Insolvency) No. 794 of 2025 and I.A. No. 3051 of 2025] held that; 

  • We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, subsection (5), does not prohibit initiation or continuation of assessment proceedings.

  • No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.

  • More so, when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP.

  • We have clearly noted the legal position that when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP.


Excerpts of the Order;

This is an Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2006 against the Impugned Order dated 28.03.2025 passed in IA (IB) (Plan) No. 3/CB/2024 IN CP (IB) No. 14/CB/2021, by National Company Law Tribunal, Cuttack Bench, Cuttack.


# 2. We have heard counsels of both sides and perused materials placed on record.


# 3. Appellant – EPFO has sought relief to set aside the Resolution Plan approved by National Company Law Tribunal (NCLT), Cuttack Bench vide order dated 28.03.2025 in I.A. (IB)(Plan) No. 3/CB/2024 in CP (IB) No. 14/CB/2021. The main reason for appeal is that while approving the Resolution Plan against the claim of Rs. 18,35,528/- towards FP dues, provisions of only Rs. 5,000/- mainly on the grounds that no claim was submitted by EPFO.


# 4. To appreciate the Appellant’s case, we look into the chronology of events, which is discussed hereinafter:

  • CIRP of the Corporate Debtor (M/s Metistech Fabrication Private Limited was initiated on 01.11.2023. Thereafter, on 03.11.2023, RP published Form A to invite the claims from creditors. RP also sent intimation to the Appellant – EPFO on 21.11.2023 regarding initiation of CIR Proceedings and clearly conveyed about moratorium under Section 14 of the Code.

  • In response to above communication from RP, EPFO (Regional PF Commissioner) on 22.12.2023 filed its claim of Rs. 50,676/- in a letter form but not in proper format and claimed that their dues are neither financial debt nor operational debt and conveyed that these dues pertains only to damages, interest and short remittances by the establishment and as regards principal, they will be conveyed in due course.

  • RP requested EPFO on 22.12.2023 itself to submit claims as per format with supporting documents.

  • Later on EPFO informed that their area enforcement officer has reported the total dues of establishment for the period 2020-21 & 2021- 22 to be Rs. 8,12,760/- basis the salary sheets provided by RP (as received from the suspended management), which included all the employees (also including the excluded employees).

  • EPFO crystallised a demand of Rs 18,33,528/- (Rs 8,12,760 under 7A and Rs 9,70,092 under interest and damages) on the basis of an enquiry initiated by the EPFO department.

  • Meanwhile Form G was published by RP on 30.12.2023 for inviting EoIs. Respondent No.1 – SRA submitted a Resolution Plan of total value of Rs. 45,00,000/- out of which Rs. 25,05,000/- was to be paid to the creditors. A sum of Rs. 5,000/- was provisioned against the demand of Rs. 18,33,528/- by EPFO along with a contingent liability clause covering any future liability however not exceeding the total liability beyond Rs. 25.05 lakh.


# 5. The Resolution Plan submitted by Respondent No.1 was approved by CoC on 21.09.2024 with 100% votes with IDBI as sole Financial Creditor. Thereafter, on 28.03.2025 the resolution plan of Respondent No.1 was approved by the Adjudicating Authority, which is being impugned in this case.


# 6. We note that CIRP against the CD was initiated on 01.11.2023 and thereafter only EPFO initiated assessment proceedings against the CD which were carried out by EPFO during the moratorium under Section 14 of the Code. It is to be noted that the EPFO – Appellant was aware about the initiation of CIRP on 21.11.2023, through a formal communication by Resolution Plan, in which the applicability of moratorium was also clearly conveyed.


# 7. It is to be noted that EPFO initially made demand on 22.12.2023 for a sum of Rs. 50,626/- for dues pertaining to 2020-2022 by the CD. Later on, basis its inspection through Enforcement Officer, it was raised to Rs. 8,12,760/- on 22.12.2023. Subsequently on 28.12.2023, it was further revised to a demand of Rs. 18,33,528/-, which included additional Rs. 9,70,092/- as interest and damages.


# 8. The Appellant also claims that the EPF Act is a social welfare legislation and provides for social security benefits of employees and workmen. The measure of mandatory creation of the Employees Provident Fund by establishments under the provisions of the EPF Act and the Employees’ Provident Funds Scheme, 1952 is as quoted by Justice V.R .Krishna Iyer in Organo Chemicals Industries v. Union of India reported in 1979 AIR 1803 is “to create a financial reservoir for the distribution of benefits to employees and workmen which is filled by the employer by deducting from the employees’ salaries and also by contributing its own equal share and duly making over the gross sums to the Fund. If the employer neglects to remit or diverts the moneys for alien purposes the Fund gets dry and the retiree employees are denied the meagre support when they need it the most. This prospect of destitution demoralizes the working class and frustrates the hopes of the community itself”. The provident fund dues are hard-earned money of the, which are deducted from their salaries but not deposited by the employer with the EPFO and the accrued interest thereon is not the asset of the Corporate Debtor but truly the assets of the employees in custody of the Corporate Debtor. As per Section 36(4)(a)(iii) of the Code, the entire employees provident fund dues are not the assets of the Corporate Debtor and are not subject to distribution as per Section 53(1) of the Code and therefore must be made in entirety to the Appellant by the Corporate Debtor. The Appellant also claims that EPFO dues are monies belonging to the employees, to be handed over by employers to EPFO for investment and safekeeping. The entrustment of these monies with the employers is merely a collection mechanism and is required to be understood as an unredeemed operational debt under IBC. While deciding on the statutory debt, the dues of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 need to be kept outside by the CoC and paid in full by SRA. And for that it relies catena of judgments by Hon’ble Supreme Court and NCLAT such as:

  • Kushal Ltd. vs Regional Provident Fund Commissioner-I, Civil Appeal No.1920 of 2020, decided on 20-05-2020 (SC);

  • Jet Aircraft Maintenance Engineers Welfare Association v. Ashish Chhawchharia & Ors. [(2012) SCC OnLine NCLAT 418] dated 21/10/2022;

  • Anuj Bajpai vs Employees Provident Fund Commissioner Com. Appl (AT)(Ins) 1141/2023.


# 9. We note that in this case, the books of accounts of the CD do not reflect, the amount deducted from the salaries of the employees and there is no such material on record that during the period of their employment any deductions had happened and the amount was not deposited by the CD with the EPFO. If it was so, it could not have been considered as asset of the CD. But in this case, we find that assessment has been made by the EPFO post moratorium. In this case, we find that there is no record to suggest that the Provident Fund was deducted contemporaneously by the CD, as such no record existed with the CD. An assessment was later on made by the EPFO basis, which is prohibited during moratorium. Therefore, these judgments are of no avail to the Appellant as the facts and circumstances are distinguishable in the present case.


# 10. Appellant also contends that computation of EPFO claims cannot be done by RP or NCLAT/NCLT. The main argument canvassed by the Appellant is that as per procedure, before commencement of assessment proceedings under Section 7A, 7Q and 14B of the EPF & MP Act, 1952, the Enquiry Officer prepares a report, based on which Show Cause Notice is issued to concerned company, giving them a fair opportunity to produce documents and assessment proceedings culminate into passing the final order under Section 7A of EPF Act. There cannot be a situation wherein: (a) EPFO cannot even continue with assessment proceedings during CIRP, (b) EPFO cannot continue with assessment after approval of Plan and claim from SRA later and (c) cannot even file claim based on its official records without proceedings with assessment. The claim cannot be rejected merely because it was based on Enquiry Officer Report which does not amount to “assessment” as per Section 7A of the EPF Act.


# 11. The arguments presented herein by the Appellant are against the scheme of the Code. We note that in this case assessment and claim by EPFO was made after initiation of CIRP and during the period of moratorium. Thus, it not mandatory for the RP to consider the same. RP also gets support from the judgment of this Appellate Tribunal in the matter of EPFO vs Jaykumar Pesumal Arlani Company Appeal (AT) (Insolvency) No.1062 of 2024 wherein it is held that after initiation of CIRP and imposition of moratorium under section 14 of IBC, no assessment proceedings can be initiated or continued by EPFO under section 7A, 7Q, 14B of EPF & MP Act and no claim based on such assessment can be admitted in CIRP. The said ratio is further affirmed in CA Pankaj Shah vs EPFO Company Appeal (AT) (Insolvency) No.77 of 2025 that demands made by EPFO on the basis of inspection and assessment orders passed during moratorium are unenforceable.


# 12. To further canvass its arguments, Appellant claims that on the order passed under Section 7A, an appeal was filed by RP/CD wherein a conditional order was passed on 18.10.2024 directing pre-deposit to be made within 30 days. Neither the RP nor SRA has confirmed whether such pre-deposit has been made in pursuance to said order. Appellant claims that it has been held in the case of GTC Industries Ltd. Vs Colelctor of Central Excise: 2013 (11) SCC 353 that when the period granted for pre-deposit has lapsed, the inevitable result is dismissal of appeals. We find the case to be of no assistance to the Appellants in the facts of the case, as such a situation will arise in a non-insolvency matter and is not applicable on a case in which moratorium is existing and that is the situation in this case.


# 13. Furthermore, we also note that the resolution plan duly provides for contingency liability clause stating to make good any such claim subject to the total amount under plan not exceeding Rs. 25.05 lacs. It is also to be noted that not a single employee of CD has filed any claim during CIRP towards their salary dues or pending PF contributions. We also observe that the Appellant was provided sufficient opportunities to file the claim in appropriate format but it did not do so. But even then, RP included the claim of the Appellant in the Information Memorandum and later the SRA – R1 had noted the claim and made appropriate provisions in the resolution plan. We also find that the plan has already been approved both by CoC and also by the Adjudicating Authority and EPFO is challenging it just on the basis that instead of total claim of Rs. 18,33,528/- only Rs. 5,000/- towards EPFO dues has been provided for.


# 14. Respondent-RP has relied on the judgement of Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019), Civil Appeal No. 8766-67 of 2019, wherein it was held that:

  • 67. A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate…”

We find that it surely supports the case of the SRA and also the RP.


# 15. Respondent-RP also relies on the following judgements:

a) Ghyanshyam Mishra & Sons v. Edelweiss Asset Reconstruction Co. Ltd., (2021 SCC OnLine SC 313), which upholds the “Clean Slate” theory under the Insolvency and Bankruptcy Code, 2016. As follows in para 86:

  • “86. …the plan conforms to the requirements as are provided in subsection (2) of Section 30 of the I&B Code. Onley thereafter, the Adjudicating Authority can grant its approval to the plan. It is at this stage, that the plan becomes binding on Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution Plan. The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan would be unworkable…”

b) Electrosteel Steel Limited (Now M/S Esl Steel Limited) vs Ispat Carrier Private Limited, Civil Appeal No. 2896 OF 2024 (Arising out of SLP (C) No. 15823 of 2023) which upholds the following:

  • “50. ….. it is by now well settled that once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, all claims which are not part of the resolution plan shall stand extinguished and no person will be entitled to initiate or continue any proceeding in respect to a claim which is not part of the resolution plan…”

We find that both above cited judgments also support the case of the respondents.


# 16. The Appellant claims that its dues have been rejected on the ground that dues are not filed in the prescribed format. Appellant places reliance on the judgment of Hon’ble Supreme Court in the matter of Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni and Anr. (2024) 6 SCC 767, wherein it was ruled that the Form in which a claim is to be submitted is directory and not mandatory and what is important is the claim must be supported by proof. The Appellant claims that the statutory forms under the Regulations formulated under the code are directory in nature and not mandatory, and the nature of Claim cannot be overlooked merely on the basis of an incorrect form. However, the said aspect was portrayed incorrectly by the Respondents.


# 17. We observe that in the facts and circumstances of the case, the resolution professional had noted the claim of the EPFO even though it was not filed in the prescribed format. And it was included in the Information Memorandum and the SRA had also acted upon that, therefore the facts of the case are distinguishable and the judgment cited by the Appellant will not be of any assistance to it.


# 18. Appellant tries to canvass the argument that AA was misled that after commencement of CIRP the EPFO raised dues u/s 74 of EPF Act to the tune of 18,33,528/-but no claim had been filed with respect to the same before the RP. Based on the above misleading statement, provision for a meagre amount of INR 5000/-was made against EPFO dues. We don’t find such arguments to be convincing as the IM notes the claims of EPFO even though not filed in proper format and SRA also makes provision which is endorsed by CoC and approved by AA. Perusal of the records reveal that even though the RP had advised the Appellant to file the claim in appropriate format, the Appellant had not filed them in those formats. Despite that Resolution Professional had included the claims in the Information Memorandum and the SRA has also provided for some amount for the EPFO.


# 19. The Appellant has also relied upon the judgment of Hon’ble High Court of Bombay (Nagpur Bench), Dalmia Cement (Bharat) Limited and Ors. Vs. The Central Board of Trustees, Employees Provident Fund Organization, Writ Petition No. 693 of 2022 decided on 29.04.2025. The relevant para is extracted as below:

  • “ 21. It would thus be apparent that since the employers provident fund contribution cannot be included in the definition of ‘assets’, in view of explanation (a) to Sec. 18(1) of the IB Code, there would be no obligation upon the provident fund department to lodge a claim for the dues, in that regard with the IRP and get such claim verified so as to be included in the resolution plan.

  • 21.1. Rule 12(2) of the IB Board of India (Insolvency Resolution Process for Corporate Person) Regulations, which requires a claim to be made with proof to the IRP on or before 90 days of the Insolvency commencement date, if a person fails to submit it within the time stipulated in the public notice / announcement, and Rule 13, which requires such claims to be verified by the IRP within 7 days from the last date of receipt of claims and to maintain a list of order form, will have to be construed in the context of the language of statutory provisions as contained in Chapter – II and specifically in light of the explanation (a) to Section 18 of the IB Code and in view of what has been held above.”


# 20. We find that in this case, it is not the case that the RP had not taken note of the claim of the EPFO. But RP included the claim in the Information Memorandum and also the SRA had made necessary provisions.


# 21. Another issue which has been raised by EPFO is whether a lower pay out towards Provident Fund dues can be approved in the resolution plan. Perusal of the facts, show that on the basis of the analysis of books of accounts, no amount is shown to be payable as Provident Fund dues. RP had requested the EPFO to file the claims. EPFO initially filed a small amount and then did its own inquiry and reassessment and filed a higher amount, which is being disputed by the RP and ex-suspended director. On the date of initiation of CIRP, there is nothing which is due to EPFO as per books of accounts and at the maximum it could be Rs. 50,626/- which is also not basis the books of accounts. But Rs. 5000/- has been provided in the resolution plan. Without books of accounts on record, it is just a nominal amount and approved as per the commercial wisdom of the CoC and which is non-justiciable. In case details of employees were available on record, situation would have been different. But herein only assessment are being made without EPF deductions being in Books of accounts. Without exact details of employees, it cannot be said that the resolution plan provides for a very low pay out towards Provident Fund dues. Moreover, it could not be done during the moratorium.


# 22. Appellant also relies on the judgment Regional Provident Fund Commissioner v. Prashant Jain Resolution Professional of Diamond Power Infrastructure Limited & Ors. CA (AT) (Ins) No. 937 of 2022 and relies on the following ratio:

  • “8. The amount u/s 7A of Rs. 2, 42, 70,538/- having been admitted as the Provident fund Dues, it was obligatory on the part of the Resolution Professional/Resolution Applicant to include the entire payment as per the law laid down by this Tribunal in Jet Airways.”


# 23. We find that facts and circumstances of the case are different as in this case the amount was not filed formally and therefore not admitted. The citation, therefore, may not be of any assistance as in the cited case the claim was admitted basis the orders of the Adjudicating Authority.


# 24. Appellant has also relied upon the High Court of Patna in M/s Shiva Agro Industries Pvt. Ltd. Vs The Employees Provident Fund Organization and Others CWJC No. 16250 of 2025 on the following paras:

  • “14. Apparently, the petitioner has not complied with its statutory duty to deduct employees share from their salary and to deposit the same in the provident fund. If the petitioner failed to discharge its statutory duties, it cannot be permitted to take the benefits of its own fault.

  • 15. It is true that the assessment is to be made with regard to the identifiable employees only. However, it is the duty of the employer to prepare the list of employees engaged by it and if the employer fails to perform its duty, it cannot be allowed to take advantage of its own laches. Further, since the petitioner failed to produce the relevant records, wage register etc. and took a plea that a fire had taken place in the establishment on 10.10.1998 in which the establishment had been gutted, the respondents cannot be asked to supply the name, address and parentage of the employees engaged in the establishment.” [Emphasis supplied]


# 25. The EPFO relies on this case, to canvass the argument that the burden to prove is on the on the Corporate Debtor [employer] for showing the strength and identity of the employees and not on the Appellant [EPFO]. We do not find anything which is contrary in the facts and circumstances of the case as the RP and also the Suspended Director had cooperated with the EPFO in its inquiry and assessment. But the moot point is that assessment cannot be done, once the moratorium comes into existence and therefore the cited case is also of no assistance.


# 26. The Appellant also relies on the judgment of Hon’ble High Court of Delhi in Saraswati Construction Co v. Central Board of Trustees W.P.(C) No. 5625/2007 as cited below:

  • 11. It is a settled legal position that if any establishment or employer is not covered under the said Act, then it is for the employer to place sufficient cogent and convincing material before the designated authority in an enquiry under Section 7A so as to satisfy the authority with regard to the non-applicability of the Act and on failure to place any such material, the onus cannot be shifted on the EPF authorities to prove the applicability of the Act, who under no circumstances, can be in possession of necessary records evidencing the extent of strength of employees in any particular establishment. In the case of Himachal Pradesh State Forest Corporation V. Regional PF Commissioner (Supra) cited by the counsel for the petitioner, being distinguishable on facts would not be applicable to the present case. As in the facts of the said case employer itself had admitted its liability under the Act and since due to delay of 16 years period, the employer was not in possession of the records, the Court directed the benefits only with respect to those employees who are identifiable and whose entitlement was proved on evidence. So far as the facts of the present case are concerned, the petitioner itself never came forward to place on record the documents or took any such plea of non-availability of the documents, therefore, the said judgment of the Apex Court will not cut any ice to help the petitioner in the facts of the present case.” [Emphasis supplied]


27. The above judgement deals with the applicability of Section 7A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The resolution professional has not questioned the inapplicability of the Act, therefore there is no relevance of the above judgement in the present case.


# 28. To canvass support the Respondent – RP relies on CA Pankaj Shah vs. Employees Provident Fund Organisation & Anr. Company Appeal (AT) Insolvency) No. 17 of 2025, para 10 extracted as below:

  • 10. The above judgment clearly indicates that after initiation of the CIRP, no assessment can be initiated or continued against the Corporate Debtor so as to pass any pecuniary liability on the Corporate Debtor. In the present case, the EPFO has made demand on the basis of an alleged inspection report dated 10.05.2023 and assessment order dated 25.09.2023 which both were subsequent to initiation of CIRP on 17.02.2023. When no demand can be made on the basis of any inspection or assessment, we do not find any ground to allow the application IA No.409 of 2024 which was filed by EPFO where direction was sought to allow the entire claim of Rs.1,37,17,837/-.”  [Emphasis supplied]


# 29. This judgment clearly brings out that after initiation of the CIRP, no assessment can be initiated or continued against the CD so, as to fasten any pecuniary liability on the CD. This judgement supports the case of the Respondent No.2 – RP and also helps us to decide the case in hand.


# 30. Respondent – RP has also relied upon the judgment of this Appellate Tribunal in Employees Provident Fund Organization Regional Office, Vashi, Navi Mumbai Through Regional PF Commissioner-II (Legal) v. Jaykumar Pesumal Arlani Resolution Professional of M/s. Decent Laminates Pvt. Ltd CA(AT)(Ins) No. 1062 of 2024 as cited below:

  • 24. In view of the aforesaid, we answer Question Nos. (1) and (2) in following manner:

  • (1) We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, subsection (5), does not prohibit initiation or continuation of assessment proceedings.

  • (2) No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.”

  • Question No. (3)

  • 25. It is an admitted fact that claims were filed by the Appellant subsequent to approval of Resolution Plan by the CoC. The Adjudicating Authority has relied on the judgment of the Hon’ble Supreme Court in RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr. – Civil Appeal No.5590 of 2021 decided on 11.09.2023, which judgment squarely applies to the facts of the present case. More so, when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP.”


# 31. In this case, we find that there is no record to suggest that the Provident Fund was deducted contemporaneously by the CD and as no such record existed with the CD. An assessment was made later on by the EPFO basis which a demand has been made and such an assessment is not allowed under the moratorium existing. We have clearly noted the legal position that when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP. Therefore, in the facts and circumstances of the case, we find that the Appeal filed by the Appellant does not merit intervention for setting aside the impugned order dated 28.03.2025.


# 32. We uphold the orders of the Adjudicating Authority, which is extracted as below:

  • “26. In view of the above discussion, the Resolution Plan submitted by Subhalaxmi Investment Advisory Pvt Ltd as approved by the CoC under Section 30(4) of the Code is hereby authorised for a total Pian Value of Rs. 45,05,000/- Forty Five Lakhs and Five Thousand Rupees) that includes Estimated CIRP Cost of Rs. 20 Lakhs, Rs 24.50 Lakhs as Liability towards Secured Financial Creditor, Rs. 50,000/- towards dues of Operational Creditors other than Statutory dues and Rs.5,000/- towards EPFO dues.

  • The Resolution Plan so approved shall be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government, or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan.

  • 27. Under the provisions of Section 31(3) of the Code, we also direct as under:

  • a) The moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 28.03.2024 shall cease to have effect; and

  • b) The Applicant/RP shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the Board to be recorded on its database.

  • 28. In view of the foregoing, IA (IB) (Plan) No. 3/CB/2024 is ALLOWED and DISPOSED OF.


# 33. Accordingly, the Appeal is hereby dismissed. All IAs also disposed of. No order as to costs.

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