Introduction
The National Company Law Appellate Tribunal (‘NCLAT’) in its recent ruling in Employees’ Provident Fund Organization Regional Office v. Jaykumar Pesumal Arlani[i] examined the validity of Employees’ Provident Fund Organization’s (‘EPFO’/‘Appellant’) claim regarding Provident Fund (‘PF’) dues in the corporate insolvency resolution process (‘CIRP’) of the corporate debtor (‘CD’). The NCLAT ruled that a claim based on an assessment conducted post-moratorium was inadmissible as per s. 14(1) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’).
Brief Facts
The CIRP was initiated against Decent Laminates Pvt. Ltd. and Apollo Soyuz Electricals Pvt. Ltd. (‘CDs’), and a moratorium was imposed.
EPFO conducted an assessment under s. 7A of the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 (‘EPF & MP Act’) regarding unpaid PF dues after the moratorium began.
EPFO subsequently filed a claim for PF dues with the Resolution Professional (‘RP’ / ‘Respondent’). However, the claims were submitted after the Committee of Creditors (‘CoC’) had already approved the Resolution Plan (‘Plan’). The RPs refused to entertain EPFO’s claims, stating that the approval of the Plan precluded any further claims.
The National Company Law Tribunal (‘NCLT’) also dismissed EPFO’s claims, holding that their delayed submission violated the principle of finality in insolvency resolutions.
Aggrieved by this decision, EPFO had preferred to appeal against the NCLT orders before the NCLAT.
Issues
Whether after the imposition of a moratorium under s.14 of the IBC, assessment proceedings can be conducted by the EPFO under ss. 7A, 14B and 7Q of the EPF & MP Act, 1952.
Whether any claim based on assessment subsequent to the imposition of the moratorium can be admitted in the CIRP.
Whether claims that were filed by the Appellant(s) subsequent to the approval of the Plan by the CoC could have been admitted to the CIRP.
Held
The NCLAT upheld the NCLT’s ruling and dismissed the appeal, observing that once CIRP is initiated, a moratorium is imposed under s. 14 of the IBC, preventing any legal action against the CD. This moratorium also applies to assessment proceedings initiated by EPFO, rendering any assessment or demand notices issued during CIRP invalid.
The NCLAT further observed that claims filed after the approval of the Plan are inadmissible; thus, EPFO’s claims, which were filed after the CoC had approved the Plan, are impermissible under IBC regulations.
The NCLAT acknowledged the argument of EPFO that provident fund dues have superior priority over other debts as per s. 36(4)(a)(iii) of the IBC. However, it held that EPFO must still file claims within the CIRP timeframe, failing which its claims would be barred, and the priority of PF dues does not override IBC’s procedural requirements.
Our Analysis
This ruling reaffirms that the IBC prevails over other legislation, including the EPF & MP Act, in insolvency resolution matters. While statutory dues such as PF contributions are protected, the procedure for claiming them must align with the IBC’s framework. This judgment sets a strong precedent for similar cases involving government dues in insolvency proceedings. EPFO and other statutory authorities must actively monitor insolvency proceedings and file claims within the CIRP timeframe to prevent rejection.
The moratorium under s. 14 of the IBC is designed to ensure that the corporate debtor’s assets are preserved during CIRP. The purpose of the moratorium is to prevent any creditor from enforcing claims during the insolvency resolution process and to ensure that the company remains a going concern to maximize value for all stakeholders.
Thus, the NCLAT’s ruling reinforces the fundamental principles of the IBC by ensuring finality and certainty in the insolvency resolution process.
End Notes
[i] 2025 SCC OnLine NCLAT 9 dated 03.01.2025.
Authored by Sweta Singh, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.