Regional Provident Fund Commissioner vs Mr. Vipul Garg Liquidator

(Arising out of the Order dated 06.03.2023 passed by the National Company Law Tribunal, Chandigarh Bench, in Company Petition. CP(IB) No. 93/chd/Hry/2018)

Regional P.F. Commissioner, Employees' Provident Fund Organisation Through Shri Udaya Gupta, RPFC (Legal) Regional Office, Sector - 15A Faridabad, Haryana -121007 Email :- ro.faridabad@epfindia.gov.in ...Appellant

Versus 1. Mr. Vipul Garg, Liquidator Representing through Corporate Debtor Mis Jai Laxmi Lighting Industries Pvt. Ltd. With its registered address at, 74, Sector-13, Kamal (Haryana) Email ID:- vipul_ ca@rediffmail.com ...Respondent No. 1

2. Canara Bank Mid Corporate Branch, 8A, First Floor, Nehru Ground, Faridabad--(HR)-121001 Mail: cb5059@canarabank.com And also at - Canara bank Arm Branch Novelty Road, Karnal (HR)- 132001. Mail: cb6290@canarabank.com ...Respondent No. 2

Present For Appellants: Mr. Braja Bandhu Pradhan, Advocate

For Respondent: Mr. Ashwani Sharma, Advocate for R-1 Mr. PBA Srinivasan, Mr. Barnali Paul & Mr. Rajshree Dhapola, Advocate for R-2

Page 1 of 28 JUDGEMENT

(24.04.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e., Regional P.F.

Commissioner, Employees' Provident Fund Organisation Through Shri Udaya

Gupta, RPFC (Legal) under Section 61 of the Insolvency and Bankruptcy Code,

2016 ("Code") against the Impugned Order dated 06.03.2023 passed by

National Company Law Tribunal, Chandigarh Bench, Chandigarh, Haryana

("Adjudicating Authority") in Company Petition (IB) NO.

93/CHD/HRY/2018.

Mr. Vipul Garg, who is the Liquidator of the Corporate Debtor M/s Jai

Laxmi Lighting Industries Pvt. Ltd. is the Respondent No.1 herein.

Canara Bank, who is the financial creditor of the Corporate Debtor, is the

Respondent No.2 herein.

2. The appellant stated that the Corporate Debtor was covered under the The

Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF

Act,), with code no. HRFRD12517. The appellant submitted that on 02.04.2019,

the EPFO Regional Office, Faridabad filed Form-B claiming Rs. 36,55,290/-

before the Resolution Professional toward EPF dues which accrued from

05/2012, well before the CIRP period. The appellant further stated that several

letters were thereafter sent to the Resolution Professional requesting payment of

PF dues relating to the employees of the corporate debtor.

Page 2 of 28

3. The appellant stated that on 11.11.2021, the Resolution Professional

informed the appellant that its share had been calculated pari passu with

financial creditors and came to Rs. 6,014/-, which, according to the appellant, is

incorrect because the protection under Section 36(4)(a)(iii) of the Code was

ignored. The appellant submitted that PF dues cannot be included in the

liquidation estate or used for recovery in liquidation. The appellant also stated

that on 02.12.2022, it submitted another letter claiming EPF dues as per

assessment order for the period 04/2015 to 12/2015 amounting to Rs.

12,63,622/-, but received no response from the Resolution Professional.

4. The appellant submitted that only on 25.03.2023, it received an email from

the Resolution Professional enclosing the order dated 06.03.2023 for dissolution

of the company, and from that communication it learnt that only the amount of

Rs. 6,014/- had been considered from the original claim filed before the IRP.

5. The appellant contended that the Adjudicating Authority failed to

appreciate the welfare object of the EPF Act, and the settled legal position that

provident fund dues enjoy priority over other debts. The appellant submitted that

Section 11 of the EPF Act creates a first charge over the employer's assets for

PF-related liabilities, including contributions, damages, interest, and other

statutory dues. The appellant further stated that this priority is not displaced by

the waterfall mechanism under Section 53 of the Code.

6. The appellant contended that the Adjudicating Authority failed to

appreciate that provident fund dues are not to be treated as ordinary liquidation

Page 3 of 28 claims and are to be paid outside the liquidation estate itself. The appellant stated

that the Resolution Professional was duty-bound to place the correct position

before the Adjudicating Authority rather than present the claim as limited to Rs.

1,42,463/- or Rs. 6,014/-.

7. The Appellant further submitted that Section 36(4)(a)(iii) of the Code,

expressly exclude all sums due to any workman or employee from the provident

fund, pension fund, and gratuity fund from the liquidation estate. The Appellant

stated that such dues cannot be treated as liquidation assets and are not subject

to distribution under the waterfall mechanism prescribed under Section 53 of the

Code.

8. The Appellant contended that the Adjudicating Authority failed to consider

that provident fund dues are excluded from the liquidation estate to enable

workmen to realize their lifelong savings, including the employer's contribution.

The Appellant emphasized that while the rights of other creditors over the assets

of the company are merely property rights, the dues of workmen, particularly

provident fund dues, are intrinsically linked to the fundamental right to life

under Article 21. The Appellant asserted that equating such dues with other debts

would unjustly dilute this inalienable right.

9. The Appellant further submitted that the Adjudicating Authority

overlooked the provisions of Section 11(2) of the EPF Act, which clearly

establish that provident fund dues shall have priority over all other debts. The

Appellant stated that such dues are deemed to be the first charge on the assets

Page 4 of 28 of the establishment and must be paid in priority, notwithstanding anything

contained in any other law.

10. The Appellant contended that the Adjudicating Authority failed to consider

the judgment of the Hon'ble Gujarat High Court in Indian Overseas Bank vs.

Employees Provident Fund Organization, wherein it was held that the statutory

first charge created under the EPF Act would prevail over other enactments such

as the SARFAESI Act. The Appellant emphasized that the said judgment clearly

establishes the supremacy of provident fund dues over other secured debts.

11. The Appellant stated that the EPF Act has an overriding effect, and dues

relating to provident fund, pension, and gratuity must be paid in priority to all

other debts. The Appellant contended that these dues as assets of the workmen,

which remain in the custody of the corporate debtor and must be disbursed

accordingly before applying the waterfall mechanism under Section 53 of the

Code.

12. The Appellant contended that this Appellate Tribunal in Jet Aircraft

Maintenance Engineers welfare Association Vs. Ashish Chhawchharia,

Resolution Professional for Jet Airways (India)Ltd. &Anr. Company Appeal

(AT)(Insolvency) No. 752 of 2021 and Regional P.F. Commissioner vs. Ashish

Chhawchharia, Resolution Professional for Jet Airways (India)Ltd. &Anr. In

Company Appeal (AT) (Insolvency) No. 987 of 2022 dated 21.10.2022 support

the case of the Appellant.

Page 5 of 28

13. The Appellant submitted that this Appellate Tribunal directed that

provident fund dues must be paid in full to avoid invalidity of the resolution

plan, and the said judgment was upheld by the Hon'ble Supreme Court upon

dismissal of the SLP.

14. The Appellant submitted that the EPF Act, is a beneficial welfare

legislation aimed at protecting the social security of employees, and the

Appellant organization acts as a custodian of the funds of millions of employees.

The Appellant contended that the statutory framework under Sections 7A, 7B,

14B, and 7Q of the EPF Act ensures determination, recovery, and protection of

such dues, and therefore, the same cannot be compromised or treated at par with

other debts.

15. Concluding his arguments, the Appellant requested this Appellate Tribunal

to set aside the impugned order and allow the present appeal.

16. Per contra, the Respondent No.1 denied all the averments made by the

Appellant as misleading and baseless.

17. The Respondent No.1 stated that, vide order dated 21.02.2019, the

Adjudicating Authority passed an order of liquidation against the Corporate

Debtor and appointed the present Respondent No.1, Mr. Vipul Garg, as the

Liquidator. The Respondent No.1 submitted that upon his appointment as

Liquidator, a public announcement was made in accordance with Form B of

Schedule II read with Regulation 12(3) of the IBBI (Liquidation Process)

Regulations, 2016 on 03.03.2019 calling upon all stakeholders to submit or

Page 6 of 28 update their claims as on the liquidation commencement date. The Respondent

No.1 stated that claims were received from various stakeholders, including

Financial and Operational Creditors, out of which claims amounting to Rs.

32,40,44,966.32/- were admitted. The Respondent No.1 contended that the

Corporate Debtor was not a going concern and its operations had ceased even

prior to initiation of CIRP. The Respondent No.1 submitted that a liquidation

estate was constituted under Section 36 of the Code, and assets including stock,

plant and machinery, and immovable properties such as land and building were

realized. The Respondent No.1 stated that a total amount of Rs. 1,70,49,610/-

was realized and distributed in accordance with the waterfall mechanism

prescribed under Section 53 of the Code.

18. The Respondent No.1 submitted that the Appellant had not filed any claim

during the CIRP. The Respondent No.1 contended that only after the liquidation

order dated 21.02.2019, the Appellant filed its claim for the first time on

02.04.2019 in Form B claiming Rs.1,42,463/-, Rs. 11,85,552/- based on

provisional assessment under Section 7A of the EPF Act, Rs. 15,53,280/-

towards penal damages and interest, and an additional Rs. 7,74,095/- in respect

of another establishment, namely M/s Laxmi Enterprises.

19. The Respondent No.1 submitted that the Liquidator informed the Appellant

that the claim was filed beyond the last date i.e., 23.03.2019 and was also

submitted in an incorrect form, namely Form B instead of the prescribed forms

for workmen and employees. The Respondent No.1 stated that vide email dated

Page 7 of 28 01.05.2019, the Appellant was requested to rectify the defects, followed by

reminders dated 06.05.2019 and subsequent communications. The Respondent

No.1 contended that the liability of Rs. 7,74,095/- did not pertain to the

Corporate Debtor and could not be admitted. The Respondent No.1 further

stated that it was clarified that under Section 33(5) of the Code, no fresh

proceedings can be initiated once liquidation has commenced, and accordingly

claims based on provisional assessments and consequential penalties could not

be entertained. The Respondent No.1 contended that only the principal amount

of Rs. 1,42,463/- was admitted as Government dues.

20. The Respondent No.1 submitted that the Appellant was duly informed that

the list of stakeholders had been finalized and filed before the Adjudicating

Authority, on 07.05.2019. The Respondent No.1 stated that subsequent

communications dated 07.01.2020, 28.09.2021, 27.10.2021 and 29.10.2021

reiterated that only the admitted amount would be considered and no further

liability could be imposed. The Respondent No.1 contended that the Appellant

was advised to seek appropriate directions from the Adjudicating Authority, if

aggrieved.

21. The Respondent No.1 submitted that vide email dated 11.11.2021, the

Appellant was informed that its share under Section 53 had been calculated at

Rs. 6,014/- on a pari passu basis with the Financial Creditor, and the same was

remitted via cheque dated 08.11.2021. The Respondent No.1 stated that the said

Page 8 of 28 amount was duly realized and acknowledged by the Appellant, which is evident

from the email communication dated 21.12.2021.

22. The Respondent No.1 submitted that despite the completion of distribution,

the Appellant again filed a claim on 02.12.2022. The Respondent No.1 stated

that the Liquidator responded vide letter dated 25.12.2022 stating that the final

liquidation report had already been filed on 23.02.2022 and no assets remained

for further distribution. The Respondent No.1 contended that the Corporate

Debtor stood dissolved vide order dated 06.03.2023 and the Liquidator had been

discharged from his duties.

23. The Respondent No.1 submitted that reliance is placed on the judgment of

the Hon'ble Madras High Court in Czarnikow Group Ltd. vs. Commissioner of

Customs (Preventive) (2023) ibclaw.in 565 HC, wherein it was held that a

creditor's right to participate in distribution arises only upon submission of a

claim, and failure to do so disentitles such creditor from claiming any share in

the liquidation proceeds. The Respondent No.1 further contended that reliance

is also placed on the judgment of this Appellate Tribunal in Parameshwara

Udpa R.P. vs. Assistant PF Commissioner, Company Appeal (AT)(CH) No. 231

of 2021 dated 23.09.2022, wherein it was clarified that the exclusion under

Section 36(4)(a)(iii) of the Code applies only where a separate provident fund is

maintained under Section 16A of the EPF Act.

24. The Respondent No.1 submitted that the inquiry proceedings initiated by

the Appellant under Sections 7A, 7Q and 14B of the EPF Act on 28.03.2019

Page 9 of 28 were initiated after the commencement of liquidation on 21.02.2019 and are

therefore hit by Section 33(5) of the Code. The Respondent No.1 contended that

such proceedings are void ab initio and any claim arising therefrom is not

maintainable.

25. The Respondent No.1 submitted that Section 36(4)(a)(iii) of the Code

protects only the amounts due to workmen or employees where a separate fund

is maintained, and since no such fund exists in the present case, the assets form

part of the liquidation estate and must be distributed in accordance with Section

53. The Respondent No.1 contended that interest and damages under Sections

7Q and 14B of the EPF Act are payable to the statutory authority and fall within

the category of Government dues under Section 53(1)(e)(i) of the Code, and

hence cannot be excluded from the liquidation estate.

26. The Respondent No.1 submitted that the Appellant failed to file its claim

in the prescribed forms under Regulation 19, i.e., Form E or Form F, and instead

filed the claim in Form B, rendering the claim procedurally defective. The

Respondent No.1 contended that such non-compliance warrants rejection of the

claim.

27. The Respondent No.1 submitted that the Appellant failed to avail the

statutory remedy under Section 42 of the Code by not challenging the decision

of the Liquidator before the Adjudicating Authority within the prescribed period

of 14 days. The Respondent No.1 contended that such failure clearly

Page 10 of 28 demonstrates lack of diligence and disentitles the Appellant from raising the

present claims at this belated stage.

28. Per contra, the Respondent No.2 denied all the averments made by the

Appellant as misleading and baseless.

29. The Respondent No. 2 submitted that it is a financial creditor of the

Corporate Debtor. The Respondent No. 2 stated that the CIRP was initiated upon

a petition filed by an operational creditor and was admitted by the Adjudicating

Authority on 26.04.2018, whereby moratorium was declared. The Respondent

No. 2 further stated that subsequently, liquidation of the Corporate Debtor was

ordered on 21.02.2019 and a Liquidator was appointed. The Respondent No. 2

submitted that the Liquidator duly made a public announcement inviting claims

from stakeholders and proceeded in accordance with the applicable regulations.

The Respondent No. 2 stated that claims were received and verified, and claims

amounting to Rs. 32,40,44,966/- were admitted.

30. The Respondent No. 2 contended that the Corporate Debtor was not a going

concern and had ceased operations even prior to the initiation of CIRP. It is

submitted that the liquidation estate was duly formed under Section 36 of the

Code, and assets including stock, plant, machinery, land and building were sold,

realizing a total amount of Rs. 1,70,49,610/-. The Respondent No. 2 stated that

the liquidation proceeds were distributed strictly in accordance with the

waterfall mechanism under Section 53 of the Code after adjusting CIRP and

liquidation costs. The Respondent No. 2 highlighted that it had claimed Rs.

Page 11 of 28 29,57,51,882/- and was distributed Rs. 1,23,96,821/-, being 4.2% of the total

realization.

31. The Respondent No. 2 submitted that the final report and compliance

certificate were duly filed before the Adjudicating Authority, certifying that the

liquidation process was conducted in accordance with the provisions of the

Code. The Respondent No. 2 contended that the Corporate Debtor stood

dissolved vide order dated 06.03.2023 and that the Respondent Bank was

directed to pursue avoidance applications under Sections 43 and 66 of the Code.

32. The Respondent No. 2 submitted that it does not dispute the valuation of

liquidation assets or the distribution made by the Liquidator. The Respondent

No. 2 stated that the liquidation process was conducted in compliance with

Sections 36 and 53 of the Code, and there was no violation of any statutory

provisions, including Section 11 of the EPF Act. The Respondent No. 2

submitted that EPFO dues are statutory dues and fall within the ambit of Section

53(1)(e) of the Code, and despite this, the Liquidator treated such dues at par

with secured creditors, thereby placing them higher in the waterfall.

33. The Respondent No. 2 contended that the Appellant failed to file its claim

during the CIRP and only submitted its claim after commencement of

liquidation. The Respondent No. 2 stated that the claim was filed in Form-B and

included amounts based on provisional assessment, damages and interest, out of

which only Rs. 1,42,463/- was admitted as government dues.

Page 12 of 28

34. The Respondent No. 2 contended that Section 36(4)(a)(iii) of the Code is

inapplicable in the absence of a separately maintained provident fund, and

reliance was placed on the judgment in Parameshwara Udpa RP vs Assistant

PF Commissioner, Company Appeal (AT) (CH) No.231 of 2021 wherein it was

held that in the absence of a separate provident fund account, claims must be

dealt with under Section 53.

35. The Respondent No. 2 contended that the Appellant initiated proceedings

under Sections 7A, 7Q and 14B of the EPF Act during the liquidation period,

which is in violation of Section 33(5) of the Code, rendering such proceedings

void ab initio. The Respondent No. 2 stated that no misrepresentation has been

made by the Resolution Professional or Liquidator, and that the Appellant was

repeatedly informed about the status of its claim and the requirement to rectify

deficiencies. The Respondent No. 2 submitted that the additional claims raised

by the Appellant based on provisional assessments and penal liabilities could

not be admitted during liquidation.

36. Concluding his arguments, the Respondent No.2 requested this Appellate

Tribunal to dismiss the present appeal.

Page 13 of 28

Findings

37. It is noted that the Corporate Debtor was admitted into the CIRP vide order

dated 26/04/2018 and was subsequently ordered to be liquidated vide order

dated 21/02/2019, whereby Respondent No. 1 was appointed as the Liquidator

pursuant to which thereto, the Liquidator issued a public announcement inviting

claims from all stakeholders in terms of the applicable IBBI Regulations,

including the Appellant and the Respondent No.2. The Respondent No.2, being

a secured financial creditor of the Corporate Debtor, duly filed its claim, which

was admitted to the extent of Rs. 29,57,51,882/-.

38. We note that the impugned order in Company Petition (IB) NO.

93/Chd/Hry/2018 was passed after consideration of the Final Report submitted

by the Liquidator that the liquidation process was duly conducted and no assets

remained for distribution, and ordered dissolution of the Corporate Debtor, M/s

Jai Laxmi Lighting Industries Pvt Ltd.

39. We take into consideration that the Appellant filed its claim which reads as

under:

Page 14 of 28 Page 15 of 28 Page 16 of 28 Page 17 of 28

40. The Liquidator, after verification, admitted the claim of EPFO of Rs.

1,42,463/- and distributed a sum of Rs. 6,014/-. It is relevant to take into

consideration that the total amount realized during liquidation was Rs.

1,70,49,610/-, and distribution was made as per the waterfall mechanism under

Section 53 of the Code, wherein both the Appellant and the Respondent No.2

received approximately 4.2% of their admitted claims. In this connection we

reproduce Para 6 of the Impugned Order including table which reads as under:

"6.It is further submitted that the liquidator had successfully completed the liquidation of the corporate debtor and thereafter distributed the proceeds from the sale of the assets of the corporate debtor to the stakeholders after adjusting the CIRP cost/liquidation cost. The details of distribution to stakeholders under Section 53 of IBC, 2016 are as under"

(Emphasis supplied)

Page 18 of 28

41. It is the case of the Appellant is that in terms of Section 36(4)(a)(iii) of the

Code the Provident Fund dues cannot be taken in Liquidation Estate. The

relevant provision is reproduced hereinbelow:

"Section 36: Liquidation estate.......

(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation:--

(a) assets owned by a third party which are in possession of the corporate debtor, including--

(i) assets held in trust for any third party;

(ii) bailment contracts;

(iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;

(iv) other contractual arrangements which do not stipulate transfer of title but only use of the assets; and

(v) such other assets as may be notified by the Central Government in consultation with any financial sector regulator;

(Emphasis supplied)

42. We note that Section 36(4)(a)(iii) of the Code states that all sums due to

any workman or employee from the provident fund, the pension, and the

gratuity fund shall not be included in the liquidation estate assets and shall not

be used for recovery in the liquidation. Section 53(1) of the Code further states

that the proceeds from the sale of the liquidation assets shall be distributed

according to the order of priority and within such period and in such manner

as may be specified under the aforementioned section. Assets which are not

Page 19 of 28 included in the liquidation estate, cannot come under the purview of Section

53 (1), which is the case with PF, Gratuity and Pension Funds.

43. In this connection both the Respondent No.1 and No.2 submitted that the

aforesaid provision excludes provident fund dues from the liquidation estate

only where such amounts are maintained as a separate and identifiable corpus

or statutory fund and both the Respondent No.1 and No.2 highlighted that in

the present case, no such separate provident fund account or trust has been

maintained by the Corporate Debtor, in the absence of which the Appellant

cannot seek exclusion of its dues from the liquidation estate, and the claim has

rightly been dealt by the Adjudicating Authority with in accordance with the

provisions of the Code.

44. This position was examined by this Appellate Tribunal in the case of

Parameshwara Udpa, RP vs. Assistant PF Commissioner, Company Appeal

(AT) (CH) No. 23 of 2021 decided on 23/09/2022 (2023) 236 Comp Cas 198.

The relevant finding of this Appellate Tribunal reads as under:

"Therefore, the 'resolution professional' is not duty bound to make adequate provisions for 'provident fund' when the 'corporate debtor' did not have separate 'provident fund account'. It is again reiterated that the 'resolution professional' has to deal with the 'claims', if any, on this account, in terms of section 53 of the I and B Code, 2016, if warranted and provided as per 'law'."

Page 20 of 28 "In the present case .... There was no specific fund towards 'Provident Fund'.... The "Corporate Debtor' has not created any specific fund for the purpose of 'provident fund' ... therefore the direction to the resolution professional to make adequate provisions ... is not correct."

(Emphasis supplied)

It was held by a two members bench in the instant case that during CIRP,

the resolution professional was not obligated to make provisions for PF dues

when the corporate debtor had not maintained a designated PF account, and any

claims towards PF dues must be made before the resolution professional and

dealt with under the waterfall mechanism under the Code. However,

subsequently a three members bench of this Tribunal in the matter of 'Mr. Anuj

Bajpai vs Employees Provident Fund Organisation (EPFO) and Ors. [Comp.

App. (AT) (Ins.) No. 1141 of 2023] has decided to that all dues of EPFO do not

fall within the purview of liquidation estate.

45. We also refer to the Judgment of this Appellate Tribunal in the case of

C.G. Vijyalaskshmi and Ors. vs Kumar Rajan, RP, Hindustan Newsprint

Limited and Ors. [Company Appeal (AT) (CH) (Ins.) No. 29 of 2021]. The

relevant paras 14,15 of the judgement reads as under:

"14. Section 36(4) provides that the following shall not be included in the Liquidation Estate Assets and shall not be used for recovery in the Liquidation'. In the instant case, clause (iii) of sub-section 4(a) is relevant which is all sums

Page 21 of 28 due to any Workmen/Employee from the 'Provident Fund'. 'Pension Fund' or the 'Gratuity Fund'.

15. Hence, sums due to any Workmen from the above funds are excluded from the "Liquidation Estate'. Legislative intent is clear that any 'sums' due to any Workmen from aforesaid 'fund' are excluded and cannot be used for "recovery' in the Liquidation. 22. Having regard to the ratio laid down by this Tribunal in 'Jet Aircraft' (Supra) and the Order having been upheld by the Hon'ble Supreme Court in Civil Appeal No. 407 of 2023 the question whether there was 'fund' maintained by the Corporate Debtor or not pales into insignificance."

(Emphasis supplied)

The aforesaid decision clearly upholds principles that the provision for dues of

PF, Pension and Gratuity of employees has to be made by the Liquidator

irrespective of the fact whether separate funds are available for the same with

the Corporate Debtor. The claims in this regard need to be settled out of

available funds of the Corporate Debtor.

46. We take into consideration the finding of the Hon'ble Supreme Court of

India in the case of State of Jharkhand and Ors. vs Jitendra Kumar Srivastava

and Ors. /MANU/SC/0801/2013/. The relevant paras 7 & 8 of the judgment

reads as under:

"7. It is an accepted position that gratuity and pension are not the bounties. An employee earns these benefits by dint of his long, continuous, faithful and un-blemished service.

Page 22 of 28 8. It is the hard-earned benefit, which accrues to an employee and is in the nature of property. This right to property cannot be taken away without the due process of law as per the provisions of Article 300A of the Constitution of India."

(Emphasis Supplied)

47. The issue of similar nature was extensively discussed and decided by this

Tribunal in the Jet Aircraft Maintenance Engineering Welfare Association V.

Ashish Chhawchharia, RP of Jet Airways India Ltd. in CP (IB) No.

2205/B/2019 and this Appellate Tribunal held that:

"68. The judgment of Hon'ble Supreme Court as relied by learned counsel for the Respondent also in Para 53 clearly held that Section 53(1) of the Code shall not be applicable to such sums, which are to be treated outside the liquidation process and liquidation estate assets under the Code. Direction issued by Hon'ble Supreme Court in Para 54(i) was with regard to wages and salary of the workmen/employees of the Corporate Debtor during the CIRP period and under direction (ii) at Para 54, Hon'ble Supreme Court directed in reference to Section 36(4) of the Code that provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets and the share of the workmen dues shall be kept outside the liquidation process. Learned counsel for the Respondent has relied on words "if any, available" occurring in direction (ii). The above words cannot be read to mean that the workmen and employees are not entitled for provident

Page 23 of 28 fund, gratuity fund and pension fund if not available with the Liquidator."

69. The present is a case where resolution plan has been approved; present is not a case of liquidation. Under the provisions of the 1952 Act, the corporate debtor is statutorily obliged to deposit the provident fund of the workmen and employees with the EPFO. It has been clearly stated in the additional affidavit of the resolution professional dated July 25, 2022 that no amount towards provident fund of the workmen and employees were deposited after February, 2019. Insolvency commencement date being June 20, 2019, the corporate debtor was obliged to deposit the contribution towards provident fund with EPFO. The claim of provident fund till the insolvency commencement date, of the workmen and employees was to be accepted and successful resolution applicant was liable to make payment of provident fund till the date of initiation of the CIRP and statutory obligation of the corporate debtor was liable to be discharged by the successful resolution applicant. From the affidavit of resolution professional it is clear that resolution professional in the claim which has been admitted of the workmen for 24 months, the provident fund and gratuity amount was also included. The workmen have received payments with regard to provident fund and gratuity in part under the resolution plan subject to the liquidation value of the workmen. We, thus, are satisfied that workmen are entitled for issuing appropriate direction to successful resolution applicant to make payment of the workmen of the provident fund and gratuity dues up to the date of insolvency commencement date

Page 24 of 28 less the amount already received under the resolution plan towards provident fund and gratuity. The corporate debtor having not deposited the statutory dues with the EPFO, the said statutory liability has to be discharged by the successful resolution applicant.................

134. In result, the appeal(s) are decided in following manner:

(I) The appeal(s) of workmen and employees being Company Appeal (AT) (Insolvency) Nos. 643, 752, 801, 915 of 2021 and 771 of 2022 are partly allowed with following directions:

(a) Successful resolution applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the resolution plan to the workmen.

(b) The workmen are also entitled to payment of their gratuity dues as on insolvency commencement date, after adjusting any amount towards gratuity paid under the resolution plan.

It is made clear that entitlement of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not been treated as termination of their services.

(c) The employees are also entitled to the payment of their full provident fund, unpaid up to the date of insolvency commencement date. It is made clear that full payment of provident fund would be of that unpaid part of provident fund, which has not been deposited by the corporate debtor in the EPFO.

(d) Employees shall also be entitled for the gratuity, which fell due up to insolvency commencement date.

Page 25 of 28

(e) The rest of the prayers of the workmen and employees are denied.

(f) The Chairman of the Monitoring Committee, erstwhile resolution professional is directed to compute the payments to be made to workmen and employees within one month from today and communicate the same to the successful resolution applicant to take steps for payment............

(Emphasis supplied)

The aforesaid decision of this Tribunal has been upheld by Hon'ble Supreme

Court headed by Hon'ble CJI in the case of 'Jalan Fritsch Consortium v.

Regional Provident Fund Commissioner & Anr. (Civil Appeal No 407 of 2023

with Civil Appeal Nos 465-469 of 2023).

48. We would also refer to yet another judgement of this Appellate Tribunal

in case of Truvisory Insolvency Professionals Pvt. Ltd. (IPE) vs Employees'

Provident Fund Organisation and Anrs. Company Appeal (AT) (INS) No. 580

of 2023 where it was clearly held that:

"29. It is clear from the discussion above that even if no separate fund is available for provident fund, gratuity fund and pension fund they have to be paid out of existing funds of the CD.

30. The decision of this Tribunal in the aforesaid matter means that in the case of Provident Fund, the employees contribution, employers contribution, interest if any to be paid by the employer in case of delay in payment and damages as provided in Sections 11 and Section 7A, 7Q, 14B and 15 (2) of Employees Provident Funds and Miscellaneous

Page 26 of 28 Provision Act, 1952 [Act 19 of 1952] are covered under the provisions of Section 36(4)(a)(iii) of the Code and are not part of the liquidation estate and hence are not subject to distribution under Section 53 (1) of the code. The aforesaid decision of the Tribunal was a case of CIRP and its resolution and the payment for PF dues had to be made by successful resolution applicant. However, the ratio is equally applicable in case of liquidation as the principles relating to components of PF dues not forming part of the liquidation estate has been decided in this case."

(Emphasis supplied)

49. We appreciate the arguments of the Appellant that the EPF Act is a welfare

legislation, and belong to legitimate dues payable to the employees. The

Appellant has submitted upon Form-B dated 02/04/2019 to claim an amount of

Rs. 36,55,290 and said claim is based on provisional assessment, penal

damages, interest, and other ancillary components.

50. Incidentally, we note that the Appellant has included outstanding

provident fund dues from Sh. Gyaninder Sadana, M/s Laxmi Enterprises, of

Rs.7,74,095 other than the Corporate Debtor indicating that the liability is not

exclusively attributable to the Corporate Debtor, and belong to M/s Laxmi

which is a separate and distinct entity and cannot be equated to the Corporate

Debtor, i.e., M/s Jai Laxmi Lighting Industries Pvt. Ltd. Both entities are

separate legal persons having distinct assets and liabilities.

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51. We are conscious of the fact that the Corporate Debtor stands dissolved

vide order dated 06.03.2023 of the Adjudicating Authority and vide the same

order the Liquidator has been discharged from his duty and responsibilities as

Liquidator of the Corporate Debtor. However, the correct law need to be made

applicable.

52. In view of detailed analysis including judicial pronouncements by

Hon'ble Supreme Court of India as well as this Appellate Tribunal, we find

merit in the contentions of the Appellant. The Appeal succeeds. Impugned

Order is set aside. The Adjudicating Authority is required to examine the issues

fresh, in accordance with law. All the parties are directed to appear before the

Adjudicating Authority on 12.05.2026.

53. No order as to cost. I.A., if any stand closed.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) Sim

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