Regional Provident Fund Commissioner vs Ms. Mamta Binani & Anr

[Arising out of Order dated 11.05.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in IA(IB) 1332/KB/2020 in CP(IB) No.1724/KB/2018]

In the matter of:

Regional Provident Fund Commissioner, ....Appellant EPFO Regional Office Jamshedpur Vs.

Ms. Mamta Binani, ...Respondents Resolution Professional & Ors. For Appellant: Mr. B.B. Pradhan, Mr. Kishore Kumar Behunia, Advocates. For Respondents: Ms. Surbhi Anand, Advocate for R-1. Mr. Shatadru Chakraborty, Mr. Tanishq Sharma, Advocates for R-2. Mr. Sunil Choudhary, Advocate for R-3. Mr. Kumar Anurag Singh, Mr. Zain A Khan, Mr. Anish A., Advocates State of Jharkhand.

JUDGMENT

(13th March, 2024)

Ashok Bhushan, J.

This Appeal by Regional P.F. Commissioner has been filed challenging

the order dated 11.05.2021 passed by the Adjudicating Authority (National

Company Law Tribunal), Kolkata Bench, Kolkata in IA(IB) No. 1332/KB/2020

by which order the Adjudicating Authority has allowed the application filed

by the Resolution Professional for approval of the Resolution Plan. 2

2. Brief facts of the case necessary to be noticed for deciding this Appeal

are:-

2.1. The Corporate Insolvency Resolution Process (CIRP) against the

Corporate Debtor- 'R.D. Rubber Reclaim Limited' commenced by the order

dated 25.10.2019. On 02.11.2019, public announcement was made. The

Appellant- Regional P.F. Commissioner submitted its claim on 28.08.2020 for

Rs.1,02,84,785/- under Section 7A, Rs.75,62,576/- under Section 7Q and

Rs.1,05,63,927/- under Section 14B of the Employees' Provident Funds &

Miscellaneous Provisions Act 1952 (hereinafter referred to as "1952 Act"). The

Resolution Professional admitted the entire amount claimed under Sections

7A, 7Q and 14B which was communicated to the Resolution Professional vide

letter dated 28.08.2020. The Resolution Plan was submitted by Resolution

Applicant which was approved by the Committee of Creditors (CoC) with 100%

vote share on 06.11.2020. The Resolution Professional filed an application

before the Adjudicating Authority for approval of the plan which Resolution

Plan has been approved by order dated 11.05.2021 and under the Resolution

Plan, the amount proposed to be paid to the Appellant as Rs.1,02,84,785/-

i.e. the amount which was claimed under Section 7A. With regard to amount

claimed under Sections 7Q and 14B, no payment was proposed. In paragraph

15, the Adjudicating Authority has noticed the details of the amount claimed,

amount admitted and the amount proposed to be paid in the plan. Appellant

aggrieved by the order dated 11.05.2021 passed by the Adjudicating Authority

approving the Resolution Plan in which only amount proposed was amount

under Section 7A has come up in this Appeal.

Company Appeal (AT) (Insolvency) No. 245 of 2022 3

2.2. Notices were issued on 14.03.2022 in this Appeal noticing the

submission of the Appellant which order is as follows:-

"14.03.2022: Learned Counsel for the Appellant submits that although Amount under Section 7A of the EPF Act has been paid. The Amount as determined under Section 7Q and 14B has not been paid in the Resolution Plan. He submits that he was entitled for entire payment which was also admitted by the IRP.

2. Issue Notice. Learned Counsel for the Respondent appears and accepts notice. Respondent to file Reply- Affidavit within two weeks. Rejoinder, if any, may be filed within two weeks, thereafter.

List this Appeal 'For Admission (After Notice)' on 12th April, 2022."

2.3. A reply has been filed by the Resolution Professional as well as the

Successful Resolution Applicant.

3. We have heard Shri B.B. Pradhan, Learned Counsel for the Appellant,

Ms. Surbhi Anand, Learned Counsel appearing for the Respondent No.1-

Resolution Professional, Shri Shatadru Chakraborty, Learned Counsel

appearing for the Respondent No.2 and Shri Sunil Choudhary, Learned

Counsel for the Respondent No.3 and Counsel appearing for the CoC.

4. Learned Counsel for the Appellant submits that when the Appellant

filed its claim under Sections 7A, 7Q and 14B, the entire amount towards

provident fund dues were required to be paid. It is submitted that the claim

which was entitled to be paid first and there can be no denial of the amount.

Company Appeal (AT) (Insolvency) No. 245 of 2022 4

It is submitted that the issue is well settled by this Tribunal in "Jet Aircraft

Maintenance Engineers Welfare Association vs. Ashish Chhawchharia,

Resolution Professional of Jet Airways (India) Ltd. & Ors.- Company

Appeal (AT) (Insolvency) No.752 of 2021" . It is submitted that the dues

under Section 7Q and Section 14B are also PF dues and are entitled to be

paid. He has relied on the judgment of the Hon'ble Supreme Court in

"Maharashtra State Cooperative Bank Limited vs. Assistant Provident

Fund Commissioner and Others- (2009) 10 SCC 123". Learned Counsel for

the Appellant has also relied a judgment of the Chennai Bench of this Tribunal

in "Mrs. C.G. Vijyalakshmi vs. Shri Kumar Ranjan, Resolution

Professional and Ors.- Company Appeal (AT) (CH) (Ins.) No.29 of 2021"

decided on 08.02.2023.

5. Learned Counsel for the Resolution Professional refuting the

submissions of the Counsel for the Appellant submits that the Appellant has

filed this Appeal only on 21.02.2022 against the order dated 11.05.2021 i.e.

more than 9 months from passing of the order. It is submitted that the

Resolution Plan has already been implemented and the amount payable to

the Appellant under Resolution Plan has already been paid which has been

accepted by the Appellant. The amount claimed by the Appellant under

Section 7A has been 100% paid. Payments to all stakeholders have been made

and plan have been fully implemented and the Respondent No.1 has no role

to play. On 02.02.2022, implementation report has already been sent to the

CoC.

Company Appeal (AT) (Insolvency) No. 245 of 2022 5

6. Learned Counsel for the Successful Resolution Applicant (SRA) also

submits that the entire amount under the plan has already been distributed.

Admitted claim of the Appellant under Section 7A of Rs.1,02,84,785/- has

been paid in full. It is submitted that the SRA has observed that all existing

employees of the Corporate Debtor and employees are working without any

objection or protest. There is no illegality of approval of the Resolution Plan

which has been approved by 100% voting share of the CoC. No irregularity

has been committed in the process of the CIRP. SRA has successfully

implemented the plan. Implementation report of the plan dated 02.02.2022

has been submitted. Appellant having received the amount as proposed in the

plan is not entitled to file this Appeal.

7. We have considered the submissions of the Counsel for the parties and

perused the record.

8. The claim submitted by the Appellant and the claim admitted by the

Resolution Professional as well as the amount proposed have been noticed in

paragraph 15 of the judgment of the Tribunal, which is as follows:-

"15. The Applicant submit the relevant information with regard to the amount claimed, amount admitted and the amount proposed to be paid by the Resolution Applicant, i.e., Glix Securities Pvt. Ltd., under the said Resolution Plan is tabulated as under:-

Sl. Creditor Amount Amount % Amount No. claimed Admitted share proposed in in Resolution Plan CoC (in Rs.)

Company Appeal (AT) (Insolvency) No. 245 of 2022 6

Financial Creditors

1. Indian 24,44,73,641 24,44,73,641 100% 7,92,00,000 Overseas Bank Operational Creditors

2. Jharkhand 7,66,69,324 6,60,20,682 NA 10,09,458 Bijli Vitran Nigam Limited

3. Jharkhand 32,58,563 32,58,563 NA 49,824 Industrial Area Development Authority

4. Deputy 2,75,56,320 2,75,56,320 NA 4,21,337 Commissioner State Tax, Adityapur Circle, Jamshedpur

5. Employees Provident Fund Organisation, Jharkhand-

u/s 7A of EPF 1,02,84,785 1,02,84,785 NA 1,02,84,785 & MP Act u/s 7Q of EPF 75,62,576 75,62,576 NA - & MP Act u/s 14b of 1,05,63,927 1,05,63,927 NA - EPF & MP Act 6. Employees 4,28,159 1,65,165 NA 2,525 State Insurance Corp, WB 7. Shouryavansh 1,49,67,640 1,49,67,640 NA 2,28,856 Enterprises Total 39,57,64,935 38,48,53,299 100% 9,11,96,785

9. From perusal of the aforesaid, it is clear that the amount claimed under

Section 7A of Rs.1,02,84,785/- has been paid in full. However, no payment

has been made towards amount claimed under Section 7Q and Section 14B.

10. Learned Counsel for the Appellant submitted that the amounts under

Section 7Q and Section 14B also form part of the amount due from the

employer. He has relied on the judgment of the Hon'ble Supreme Court in

Company Appeal (AT) (Insolvency) No. 245 of 2022 7

"Maharashtra State Cooperative Bank Limited" (supra) where the Hon'ble

Supreme Court after noticing the provisions of Sections 7Q and 14B has held

that the amounts claimed under Section 7Q and Section 14B are amounts

which have priority of payment under Section 11 of the Employees' Provident

Funds & Miscellaneous Provisions Act 1952. We, thus, are of the clear view

that all the amounts claimed by the Appellant under Sections 7A, 7Q and 14B

were part of provident fund dues.

11. Learned Counsel for the Appellant has relied on the judgment of this

Tribunal in "Jet Aircraft Maintenance Engineers Welfare Association"

(supra) where it was held that the PF dues of the employees have to be paid

in full and one of the Appeals which was considered in the judgment was

Company Appeal (AT) (Insolvency) No. 987 of 2022 filed by the Regional

Provident Fund Commissioner which Appeal was allowed by this Tribunal and

the Successful Resolution Applicant was directed to make payment to the

Appellant of provident fund dues as admitted by the Resolution Professional.

Counsel for the Appellant has relied on paragraph 134(II) of the judgment

which is as follows:-

"(II) Company Appeal (AT) (Insolvency) No.987 of 2022- Regional P.F. Commissioner vs. Ashish Chhawchharia, Resolution Professional for Jet Airways (India) Ltd. & Anr.- is allowed. The Successful Resolution Applicant is directed to make payment to the Appellant of provident fund dues as admitted by the Resolution Professional."

Company Appeal (AT) (Insolvency) No. 245 of 2022 8

12. Judgment relied by the Counsel for the Appellant in Company Appeal

(AT) (Insolvency) No.29 of 2021 also do support the submissions of the

Appellant. In paragraphs 28, 29 and 30, this Tribunal held:-

"28. Having regard to the ratio of the Judgement in 'Jet Aircraft Maintenance Engineers Welfare Association' (Supra) of this Tribunal, upheld by the Hon'ble Apex Court, this Tribunal is of the earnest view that 'PF' and 'Gratuity' is to be paid in full as per the provisions of EPF and NP Act, 1952 and payment of Gratuity Act, 1972. Since admittedly the amounts paid are only 35.13% having treated them as 'Secured Creditors', we are of the considered view that indeed there was a violation of the provisions of Section 30(2) of the Code, with respect to the payment of 'PF' and 'Gratuity' only.

29. As regards the other allegations, raised by the Appellant with respect to undervaluation and the scope and performance of SRA in taking over the unit are sans evidence and this `Tribunal', does not find any other `material irregularity', in the `Approval' of the 'Resolution Plan'. Rest of the prayers are declined and this `Tribunal', does not find any other case / issue for interfering with the `Order' of the 'Adjudicating Authority', approving the 'Resolution Plan', except for issuing this `direction' to the `Successful Resolution Applicant', to make payment of unpaid 'Provident Fund' and 'Gratuity Fund' and 'pending dues' to the `Workmen' / `Employees', till the date of `Corporate Insolvency Resolution Process', after deducting the amount already paid towards `Provident Fund', in the 'Resolution Plan', as per the

Company Appeal (AT) (Insolvency) No. 245 of 2022 9

principles laid down in 'Jet Aircraft maintenance Engineers Welfare Association' (Supra), upheld by the Hon'ble Supreme Court in Civil Appeal No. 407/2023 dated 30.01.2023, which is the law of the land and is binding on all 'Courts' & 'Tribunals' of India.

30. Accordingly, these `Appeals' are `allowed' in `part', to the extent indicated supra. The connected pending `Interlocutory Applications', if any, are closed."

13. Claim of the Appellant submitted under Sections 7A, 7Q and 14B

having been admitted, we are of the view that the Appellant's entire claim

require consideration and payments in the Resolution Plan.

14. Learned Counsel for the SRA submitted that their plan has already been

implemented and all employees and workmen have been allowed to work in

the SRA. It is submitted that the Appeal was filed after 9 months from the

order and on the date when the Appeal was filed, the entire plan was already

implemented and at this stage, if SRA is directed to make the entire payment

running company may have to be closed. SRA submitted that in any view of

the matter the SRA has already paid the entire dues under Section 7A which

was the dues of the provident fund, the damages under Section 14B are not

to be recovered and the SRA be exempted from payment of the said amount

under Section 14B.

15. We have occasion to consider the similar issue which raised in

Company Appeal (AT) (Insolvency) No.808 of 2022- "Regional Provident

Fund Commissioner vs. Shri Manish Kumar Bhagat & Anr." decided on

11.10.2023. One of the claims which was not paid by the Resolution Plan in Company Appeal (AT) (Insolvency) No. 245 of 2022 10

the said case was also claim under Section 14B of the Employees Provident

Fund Miscellaneous Provisions Act, 1952. This Tribunal taking note of the

claim under Section 14B took the view that the Central Board is empowered

to waive the damages under Section 14B as per the scheme under the 1952

Act. It was observed that Section 14B referred to recommendation by Board

under the 1952 Act. The said Act having been repealed and now repealed by

the IBC Code, the power of recommendation can be exercised by NCLT. In

paragraphs 13 and 14 of the judgment, following was held:-

"13. The above provision indicates that the Central Board is empowered to waive the damages under Section 14B of the Act. The Para 32B of the Scheme provides that Board for Industrial and Financial Reconstruction for reasons to be recorded in its schemes, in this behalf recommends, waiver of damages up to 100 per cent may be allowed. After enforcement of IBC, the provisions of Board for Industrial and Financial Reconstruction and Sick Industrial Companies (Special Provisions) Act, 1985 were repealed and earlier statutory regime for rehabilitation is now substituted by Insolvency Regime as contained in IBC. Thus when Insolvency Resolution Process has been initiated against a Corporate Debtor and Resolution plan has been approved under IBC, power of Central Board to reduce or waive the damages can be exercised with regard to the damages imposed under Section 14B. Paragraph 32 of the 1952 Scheme as extracted above also contemplate recommendation by Board for Industrial and Financial Reconstruction, 1985 Act being not in force and substituted by Insolvency Company Appeal (AT) (Insolvency) No. 245 of 2022 11

Regime there can be now no recommendation for waiver of the damages under Section 14B of Board for Industrial and Financial Reconstruction. The power of recommendation as contemplated in paragraph 32B scheme can very well be exercised by the NCLT. We while hearing the Appeal against order of NCLT in an appropriate case can make a recommendation to the Central Board to waive the damages.

14. In the facts of the present case as noted above, we are of the view that Successful Resolution Applicant along with the Order of this Tribunal may pray to the Central Board to waive 100 percent damages of Rs. 31,16,446 imposed by Order dated 25th July, 2017 under Section 14B which step to be taken by SRA within a period of one month from today. We grant liberty to both the parties to make an appropriate application in this Appeal, if any, occasion arises for any further order with regard to wavier as recommended herein. We thus are of the view that no direction need to be issued for payment of damages of Rs. 99,71,315/- which was imposed under Section 14B for reasons indicated above."

16. This Tribunal ultimate directions in paragraph 18(i) (c) permitted the

SRA to make an application to Central Board for waiver of 100 per cent

damages along with the copy of the order. In the facts of the present case, we

are inclined to grant liberty to SRA to make an application to the Central

Board for waiver of the amount of damages under Section 14B as provided in

Section 14B of the 1952 Act.

Company Appeal (AT) (Insolvency) No. 245 of 2022 12

17. Now coming to another part of the claim which was admitted in the

CIRP i.e. amount under Section 7Q amounting to Rs.75,62,576/-. We are of

the view that the said amount is required to be paid by SRA to the Appellant.

18. In view of the above discussions and our conclusion and following the

judgment of this Tribunal in "Jet Aircraft Maintenance Engineers Welfare

Association" (supra) as well as the judgment of this Tribunal in "Mrs. C.G.

Vijyalakshmi" (supra), we dispose of this Appeal with following directions:-

(i) The SRA- Respondent No.3 is directed to make payment of

amount of Rs.75,62,576/- within the period of two months from

today to the Appellant which was admitted claim under Section

7Q.

(ii) With regard to amount admitted under Section 14B of

Rs.1,05,63,927/-, we grant liberty to the SRA to make an

application to the Central Board to waive 100% damages levelled

under Section 14B. SRA make an application under Section 14B

2nd proviso for waiver of the damages under Section 14B which

application be filed within 30 days from today and the Central

Board may consider and take appropriate decision regarding

waiver of the damages under Section 14B expeditiously within

the period of three months from the date copy of the application

is submitted.

Company Appeal (AT) (Insolvency) No. 245 of 2022 13

19. Subject to directions as above, the impugned order dated 11.05.2021

passed by the Adjudicating Authority is affirmed. Parties shall bear their own

cost.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Insolvency) No. 245 of 2022