Tribunal Orders Liquidation of Company, EPFO Entitled to Full PF Dues

The Tribunal ordered the liquidation of the Corporate Debtor, M/s. SAS Autocom Engineers India Pvt. Ltd., following the recommendation of the Committee of Creditors. The EPFO's sale notice for the movable properties of the Corporate Debtor was contested by the Liquidator, emphasizing the need for EPFO to file claims during the insolvency process. The Tribunal affirmed EPFO's entitlement to full PF dues, validated the pre-CIRP attachment by EPFO, set aside the auction conducted by the Liquidator, and directed the Liquidator to prioritize payment of PF dues, with any surplus to be included in the liquidation estate assets.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) and appointment of Interim Resolution Professional (IRP).
2. Liquidation of Corporate Debtor and the role of the Liquidator.
3. Issuance of sale notice by Employees' Provident Fund Organisation (EPFO) and its implications.
4. Jurisdiction of the Tribunal vis-a-vis EPF & MP Act, 1952 and IBC, 2016.
5. Priority of EPF dues and their exclusion from the liquidation estate.
6. Validity of attachment orders issued by EPFO before and during CIRP.
7. Conduct of auction by the Liquidator and its legality in light of existing attachments.
8. Directions for compliance and resolution of outstanding claims.

Detailed Analysis:

1. Initiation of CIRP and Appointment of IRP:
The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor, M/s. SAS Autocom Engineers India Pvt. Ltd., by this Tribunal on 05.10.2018, based on an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code 2016) by an Operational Creditor. The Tribunal appointed the Applicant as the Interim Resolution Professional (IRP), who continued as the Resolution Professional (RP) following the decision of the Committee of Creditors (CoC).

2. Liquidation of Corporate Debtor and Role of the Liquidator:
Based on the CoC's recommendation for liquidation, the RP filed an application seeking the liquidation of the Corporate Debtor, which was ordered by the Tribunal on 08.07.2019. The Liquidator then moved an application to stay the sale of the Corporate Debtor's movable properties by EPFO, which was initially stayed by the Tribunal.

3. Issuance of Sale Notice by EPFO:
The EPFO issued a sale notice dated 23.07.2019 for the sale of the Corporate Debtor's movable properties, claiming an outstanding amount of Rs. 38,89,229/-. The Liquidator contested this sale notice, stating that EPFO did not file a claim during the CIRP or liquidation process. The Tribunal directed EPFO to file necessary forms before the Liquidator for proper consideration and to follow the procedure under IBC, 2016.

4. Jurisdiction of the Tribunal vis-a-vis EPF & MP Act, 1952 and IBC, 2016:
The Tribunal has exclusive jurisdiction under Section 238 of IBC, 2016, which overrides other laws. The Tribunal's jurisdiction includes entertaining applications or proceedings by or against the corporate debtor, claims made by or against the corporate debtor, and questions of priorities or law arising out of insolvency resolution or liquidation proceedings.

5. Priority of EPF Dues and Exclusion from Liquidation Estate:
Section 36(4)(a)(iii) of IBC, 2016, provides that all sums due to any workman or employee from the Provident Fund, Pension Fund, and Gratuity Fund are not to be included in the liquidation estate assets. The Tribunal noted that EPF authorities must file claims during the CIRP or liquidation process to put the IRP/RP/Liquidator on notice about the claim.

6. Validity of Attachment Orders Issued by EPFO:
The attachment of movable properties by EPFO was effected on 25.04.2018, prior to the initiation of CIRP on 05.10.2018. The Tribunal held that the attachment order issued by EPFO is not hit by the declaration of moratorium under Section 14 of IBC, 2016, following the ratio of the Hon'ble NCLAT.

7. Conduct of Auction by the Liquidator:
The Liquidator conducted an auction on 12.02.2020 while the matter was pending before the Tribunal. The Tribunal set aside the auction as it could not be sustained in view of the statutory first charge on the assets of the Corporate Debtor in relation to PF dues, which had not been discharged.

8. Directions for Compliance and Resolution of Outstanding Claims:
The Tribunal directed that the Liquidator can pay off the amount due under the EPF & MP Act, 1952, to the satisfaction of EPFO, in priority to all other debts. If the Liquidator fails to do so, EPFO is free to proceed with the recovery of PF dues as per the provisions of EPF & MP Act, 1952. Any surplus after appropriation of PF dues should be lodged with the Liquidator as part of the liquidation estate assets.

Conclusion:
(i) EPFO is entitled to the satisfaction of full PF dues including interest, as reflected in the Proclamation of Sale Notice issued on 23.07.2019.

(ii) The attachment of movables by EPFO prior to the initiation of CIRP is valid and not affected by the moratorium under Section 14 of IBC, 2016.

(iii) The auction conducted by the Liquidator is set aside due to the existing statutory first charge on the assets.

(iv) The Liquidator is directed to pay off the PF dues within two weeks, failing which EPFO can proceed with the recovery. Any surplus after PF dues appropriation should be lodged with the Liquidator.

The applications IA/370/2020, IA/31/2021, and MA/868/2019 are disposed of accordingly.

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