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Issues: (i) Whether the orders and recovery notices issued under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 after commencement of moratorium and during liquidation were barred by the Insolvency and Bankruptcy Code, 2016. (ii) Whether proceedings under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are legal proceedings hit by the moratorium and liquidation bar.
Issue (i): Whether the orders and recovery notices issued under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 after commencement of moratorium and during liquidation were barred by the Insolvency and Bankruptcy Code, 2016.
Analysis: Section 14 of the Insolvency and Bankruptcy Code, 2016 imposes a broad prohibition on institution or continuation of proceedings against the corporate debtor during moratorium, and Section 33(5) of the Insolvency and Bankruptcy Code, 2016 similarly bars suit or legal proceedings during liquidation. The impugned determination orders and recovery notices were issued after the moratorium had come into force and after liquidation had been ordered. They therefore amounted to proceedings against the corporate debtor in the prohibited period and could not be sustained.
Conclusion: The orders and recovery notices were barred and liable to be set aside.
Issue (ii): Whether proceedings under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are legal proceedings hit by the moratorium and liquidation bar.
Analysis: Proceedings under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 involve inquiry, determination of dues, production of evidence, and powers analogous to a civil court, and are treated as judicial proceedings. Such proceedings are not merely administrative assessments. Since they can culminate in monetary liability, damages, and penalty against the corporate debtor, they fall within the expression proceedings barred by Section 14 of the Insolvency and Bankruptcy Code, 2016 and, during liquidation, by Section 33(5) of the Insolvency and Bankruptcy Code, 2016.
Conclusion: Proceedings under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 were held to be barred in the facts of the case.
Final Conclusion: The impugned provident fund determinations and consequential recovery action could not continue after moratorium and liquidation, and the liquidation process would govern any admissible provident fund claims in accordance with the Code.
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