2026 (1) TMI 530 - AT - IBC

Moratorium bars EPFO PF dues assessments u/s7A/7Q/14B during CIRP; later recovery notices invalid, appeal allowed.

Once CIRP commenced and moratorium under s.14 IBC operated, EPFO could not initiate or continue assessment proceedings under ss.7A, 7Q and 14B EPF Act to ... Moratorium under the liquidation proceedings - Lack of jurisdiction - initiation of the CIRP - recovery of dues from the Successful Resolution Applicant (SRA) - waiver of statutory liabilities - Damages levied u/s 14-B operate as a statutory penalty to compensate for loss of interest caused by delayed payment of PF contributions - Enhanced claim made by the EPFO after the approval of resolution plan - non-payment of additional amount of interest u/s 7(Q) of EPF Act - Whether any proceeding under EPFO Act could be undertaken by the EPF Authorities during the period of moratorium in CIRP proceedings u/s 14 of the Code? - HELD THAT:- It is undisputed that the CIRP of the Corporate Debtor commenced on 04.07.2019, and the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 continued till the approval of the Resolution Plan on 09.11.2021. The demand made by the EPFO on the basis of the inspection and assessment culminating in the order dated 06.04.2021, as well as the summons dated 18.05.2022, is clearly a demand sought to be enforced after commencement of the CIRP and during the subsistence of moratorium. The assessment proceedings under Sections 7A, 7Q and 14B, which formed the basis of the subsequent demands, were initiated and culminated during the moratorium period, and the consequential demands were sought to be raised after approval of the Resolution Plan. We note that the judgment of this Appellate Tribunal in “CA Pankaj Shah [2025 (9) TMI 337 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] reiterated the decision of this Tribunal in Pesumal Arlani [2025 (1) TMI 352 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB], holding clearly that after initiation of the CIRP, no assessment proceedings can be initiated or continued against the Corporate Debtor so as to fasten any pecuniary liability upon it. In the present case, it is undisputed that the CIRP of the Corporate Debtor commenced on 04.07.2019, and the moratorium under Section 14 of the Code remained in force till 09.11.2021, when the Resolution Plan came to be approved. Notwithstanding the subsistence of the moratorium and the subsequent approval of the Resolution Plan, the EPFO raised demands on the basis of assessment proceeding which culminated in the order dated 06.04.2021. Thereafter EPFO issued a notice dated 29.04.2022 and summons dated 18.05.2022, to the Corporate Debtor, claiming fresh dues amounting to Rs. 62,09,154/- were to be paid by the CD. The said demands were founded upon proceedings and determinations undertaken during the moratorium period, and no claim in respect thereof was ever filed during the CIRP. When no demand could be made on the basis of any inspection or assessment carried out during the moratorium, we find no ground to sustain the claim sought to be enforced by the EPFO through its post-CIRP notices and summons, nor do we find any merit in the cross appeal filed by the EPFO seeking priority treatment of such claims. In view of the findings, that no assessment proceedings can be continued by the EPFO after the initiation of moratorium under section 14(1) of the Code and further no claim on the basis of assessment carried out during the moratorium period can be pressed by the EPFO, the Appeal filed by the Successful Resolution Applicant, being Company Appeal (AT) (Insolvency), to the extent of prayer (a) of the appeal is allowed. Issues: (i) Whether assessment or other proceedings by the Employees' Provident Fund Organisation (EPFO) during the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 are permissible and whether determinations made during the moratorium can be enforced against the Successful Resolution Applicant after approval of the resolution plan; (ii) Whether claims founded on assessments or orders made during the moratorium that were not filed or admitted in the CIRP survive the approval of the resolution plan.Issue (i): Whether assessment or other proceedings by EPFO during the moratorium under Section 14(1)(a) of the IBC are permissible and whether determinations made during the moratorium can be enforced against the Successful Resolution Applicant after approval of the resolution plan.Analysis: Section 14(1)(a) imposes a broad moratorium prohibiting institution or continuation of proceedings against the corporate debtor before any authority. Precedents of this Tribunal and the Supreme Court interpreting Section 14 treat assessment and recovery proceedings which have the effect of fastening pecuniary liability on the corporate debtor as falling within the moratorium's prohibition. Determinations and assessment proceedings initiated and concluded during moratorium that were not the basis of claims admitted in the CIRP were examined in light of the IBC provisions on moratorium and the binding nature of an approved resolution plan under Section 31(1). The analysis distinguished between proceedings in liquidation (where different rules on initiation may apply) and proceedings during CIRP moratorium, and considered prior authorities holding that claims based on assessments made during moratorium cannot be pressed in CIRP or enforced thereafter.Conclusion: Assessment or recovery proceedings by EPFO that were initiated and concluded during the moratorium and which result in demands not filed or admitted during the CIRP are barred by Section 14(1)(a) and cannot be enforced against the Successful Resolution Applicant after approval of the resolution plan.Issue (ii): Whether claims founded on assessments or orders made during the moratorium that were not filed or admitted in the CIRP survive the approval of the resolution plan.Analysis: Section 31(1) renders an approved resolution plan binding on stakeholders and prior authorities. Supreme Court authority establishes that claims not included in an approved resolution plan stand extinguished. The interplay between exclusion of provident fund and gratuity from the insolvency estate under Sections 36 and related IBC provisions was considered, but the distinguishing feature is whether the EPFO determination was made and enforced during the moratorium and whether any claim based on that determination was filed and processed in the CIRP. Where assessments were carried out during moratorium and no claim based on those assessments was admitted during CIRP, the binding effect of the approved plan extinguishes post-CIRP attempts to enforce such claims; for amounts lawfully admitted and provided for in the plan, payment under the plan is final and not refundable.Conclusion: Claims founded on assessments or orders concluded during the moratorium that were not filed or admitted in the CIRP do not survive the approval of the resolution plan and cannot be enforced against the Successful Resolution Applicant.Final Conclusion: The legal effect of the decision is that assessment proceedings and consequent demands effected during the moratorium period that did not result in claims admitted in the CIRP are barred from enforcement after plan approval, while amounts provided for and paid pursuant to an approved resolution plan are final and binding on stakeholders; claims properly admitted and addressed in the CIRP remain subject to the plan's provisions.Ratio Decidendi: Where the moratorium under Section 14(1)(a) of the IBC precludes initiation or continuation of proceedings against the corporate debtor, determinations or assessments concluded during that moratorium which were not the basis of claims filed and admitted in the CIRP cannot be pressed or enforced after approval of the resolution plan and are thereby extinguished by the binding effect of an approved resolution plan under Section 31(1).