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. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, during the period of moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, the provident fund authority could initiate or continue assessment/determination proceedings under the Employees' Provident Fund law so as to fasten a pecuniary liability on the corporate debtor. (ii) Whether demands raised after approval of the resolution plan, founded on such assessment/determination undertaken during moratorium and not forming part of the admitted CIRP claim/approved resolution plan, could be enforced against the successful resolution applicant. (iii) Whether the provident fund authority's request for 'priority' payment/enforcement of such post-plan demands could be granted despite the moratorium bar and the approved plan's binding effect. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Bar of moratorium on provident fund assessment/determination proceedings Legal framework: The Court considered Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, which prohibits 'institution' or 'continuation' of 'suits or proceedings against the corporate debtor' before 'any ... tribunal ... or other authority' during moratorium. Interpretation and reasoning: The Court held that the statutory language is wide and sweeping, and expressly extends to proceedings before 'other authority', thereby covering proceedings before the provident fund authority. The moratorium consequently bars initiation/continuation of such proceedings during CIRP when they operate 'against the corporate debtor' and have the effect of creating or fastening pecuniary liability. On the facts, the inspection/assessment culminating in an order during moratorium was treated as falling within the prohibited category. Conclusion: After moratorium commences, no assessment proceedings could be initiated or continued by the provident fund authority during that period so as to impose a pecuniary liability on the corporate debtor. Issue (ii): Enforceability of post-plan demands based on moratorium-period determinations and not part of the approved plan Legal framework: The Court applied the binding effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, as discussed in the judgment, and the legal consequence that claims not forming part of the approved plan cannot be pursued thereafter. Interpretation and reasoning: The Court noted that (a) moratorium ran from commencement of CIRP until plan approval; (b) the provident fund authority's later notices/summons demanded additional amounts for a pre-CIRP period but were founded entirely on inspection/assessment undertaken and concluded during moratorium; and (c) no claim for those additional amounts was filed/admitted during CIRP and they were not reflected in the approved plan. Since the underlying determination was hit by moratorium, and the later demand sought enforcement post-plan on the basis of that prohibited determination, the Court held such demand could not form the basis of any enforceable claim against the successful resolution applicant. Further, once the plan is approved, claims outside the plan stand extinguished and cannot be revived by later proceedings. Conclusion: Post-approval notices/summons demanding additional provident fund-related amounts, where the liability is founded on moratorium-period assessment/determination and was never filed/admitted in CIRP or included in the approved plan, are unenforceable against the successful resolution applicant. Issue (iii): Provident fund authority's plea for priority treatment/enforcement of such demands Interpretation and reasoning: The Court distinguished reliance placed on a liquidation-context decision, observing that its ratio did not govern a CIRP moratorium situation because Section 14(1)(a) operates with wide amplitude during CIRP and bars proceedings by statutory authorities as well. Since the particular demands were found to be rooted in moratorium-prohibited proceedings and were not part of the CIRP-admitted claims/approved plan, there was no basis to sustain them or to grant any 'priority' enforcement against the successful resolution applicant. Conclusion: The provident fund authority was not entitled to priority treatment or enforcement of the impugned additional demands raised post-plan, and its cross-appeal seeking such relief was dismissed.