Exclusion of workmen dues from liquidation estate affirmed; provident and pension funds treated as third-party assets and payable before distribution.

Distribution of assets in liquidation must exclude sums due to workmen and employees as third-party assets, with that exclusion taking precedence over the statutory distribution waterfall; consequence: such excluded amounts are not part of the liquidation estate and must be paid before distribution. Amounts determined as dues from provident, pension and gratuity funds (including those under enforcement provisions) qualify as workmen/employee dues and thus as third-party assets; consequence: they must be kept outside the liquidation estate and paid to beneficiaries. Liquidator misclassified the claim, and the financial creditor was directed to remit the specified amount within 30 days.

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Issues: (i) Whether Section 36(4)(a)(iii) of the IBC takes precedence over Section 53 of the IBC in the distribution of liquidation assets. (ii) Whether "all sums due to any workmen or employee from the provident fund" under Section 36(4)(a)(iii) include interest under Section 7Q and damages under Section 14B of the EPF Act. (iii) Whether sums described in Section 36(4)(a)(iii) must be held in a dedicated fund/account to qualify as third-party assets outside the liquidation estate.

Issue (i): Whether Section 36(4)(a)(iii) takes precedence over Section 53 in liquidation distributions.

Analysis: The Code and Supreme Court authority establish that distribution in liquidation is governed by Section 53 subject to Section 36(4). The Tribunal examined prior Supreme Court and NCLAT/NCLATly decisions which hold that amounts excluded by Section 36(4) are not part of the liquidation estate and must be treated outside the waterfall prescribed by Section 53. The Liquidator's treatment of EPF dues under Section 53(1)(e) was evaluated against these authorities and the statutory scheme which requires exclusion of sums falling within Section 36(4) before forming the liquidation estate.

Conclusion: In favour of Appellant. Section 36(4)(a)(iii) operates to exclude specified sums from the liquidation estate and thereby takes precedence over distribution under Section 53 for those excluded sums.

Issue (ii): Whether provident fund dues include interest under Section 7Q and damages under Section 14B of the EPF Act.

Analysis: The Tribunal relied on binding decisions of the Supreme Court and consistent Tribunal precedents that have interpreted "any amount due from the employer" and related provisions of the EPF Act to encompass statutory interest and damages (Sections 7Q and 14B). Prior decisions of this Tribunal and the Supreme Court were applied to the facts to determine the scope of "all sums due" under Section 36(4)(a)(iii).

Conclusion: In favour of Appellant. Amounts determined under Sections 7Q and 14B are included within "all sums due" for the purposes of Section 36(4)(a)(iii) and therefore fall within the exclusion from the liquidation estate.

Issue (iii): Whether the excluded sums must be held in a dedicated fund/account to qualify as third-party assets outside the liquidation estate.

Analysis: The Tribunal interpreted the relevant authorities to hold that a formal separate account is not a precondition for exclusion. Where the employer is required by law to hold or remit provident/pension/gratuity sums (or is deemed to hold such sums), those amounts are regarded as falling within the "all sums due" description and are treated as third-party assets under Section 36(4)(a)(iii). The absence of a segregated account does not defeat the exclusion where, by law or by constructive characterization, the sums are due to employees and thus outside the liquidation estate.

Conclusion: In favour of Appellant. A dedicated segregated fund is not necessary; unpaid statutory provident/pension/gratuity sums (including interest and damages) qualify as third-party assets under Section 36(4)(a)(iii) even if not held in a separate account.

Final Conclusion: The Liquidator erred in treating the EPFO claim under Section 53(1)(e); the admitted EPFO claim of Rs. 6,34,816/- fell within Section 36(4)(a)(iii) and should have been paid prior to distribution under Section 53. The financial creditor is directed to remit the said amount to the Appellant within the time ordered and report compliance to the adjudicating authority; the appeal is disposed accordingly.

Ratio Decidendi: Where sums are due to workmen/employees from provident, pension or gratuity funds they are excluded from the liquidation estate under Section 36(4)(a)(iii) of the IBC and this exclusion governs distribution notwithstanding Section 53; such exclusion includes amounts of interest and damages under Sections 7Q and 14B of the EPF Act and does not require a separately maintained dedicated fund to take effect.

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