Uncrystallised EPF interest and damages cannot be forced into a resolution plan without prior adjudication

Interest under Section 7Q and damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act were held to remain uncrystallised where no final adjudication quantified them before commencement of CIRP. A claim admitted by the Resolution Professional for collation did not itself amount to statutory determination, and proceedings initiated after the insolvency commencement date could not continue during the Section 14 moratorium where they would create or enhance liabilities. The Resolution Plan therefore could validly provide for payment of the determined Section 7A provident fund contribution while excluding the unadjudicated interest and damages.

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Issues: Whether the amounts claimed towards interest under Section 7Q and damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, in the absence of any adjudication by the EPFO authorities before commencement of CIRP, could be treated as crystallised dues payable under the Resolution Plan.

Analysis: The Corporate Debtor entered CIRP on 01.05.2023. The claim filed by the EPFO included provident fund contribution under Section 7A as well as interest under Section 7Q and damages under Section 14B. The record showed that only the provident fund contribution had been determined, while the proceedings for interest and damages were initiated by a summons dated 10.05.2023, after commencement of CIRP, and no final adjudicatory order quantifying those liabilities had been passed before the insolvency commencement date. Admission of a claim by the Resolution Professional for collation purposes did not amount to statutory determination. During the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, proceedings that would create or enhance liabilities could not continue. The Resolution Plan, however, provided full payment of the determined provident fund contribution under Section 7A, while excluding the uncrystallised components.

Conclusion: The claims towards interest under Section 7Q and damages under Section 14B were not crystallised dues and could not be compelled as payable under the Resolution Plan. The exclusion of those amounts was upheld, and the appeal failed.

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