Provident Fund claims during insolvency moratorium ruled inadmissible; lower resolution plan payout upheld and appeal dismissed

Claims arising from assessments conducted after the insolvency moratorium are inadmissible under the moratorium; assessments made postinitiation were struck down and the related claim could not be admitted in the CIRP, resulting in dismissal of the appeal. The resolution professional had recorded the provident fund claim despite procedural deficiencies and included it in the Information Memorandum; the Committee of Creditors' commercial judgment and provisions in the resolution plan were considered but could not validate a postmoratorium assessment. The clean slate principle and extinguishment of nonincorporated claims on plan approval were applied.

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Issues: Whether the Resolution Plan approved by the Adjudicating Authority, which provides a nominal payment towards a Provident Fund claim assessed by the statutory authority after commencement of CIRP and during the moratorium, is liable to be set aside on the ground that the EPFO's assessmentbased claim was not admissible in the CIRP.

Analysis: The admitted facts show that the assessment and demand relied upon by the claimant were initiated/raised after commencement of the CIRP and during the moratorium period under Section 14. The Resolution Professional had invited and included available claims in the Information Memorandum; the Committee of Creditors evaluated and provisioned for the claim in the Resolution Plan, which also contains a contingent liability clause. Precedents and statutory scheme establish that assessment proceedings and fresh demands that seek to fasten pecuniary liability on the corporate debtor after initiation of CIRP are barred by the moratorium and cannot be admitted in the CIRP. The valuation and provisioning of claims by the Resolution Professional and acceptance by the Committee of Creditors reflect commercial wisdom entrusted to them and, where supported by the record, are not justiciable merely because a statutory authority subsequently arrived at an assessment during the moratorium.

Conclusion: The impugned order approving the Resolution Plan is upheld and the appeal to set aside the plan insofar as it provides a nominal amount towards the contested Provident Fund claim is dismissed; the Resolution Plan remains binding and the postCIRP assessmentbased claim is not admissible in the CIRP.

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