TaxTMI 
TaxTMI 
2021 (4) TMI 855
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....al Creditor, namely, M/s. APL Apollo Tubes Limited. 2. At the time of initiation of the CIRP, this Tribunal had appointed the Applicant herein as the Interim Resolution Professional (IRP). After the constitution of the Committee of Creditors (CoC), it is seen that the IRP continued as Resolution Professional (RP) of the Corporate Debtor, in view of the decision of CoC of the Corporate Debtor choosing him to act as such. Based on the recommendation of the CoC for the liquidation of the Corporate Debtor, the RP filed an Application in MA/696/2019 seeking for the liquidation of the Corporate Debtor, which was ordered by this Tribunal on 08.07.2019. 3. While so, it is seen that the Respondent, namely, Employees' Provident Fund Organisation (EPFO) through the Office of the Recovery Officer had issued a sale notice dated 23.07.2019 for the sale of movable properties of the Corporate Debtor claiming that an outstanding amount in a sum of Rs. 38,89,229/- is due and the date of sale was also fixed as 22.08.2019 pursuant to the sale notice. The said notice provoked the Applicant herein, in the capacity as a Liquidator, to move the Application in MA/868/2019 before this Tribunal, wh....
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....achment of movable property dated 23.10.2018, the notice shows the following amounts have been claimed as due from the Corporate Debtor: S No RRC No Nature of due Period amount 1 CBSLM2574 Dt 06/04/2017 7A 06/2004 to 10/2012 2905380 2 CBSLM5814 Dt 09/05/2017 PD 04/2013 to 01/2014 477380 3 CBSLM5814 Dt 09/05/2017 INTEREST 04/2013 to 01/2014 229142 3611902 As a consequence of non-payment of the money admitted as demanded in the attachment notice, proclamation of sale has been made and in the circumstances, the interference of this Tribunal is not called for. Counsel for the Liquidator brings to the notice of this Tribunal that during the CIRP period as well as subsequent to the liquidation passed by this Tribunal on 04.07.2019, the Respondent has not lodged its claim as required under the provisions of IBC, 2016. It is also brought to the notice of this Tribunal that in the absence of any claim being lodged and an option being exercised with liquidation in relation to the property, the Respondent wants to invoke pursuant to the attachment notice and sell the property belong....
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....ry of the Corporate Debtor, namely, M/s. SAS Autocom Engineers India Private Limited, which is undergoing Liquidation Process; (b) To pass an order for co-operation of the Respondent for relocating the machinery of the Corporate Debtor, namely, M/s. SAS Autocom Engineers India Private Limited while it is undergoing Liquidation Process; and (c) To pass such other orders or further orders which may deem to be fit and proper in the interest of justice". On its part, the Respondent herein, in relation to the Order dated 19.02.2020 passed by this Tribunal in MA/868/2019, had chosen to file a Writ Petition in WP/9036/2020 before the Hon'ble High Court of Madras seeking for the issue of Writ of Certiorari to call for the records of this Tribunal in MA/868/2019 and quash the same. 7. From the records available before this Tribunal, it is seen that initially the Hon'ble High Court of Madras vide its Order dated 09.07.2020 had granted an Interim Stay of four weeks and also with the further directions that the properties which are the subject matter of the Order dated 19.02.2020 not to be brought up for auction and no third party interest to be created in relat....
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....n enquiry conducted for the determination of dues and as a consequence of which it has been arrived at that the PF dues aggregates to a sum of Rs. 38,83,229/-. Pursuant to the determination of the PF dues payable under the EPF Act, recovery procedures were initiated as contemplated under the said Act under Sections 8B to 8G of the said Act read with Second Schedule of the Income Tax Act, 1961. Due notices and communication were also issued, as per the averments made by the Respondent in the Counter and in relation to the same, it is averred that the Order(s) of attachment of property was issued, dated 25.04.2018 and 23.10.2018 and the physical possession of the same was taken on 26.04.2018 pursuant to the Order of Attachment. iii. Subsequently, the property was valued on 11.04.2019 and the issue of RRC/CP-I was communicated to the Establishment on 11.04.2019 as well as 19.06.2019 and thereafter warrant of sale was issued on 23.07.2019. Proclamation of sale and publication was effected on 23.07.2019 and 24.07.2019 respectively for the auction, which was fixed on 22.08.2019 in relation to the dues payable by the Corporate Debtor under the EPF and MP Act, 1952. iv. I....
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..../restraining the Respondent from selling the property vide the proclamation of sale notice by this Tribunal vide Order dated 20.08.2019 is that it will amount to violation of the moratorium under Section 14 of IBC, 2016 and cannot be countenanced in view of the plain reading of Section 36(4) of IBC, 2016, as all sums due to the workmen under Provident Fund, Pension Fund and Gratuity cannot be included in the liquidation estate of the Corporate Debtor. In view of the attachment already being effected even prior to the initiation of the CIRP of the Corporate Debtor and as PF dues are not part of the liquidation estate, it will not fall under the water fall mechanism under IBC, 2016. Further, the attachment and possession of the property attached had happened, much prior to the initiation of the CIRP. The RP has to exclude the assets under Section 36 of the Code as not forming part of the liquidation estate. viii. In any case, it is submitted that proceedings under the EPF and MP Act, 1952 cannot be considered as a proceeding falling under Section 14 of IBC, 2016 and the moratorium cannot be applied to all proceedings. In this connection, the decision of the Hon'ble Delhi....
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....bunal is vested with exclusive jurisdiction under Section 238 of IBC, 2016 whereby the provisions of the Code are to override other laws. Further, under Section 60 of IBC, 2016 and more particularly under Sub-section (5) of Section 60 of the Code, incidentally under which the main Application has been moved reads as follows: Section 60 Adjudicating Authority for Corporate Persons:- (1) xxxxxx (2) xxxxxx (3) xxxxxx (4) xxxxxx "(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of:- a) any application or proceeding by or against the corporate debtor or corporate person; b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code". (underline supplied) 13. In a recent ....
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....is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist". 68. It is appropriate to refer to the observations in the Report of the BLRC, wherein it noted the role of the NCLT, as the Adjudicating Authority for the CIRP, in the following terms:- "An adjudicating authority ensures adherence to the process. At all points, the adherence to the process and compliance with all applicable laws is controlled by the adjudicating authority. The adjudicating authority gives powers to the insolvency professional to take appropriate action against the directors and management of the entity, with recommendations from the creditors committee. All material actions and events during the process are recorded at the adjudicating authority. The adjudicating authority can assess and penalise frivolous applications. The adjudicator hears allegations of violations and fraud while the process is on. The adjudicating authority will adjudicate on fraud, particularly during the process resolving bankruptcy. Appeals/actions against the behavior of the insolvency professional are directed to t....
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....e of residuary power by the NCLT is premised on the facts of this case. We are not laying down a general principle on the contours of the exercise of residuary power by the NCLT. However, it is pertinent to mention that the NCLT cannot exercise its jurisdiction over matters dehors the insolvency proceedings since such matters would fall outside the realm of IBC. Any other interpretation of Section 60(5)(c) would be in contradiction of the holding of this Court in Satish Kumar Gupta (supra). (underline supplied) 163. Although various provisions of the IBC indicate that the objective of the statute is to ensure that the corporate debtor remains a 'going concern', there must be a specific textual hook for the NCLT to exercise its jurisdiction. The NCLT cannot derive its power from the 'spirit' or 'object' of the IBC Section 60(5)(c) of the IBC vests the NCLT with wide powers since it can entertain and dispose of any question of fact or law arising out or in relation to the insolvency resolution process. We hasten to add, however, that the NCLT's residuary jurisdiction, though wide, is nonetheless defined by the text of the IBC. Specificall....
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....uring collation of the claims which is made available to the COC as well as during the resolution process to the Resolution Applicant who may intend to resolve the insolvency of the corporate debtor to factor it in the Resolution Plan outlay as subsequent to the receipt of the 'claims', the Code envisages the constitution of the CoC and thereafter the CoC to pilot the implementation of CIRP and taking it to its conclusion either by resolving the insolvency of the Corporate Debtor under CIRP by way of approval of a resolution plan or for the liquidation of the Corporate Debtor. 18. While so, during the course of submissions made by the Respondent, a vehement contention was taken by the Ld. Counsel for the Respondent that it is not necessary for the Respondent even to lodge a claim with IRP/RP as the case may be during the CIRP or with the Liquidator during the liquidation process in view of Section 11 of EPF & MP Act, 1952. Section 11 of the EPF & MP Act, 1952 reads as follows:- 11. Priority of payment of contributions over other debts. [(1)] Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due-....
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....y Ld. Counsel for the Respondent, that the debts arising under the EPF & MP Act, 1952 up to the date of insolvency or winding up, is deemed to be included in the list of debts also having a statutory first charge on the assets of the establishment in relation to dues as envisaged under Section 11(1)(a) of the EPF & PF Act, 1952 which stands created and is required to be paid in priority to all other debts and hence, whether a claim is lodged or not the same is required to be factored during the CIRP or Liquidation process. 20. Further, it is also pointed out that the provisions of IBC, 2016, more particularly, by virtue of Section 36(4)(a)(iii) of the Code provides that all sums due to any workman or employee from the Provident Fund, the Pension Fund and the Gratuity Fund are not to be included in the liquidation estate assets and shall not be used for recovery in liquidation. 21. Thus, we pose ourselves with a question as an Adjudicating Authority having jurisdiction exclusively over the insolvency of Corporates, like that of the company under liquidation can such a view be entertained or countenanced. 22. A careful perusal of both i.e., Section 11 of the EPF & MP Act, 19....
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....RP/RP/Liquidator to adjudicate upon the claim preferred, as that will be venturing into the jurisdiction of the other authorities and encroaching on their powers as provided under the respective statutes of which an example had been given by the Hon'ble Supreme Court in relation to Income Tax in the matter of Embassy Property Developments Ltd., case. Thus lodging of a claim of the PF dues by the PF authorities puts the IRP/RP/Liquidator on notice of the claim and to be beware in dealing with the assets of the Corporate Debtor and in turn put on notice any Resolution Applicant during the CIRP or a purchaser of the assets of the company under liquidation as in the present instance. This enables the PF authorities to reinforce the claims arising out of PF dues avowedly for the welfare of the employees and the PF authorities being a statutory body created under the EPF & MP Act, 1952 is required to act more responsibly keeping in mind the overall interest of the Nation in relation to speedier resolution of insolvency of corporate and cannot act in an obdurate manner which makes the resolution or liquidation process under IBC, 2016 a never ending process similar to the one which was....
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....he respective Statement of Objects and Reasons, giving the purpose of the respective statutes and leading to its very enactments. 25. In relation to the EPF & MP Act, 1952 the statement of objects and reasons, inter-alia given for its enactment reads as follows:- STATEMENT OF OBJECTS AND REASONS The question of making some provision for the future of the industrial worker after he retires or for his dependents in case of his early death, has been under consideration for some years. The ideal way would have been provisions through old age and survivors' pensions as has been done in the industrially advanced countries. But in the prevailing conditions in India, the institution of a pension scheme cannot be visualised in the near future. Another alternative may be for provision of gratuities after a prescribed period of service. The main defect of a gratuity scheme, however, is that amount paid to a worker or his dependents would be small, as the worker would not himself be making any contribution to the fund. Taking into account the various difficulties, financial and administrative, the most appropriate course appears to be the institution compulsorily of co....
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....is Tribunal is bound to take note of in arriving at its decision in the instant case. (i) In the matter of Regional Provident Fund Commissioner Ahmedabad vs. Ramachandra D. Choudhry (Company Appeal (AT)(Insolvency) No. 1001 of 2019 In answering the question as to whether PF authorities are entitled to a claim of interest charged by the said authority during the course of CIRP of the corporate debtor post CIRP, in addition to the principal amount of provident fund due of which has been fully taken care of in the approved Resolution Plan, negating the contention of the successful resolution applicant that Sections 7Q and 14B of the EPF & MP Act, 1952 cannot be relied upon, as the provisions of IBC, 2016 has an overriding effect on the same in terms Section 238 of the Code, it was held that no provisions of EPF & MP Act, 1952 and IBC, 2016 are in conflict and on the other hand in terms of Section 36(4)(iii), the provident fund and gratuity funds are not the assets of the corporate debtor, there being specific provisions, the application of Section 238 of the Code will not arise. In the circumstances the successful resolution applicant was directed to release full pro....
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.... in the register during the CIRP, would still be a valid attachment. (iv) In the matter of Precision Fasteners Ltd. through the Liquidator Vs. Employees Provident Fund Organisation, Thane & Ord in MA 576 & 752/2018 in C.P.(IB) 1339(MB)/2017 (NCLT-Mumbai Bench) reported in Upon a detailed consideration of the interplay of EPF&MP Act, 1952, Companies Act of 1956 and 2013 as well as IBC, 2016 and the decisions of the Apex Court it has been held that:- a) In relation to attachments effected by the PF authorities, it makes no difference whether attachments have been made prior to or subsequent to admission of Company Petition under IB Code, the statutory first charge having remained in force against the assets of the corporate debtor company, there is no merit to differentiate in respect of attachments made prior to filing of the Company Petition and during CIRP period; b) The charge in relation to PF dues will be the first charge in priority to all other debts, including Liquidator costs because the PF dues has been excluded from the Liquidation Estate; c) PF dues being treated as an asset of the workmen u/s. 36(4)(a)(iii) of the Code, for r....
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....on of its claim, we are of the considered view that this Tribunal has the jurisdiction to entertain the application as filed before it and it is accordingly dealt with. CONCLUSION (i) In relation to the Claim of the PF Authorities in the instant case, the PF Authorities are entitled to the satisfaction of the full claim in relation to the PF dues including interest in a sum of Rs. 36,11,902/- as well as any additional amounts as may be found due under the EPF & MP Act, 1952 as reflected in the Proclamation of Sale Notice issued dated 23.07.2019 following the decision of the Hon'ble NCLAT in Company Appeal (AT)(Insolvency) No. 1001 of 2019 referred supra. (ii) Since the attachment of movables effected by the PF Authorities by way of Order of Attachment of Property issued dated 25.04.2018 for the recovery of the PF dues is even prior to the initiation of CIRP by this Tribunal on 05.10.2018, the said order of attachment will not be hit by the declaration of moratorium under Section 14 of IBC, 2016 following the ratio of the Hon'ble NCLAT as held in Company Appeal (AT)(Insolvency) No. 1521 of 2019 also referred supra and hence this Tribunal is not req....