TaxTMI 
TaxTMI 
2024 (7) TMI 762
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.... in I.A. 2229 of 2022 in C.P (IB) No. 2534 of 2019 under Section 61(2) of the Insolvency & Bankruptcy Code, 2016 (in short 'Code'). 2. Heard the Counsel for the Parties and perused the records made available including the cited judgements. 3. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (in short 'CIRP') vide order of the Adjudicating Authority dated 26.02.2020 and the Respondents had filed their claims before the Interim Resolution Professional (in short 'IRP') of Rs. 1,24,86,750/-. The Corporate Debtor was subsequently directed to be liquidated vide the Adjudicating Authority's order dated 22.12.2021 and the Appellant was appointed as the Liquidator, who asked the Respondents to file the claims during liquidation period. 4. It is the case of the Appellant that the Erstwhile Management of the Corporate Debtor did not maintain separate funds w.r.t. pension fund and provident fund and therefore according to the Appellant the claims of the Respondents as to be treated under the waterfall mechanism as per Section 53 of the Code. 5. Section 53 of the Code is reads as under : - " 53. Distribution of assets. - (1) Notwithstanding any....
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....ents, if the proceeds are insufficient to meet the debts in full;and (ii) the term " workmen's dues " shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013). " ( Emphasis Supplied ) 6. It has been brought out that the Respondent No. 2 vide order dated 20.06.2022 directed the Respondent No. 1 to issue sale proclamations for the assets of the Corporate Debtor and started recovery in terms of provision of the Employees Provident Funds & Miscellaneous Provisions Act, 1952 (in short 'EPF Act'). 7. Aggrieved by this, the Appellant preferred I.A. No. 2229 of 2022 before the Adjudicating Authority and during hearing the Appellant issued public notice for auction of a certain property and during such e-Auction Notice, the Appellant came to know charge created by the Respondents on the said property. The Appellant, therefore, again preferred an I.A. before the Adjudicating Authority against such charges created by the Respondents and the Adjudicating Authority gave interim relief to the Appellant which was pronounced in open court during hearing on 13.12.2022 and directed the Appellant to create a fixed deposit to the exte....
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....s issues partly allowed the I.A. No. 2229 of 2022. In this regard, we note that para 31 of the Impugned Order dated 30.06.2023 captures the disposal of I.A. No. 2229 of 2022 which reads as under :- "Accordingly, the present IA. No. 2229 of 2022 is Partly allowed to the extent that separate recovery proceedings against the Corporate Debtor shall not be continued any further and the attachment imposed by the Respondents over the assets of the Corporate Debtor shall stand discharged considering the fact that an amount of Rs. 1,24,86,750/- equivalent to the claimed amount on account of EPF has already been secured in the shape Fixed Deposit bearing an Account No. 41518465189 maintained with State Bank of India" 11. Aggrieved by the same, the Appellant has preferred the present appeal. 12. It is the case of the Appellant that the Adjudicating Authority failed to examine the different components of the claims filed by the Respondents and has treated everything as contribution, which is in violation of waterfall mechanism as stipulated under Section 53 of the Code. 13. It is further the case of the Appellant that the EPF Act is a welfare law for workers whereas the Code ....
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....l to set aside the Impugned Order. 20. Per contra, the Respondents denied all the averments made by the Appellant. 21. It is the case of the Respondents that priority of PF dues are required to be considered as a whole and not to be divided amongst several components as pleaded by the Appellant. 22. It is further the case of the Respondents that the interest under Section 7Q and damages under Section 14B are levied after following statutory procedures and are imposed due to delayed remittances of dues by the employers and are considered for overall welfare measures for the workers. 23. The Respondent submitted that the Corporate Debtor failed to remit all dues in time and therefore in terms of EPF Act, the Respondents correctly levied the charges. 24. The Respondent also submitted that in case the Appellant is aggrieved by any undue amount levied by the EPF Authority, the Appellant need to approach Central Government Industrial Tribunal or High Court and not before this Appellate Tribunal as the Adjudicating Authority or this Appellate Tribunal under the Code are not meant to decide quantum of the amount of dues under EPF Act for which appropriate alternatives remedi....
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....cluded in the liquidation estate and shall not be used for recovery in the liquidation and thus it becomes clear that the assets of liquidation can be used by the liquidator only after settling the dues of the provident fund. 33. The Respondents submitted that they have filed their claims before the Resolution Professional without any delay for Rs. 1,24,86,750/- on 26.02.2020 to protect the interest of the workers and employers of the Corporate Debtor. 34. Concluding their arguments, the Respondents requested this Appellate Tribunal to dismiss this appeal. Findings 35. From the above facts, the following issues need to be decided to decide the present appeal : - (i) Whether, provident fund dues are to be decided and distributed in accordance with Section 36(4)(iii) of the Code or in accordance with Section 53 of the Code. (ii) Treatment of the various components of claims of the EPFO (the Respondent herein) i.e., contribution under Section 7A, interest under Section 7Q and damages under Section 14 of the EPF Act and whether all these will constitute as PF dues in terms of EPF Act. (iii) What constitute the part of liquidation estate and what d....
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....s under :- "Section 7A in The Employees' Provident Funds And Miscellaneous Provisions Act , 1952 7A. Determination of moneys due from employers. - (1) The Central Provident Fund Commissioner, any Additional Central Provident Fund Commissioner, any Deputy Provident Fund Commissioner, any Regional Provident Fund Commissioner, or any Assistant Provident Fund Commissioner may, by order,- (a) in a case where a dispute arises regarding the applicability of this Act to an establishment, decide such dispute; and (b) determine the amount due from any employer under any provision of this Act, the Scheme or the Pension. Scheme or the Insurance Scheme, as the case may be, and for any of the aforesaid purposes may conduct such inquiry as he may deem necessary.*** 7Q. Interest payable by the employer.--The employer shall be liable to pay simple interest at the rate of twelve per cent. per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment: Provided that higher rate of interest specified in the ....
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....over damages (including provisional damages of Rs. 21,08,056/-) 61,38,551/- 4. Provisional cost and charges 36,282/- 5. Total 1,24,86,750/- 44. From above table, it is noted that there are four components of claims i.e., contribution of Rs. 34,47,599/- under Section 7A; Rs. 28,64,318/- as interest component as per Section 7Q; Rs. 61,38,551/-as damages under Section 14B of the EPF Act and residual Rs. 36,282/- as provisional costs and charges. Section 7Q of the EPF Act stipulates that the employer shall be liable to pay simple interest @ 12% p.a. or as specified on any amount due from the employer under EPF Act, from the date of which amount becomes due until date of its actual payment. 45. From section 14B of the EPF Act, we note that the EPFO Authorities hae been given powers to recover damages in case of employer's defaults in payment of any contribution to the fund. There is no pre-conceived formula regarding what damages should be fixed under Section 14B of the EPF Act and the same has been left to the discretion of the EPFO Authority to determine the damages in facts of each case. Thus it becomes clear that the EPFO Authorities....
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....ure of life insurance to employees, whether linked to their deposits in provident fund or not, without payment by the employees of any separate contribution or premium in that behalf.] [(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer, [whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution], the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts.]" (Emphasis Supplied) 47. The liability accrued before the order of adjudication of insolvency or winding up are to be paid in priority over other claims. 48. In the present appeal, the claims pertains to the period prior to CIRP and subsequent liquidation and the claims were filed by the Respondents before the Resolution Professional after issue of by public notice inviting claims and the Respondents filed the claim of Rs. 1,24,86,750/-. 49. It is significant to note that an amendment was be made in the EPF Act vie amendme....
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....y the employer under Section 7-Q and damages leviable under Section 14 (sic Section 14-B) are excluded from the ambit of expression "any amount due from an employer", every employer will conveniently refrain from paying contribution to the Fund and other dues and resist the efforts of the authorities concerned to recover the dues as arrears of land revenue by contending that the movable or immovable property of the establishment is subject to other debts. Any such interpretation would frustrate the object of introducing the deeming provision and non obstante clause in Section 11(2). Therefore, it is not possible to agree with the learned Senior Counsel for the appellant Bank that the amount of interest payable under Section 7-Q and damages leviable under Section 14-B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act." ( Emphasis Supplied ) 51. The Hon'ble Supreme Court laid down that there is no reason to give restrictive meaning of expression "any amount due from the employer" and confine to only amount determine under Section 7A of the EPF Act. The Hon'ble Supreme Court further held that interest payable by the employee un....