TaxTMI 
TaxTMI 
2024 (10) TMI 293
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.... order directed the Appellant/Resolution Professional to: (a) Set aside amounts corresponding to the provident fund contributions of the employees of the Corporate Debtor from the funds available in the attached bank accounts. (b) Furnish an undertaking to the Respondents (EPFO, Kannur, and EPFO-Yelahanka) that the Corporate Debtor shall remit the aforesaid dues upon the Respondents vacating the attachment over the bank accounts of the Corporate Debtor. 2.The brief facts of the case are as follows: (i)Bombay Rayon Fashions Limited (Corporate Debtor) is a company registered under the Companies Act, 1956, which is engaged in the production of textiles, fabrics, and spinning of linen yarn. On 07 June 2022, the AA admitted an insolvency petition filed by an operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short, the Code) against the Corporate Debtor and initiated the Corporate Insolvency Resolution Process (CIRP). Mr. Santanu T. Ray was appointed as the Interim Resolution Professional (IRP). During the first meeting of Committee of Creditors (in short CoC) held on 26 July 2022, the CoC unanimously approved the replacement of the IRP with Mr. S....
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....er the "government dues" category, Respondent Nos. 1 and 2 did not withdraw the attachments on the Corporate Debtor's bank accounts. The list of admitted claims published by the Appellant on 13 February 2023 continues to reflect the claims of Respondent Nos. 1 and 2. (vi)The IRP aggrieved by the refusal of Respondent Nos. 1 and 2 to lift the attachments on the bank accounts of the Corporate Debtor, and facing liquidity challenges in continuing the CIRP, filed a De-Attachment Application before the AA on 4 August 2022 vide I.A. No. 2152 of 2022. The application sought, among other reliefs, the de-attachment of the bank accounts of the Corporate Debtor maintained with Respondent Nos. 3 and 4. (vii)Following the appointment of the Appellant as the RP on 4 August 2023, the Appellant was informed that the Corporate Debtor's bank accounts remained inaccessible due to EPFO Attachment Orders, thereby hampering the Appellant's ability to manage the CD as a going concern due to insufficient cash balances. The Appellant identified several other bank accounts that were attached, which had not been included in the initial De- Attachment Application. Consequently, the Appellant....
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....g the De-Attachment Application, imposed conditions requiring the RP to set aside PF contributions from the attached accounts, provide an undertaking to remit dues, and handle PF claims as per the EPFOs' demands. 4.The counsel for the Appellant submitted that the CD's statutory creditors include eight Employee Provident Fund (EPF) organisations, including the EPFOs, all of which have filed claims. These claims, including those of the EPFOs, were fully admitted. The remaining six creditors-EPFO Thane, EPFO Kandivali West Tarapur, EPFO Kandivali West Exleela, EPFO Solapur, EPFO Kolhapur, and EPFO Peenya-are similarly situated. The Appellant contends that the Impugned Order should be overturned as it enforces improper preferential treatment among creditors and is based on incorrect legal interpretation and inadequate consideration of applicable laws. 5.The appellant further submitted that the AA's directions to (a) set aside amounts for PF contributions from the Attached Accounts and require an undertaking to remit these amounts "immediately" to the EPFOs, and (b) prioritize EPFO payments upon lifting the attachment orders, create an unlawful preferential treatment for the E....
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....uch orders cannot continue during the moratorium. 10.In the end the Counsel submitted that the Impugned Order should be set aside due to its erroneous preferential treatment of EPFOs, its obstructive impact on the liquidation process, and its misinterpretation of relevant legal precedents. Submission of the Respondents: 11.The Counsel for Respondents 1 and 2 stated that the order of the attachment issued by the Respondent No.1 is dated 06.06.2022 and attachment order issued by Respondent No.2 is dated 03.02.2022. Further, the CIRP commencement date with respect to the CD is 07.06.2022. Therefore, both the attachment orders are prior in time and not during the CIRP. 12.The Counsel for Respondents cited this Appellate Tribunal's Judgment in the case of Regional Provident Fund Commissioner vs T.V. Balasubramanian Company Appeal (AT) (Insolvency) No. 1521 of 2019 Decided on: 08.06.2020. By the Judgement Supra passed by three members Bench, whereby it has been specifically held that attachment of the property of the Corporate Debtor by the EPFO before initiation of CIRP is prior to commencement of CIRP, therefore, the same cannot be held to be against the provisions of the C....
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....mployees Provident Fund Organization. Thus, it is undisputed that the attachment of immovable property of the Corporate Debtor was made by the Recovery Officer EPFO Organization on 04th August 2017 much before the petition under Section 7 of the Code. 13.The counsel stated that the Impugned Order does not create any disparity between similarly situated creditors. the filing of claim by other regional offices of EPFO does not justify the statement of Appellant as it is settled proposition of law that sums due to any Workmen from the above 'funds' are excluded from the "Liquidation Estate' Legislative intent is clear that any sums' due to any Workmen from aforesaid 'fund' are excluded and cannot be used for 'recovery' in the Liquidation. 14.The counsel placed reliance upon the Judgment of this Tribunal in C.G. Vijaya Lakshmi and Or's. vs Kumar Rajan, RP, Hindustan Newsprint Limited and Or's. [Company Appeal (AT) (CH) (Ins.) No. 29 of 2021]. In particular, the paras 14,15 & 22 which are reproduced below: 14.Section 36(4) provides that the following shall not be included in the Liquidation Estate Assets and shall not be used for recovery in th....
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....long, continuous, faithful and un-blemished service. 8.It is the hard-earned benefit, which accrues to an employee and is in the nature of property. This right to property cannot be taken away without the due process of law as per the provisions of Article 300A of the Constitution of India." 18.The Counsel for Respondents stated that during the hearing the Hon'ble Tribunal sought explanation with respect to whether any of the attachment order is only for damages and interest. The respondent further submitted that this issue is covered in entirety by the judgment of this very 3-member bench of Hon'ble NCLAT Mr. Anuj Bajpai vs Employees Provident Fund Organisation (EPFO) and Or's. /Comp .App. (AT) (Ins.) No.1141 of 2023 & I.A. No.3979 of 2023/. Analysis and findings: 19.We have gone through the record and heard the submission of learned counsels in detail. 20.The operative part of the decision of the AA is reproduced below: "5. Following the decision in the case of Jet Aircraft Maintenance Engineer's Welfare Association (Supra), we hold that PF dues do not form part of Corporate Debtor's Assets and accordingly need to be excluded there....
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....ce, Peenya 4,59,52,754 4,59,52,754 (100%) 4,59,52,754 4,59,52,754 (100%) EPFO, Regional Office, Thane 57,46,56,297 18,51,01,405 (32.21%) 57,46,56,297 18,51,01,405 (32.21%) EPFO, Solapur 20,89,95,071 1,51,81,898 (7.26%) 20,89,95,071 1,51,81,898 (7.26%) EPF Kandivali, West Mumbai (Tarapur) 23,30,27,625 23,30,27,625 (100%) 23,30,27,625 23,30,27,625 (100%) 22.The appellant has sought quashing of impugned order of AA on the grounds that similarly placed provident funds are being treated differentially. There are six other EPFOs who's claim have not been decided in the instant order. The preferential treatment given to claims of two EPFOs would be discriminatory and bad in law. 23.The appellant has relied upon the decision of Hon'ble Supreme Court in the case of 'Sunil Kumar Jain & Or's. v. Sundaresh Bhatt and Or's. [(2022) 7 SCC 540] Paras 53 and 54 of the Judgment which are reproduced below: "53. Now so far as the dues of the workmen/employees on account of provident fund, gratuity and pension are concerned, they shall be go....
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....nce to provident fund, gratuity fund and pension fund. Hon'ble SC has clearly directed that share of workman dues shall be kept outside the liquidation process and the concern workman/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any available. The appellant relies on the specific word 'if any available', in the Judgment supra and claims that the attached accounts are savings and current accounts of the CD and do not fall in the purview of dedicated provident fund, gratuity fund and pension fund as ordered by the Supreme Court. 25.We find that this issue was analysed and decided by this Tribunal in the Jet Aircraft Maintenance Engineering Welfare Association V. Ashish Chhawchharia, RP of Jet Airways India Ltd. in CP (IB) No. 2205/B/2019. The Tribunal has framed questions relating to entitlement of provident fund gratuity etc. in the para 33 of the aforesaid judgment. The relevant questions are as given below: "II. Whether the workmen and employees are entitled to receive the payment of provident fund, gratuity and other retirement benefits in full since they are not part of the liquidation estate under Section 36....
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....nce unpaid amount of provident fund and gratuity to workmen and employees. 72.Our answer to Question II and III is as follows: (i)The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(a)(iii). (ii)The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 32(2)(b) read with Section 53(1). 28.The question XI as framed by the Tribunal was answered in following manner in paras 117 to 119, which are reproduced below: 117.In the appeal filed by the Regional Provident Fund Commissioner, it has been pleaded that the claim was filed by the Appellant for an amount of Rs.24,40,65,594/- towards damages under Section 14B of Employees' Provident Funds & Miscellaneous Provisions Act 1952, as per the order dated 17.10.2018. It is further mentioned that interest under Section 7Q was also levied of Rs.12,85,92,763/-, which amount was paid by the establishment. The amount which was claimed by the Appellant wa....
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.... there cannot be any quarrel to the preposition as laid down by the Hon'ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act must be investigated in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three-member bench judgment of this Tribunal in "Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors." (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in "Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others" (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity. 29.It is....
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....gainst the provisions of Section 36(4) (iii) of the 'I&B Code' as per which the 'provident fund' and 'gratuity fund' cannot be included as assets of the 'Corporate Debtor'. 42.An Affidavit has been filed by 'Kushal Limited'- ('Successful Resolution Applicant') stating that the approved 'Resolution Plan' has duly taken care of all the statutory dues amounting to total Rs.5.09 crore. It was further submitted that the principal amount of 'provident fund' has been taken into consideration whereas the order of levying of interest by the 'PF Authority' post 'Corporate Insolvency Resolution process' is not permissible under the law for the time being in force. 43.Further, according to 'Successful Resolution Applicant', Section 7Q and 14B of the 'Employees Provident Funds and Miscellaneous Provision Act, 1952' cannot be relied upon as the provision of the 'I&B Code' has overriding effect on the same in terms of Section 238 of the 'I&B Code'. 44.However, as no provisions of the 'Employees Provident Funds and Miscellaneous Provision Act, 1952' is in conflict with any of the provisions of the 'I&B Code' and, on the other hand, in terms of Section 36 (4) (iii), the '....
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....into CIRP vide order of AA dated 26.02.2020 and the respondents had filed their claim before the IRP of Rs.1,24,86,850/-. The CD was subsequently directed to be liquidated, and the appellant was appointed as the Liquidator who asked the respondents to file the claim during liquidation period. iii. It is the case of the appellant that the CD did not maintain sperate funds with respect to pension fund and provident fund and therefore according to the appellant the claim of the respondent is to be treated under the water fall mechanism as per the Section 53 of the Code. iv. EPFO Authorities issued sale proclamation for the assets of the CD and started recovery in terms of provisions of the Employees Provident Fund & Miscellaneous Provision Act, 1952. v. The Liquidator issued public notice for auction of a certain property and during such e-auction notice the appellant came to know of the charge created by the respondent on the said property. On the prayer of the appellant the AA allowed him to create a fixed deposit to the extent of Rs. 1,24,86,750/- as claimed by EPFO. The auction sale of the subject property was conducted and a fixed deposit as directed by....
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....ions required to be transferred under sub-section (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the [Scheme or the Insurance Scheme]; or (b)from the employer in relation to an exempted [establishment] in respect of any contribution to the provident fund or any insurance fund] (in so far as it relates to exempted employees), under the rules of [the provident fund or any insurance fund] [any contribution payable by him towards the [Pension] Fund under sub-section (6) of section 17,] damages recoverable under section 14B or any charges payable by him to the appropriate Government under any provision of this Act under any of the conditions specified under section 17, shall where the liability therefor has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency Towns Insolvency Act, 1909, or under section 61 of the Provincial Insolvency Act, 1920, or under [section 530 of the Companies Act, 1956], are to be paid in priority to all other debts in the distribution of the property ofthe insolvent or the assets of the company bein....