TaxTMI 
TaxTMI 
2025 (9) TMI 1095
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....Adjudicating Authority has approved the Resolution Plan of the Corporate Debtor. Aggrieved by the impugned order on the terms of payment of EPFO dues by the Successful Resolution Applicant, cross appeals have been filed by the Successful Resolution Applicant and the Employees Provident Fund Organisation. 2. Coming to the factual matrix of the matter which needs to be noticed for consideration of the two Appeals, we find that the Corporate Debtor-Global Energy Pvt. Ltd. was admitted into Corporate Insolvency Resolution Process ("CIRP" in short) on 02.12.2019. Moratorium came into effect from the same date i.e. 02.12.2019 with the commencement of CIRP. A public announcement was made on 09.06.2022 inviting claims from creditors of the Corporate Debtor by 22.06.2022. No claims were filed by Employees Provident Fund Organisation ("EPFO" in short) within the stipulated time-line of 22.06.2022. Request for resolution plan was issued by the Resolution Professional ("RP" in short) on 14.10.2022. The EPFO submitted its claim for the first time on 06.03.2023 based on the Area Enforcement Officer's Report ("AEOR" in short) for an amount of Rs. 1,33,19,135/- with the RP. The claim filed by t....
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....ent proceedings was not tenable. In support of their contention, reliance was placed on the judgment of this Tribunal in Employees' Provident Fund Organisation Vs Jaykumar Pesumal Arlani in CA(AT)(Ins) No. 1062 of 2024 wherein it had been held that no assessment proceedings can be continued after initiation of moratorium and that claim based on assessment carried out during moratorium period cannot be pressed in the CIRP. 5. Furthermore, contention was raised that the findings in the AEOR did not co-relate to identified employees to whom the claims of EPFO could be distributed besides being based on a non-existent establishment of the Corporate Debtor. In the absence of determinate beneficiaries, the assessment of AEOR was incapable of enforcement. In support of their contention, reliance was placed on the judgement of the Hon'ble Supreme Court in Himachal Pradesh State Forest Corporation Vs Regional Provident Fund Commissioner (2008) 5 SCC 756; judgment of Hon'ble High Court of Patna in Assistant Provident Fund Commissioner Vs M/s Nand Lal & Company 2016 SCC Online Pat 2402; and judgment of the Hon'ble High Court of Delhi in Central Board of Trustees (EPFO) Vs Era Infra Enginee....
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.... passed by the Adjudicating Authority, to the tune of the admitted claims of Respondent No. 2, an extract of the same is reproduced verbatim herein: II. Payment to the Operational Creditors: iii. Secondly payment towards the EPFO dues, in case of insufficiency of the funds, then the shortfall shall be met by the Resolution Applicant as part of the funds. 22. It is to be noted that IA 2332 of 2023 was filed by the Regional Provident Fund Commissioner-II, Regional Office, Delhi (Central) seeking direction against the Resolution Professional/Respondent to consider the claim of Rs.1,33,19,135/-. including the principal claim of Rs. 77,67,128/- and damages & interest amounting Rs. 55,52,007/- of the Employees Provident Fund Organization. The said claim was submitted before the approval of the Resolution Plan and the Successful Resolution applicant vide an additional affidavit dated 28.06.2024 has taken upon himself to pay the said claim within 180 days from the handover of the management of Company to the SRA. The relevant portion of the affidavit is reproduced here under: "3. I acknowledge and undertake to pay the principal amount Rs. 77,67,128/- (Ru....
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....tion of their claim. The order of the Adjudicating Authority dated 08.02.2024 after noting that the "Counsel for Resolution Professional states at bar that the claim was submitted prior to the approval of the Resolution Plan by the CoC" correctly directed the RP to consider and verify the claims of EPFO. 10. In pursuance of the order of the Adjudicating Authority dated 08.02.2024, the claim of EPFO was admitted by the RP. The updated claim of EPFO was thereafter uploaded and reflected on the CIRP website under the caption "Amount of claim admitted" as may be seen at page 233 of the Reply of SRA in Company Appeal No. 1752 of 2024. It was therefore contended that when the claim has been admitted by the RP, the SRA cannot resile from making good these payments qua the admitted claims of EPFO and that too when they had submitted an affidavit wherein the SRA had given an undertaking to pay the EPFO claims. It was also asserted that the allegation made by the SRA that EPFO had made a misrepresentation before the Adjudicating Authority that the claim of EPFO was based on Section 7A order is baseless. 11. Assertion was also made that not only did the RP admit the claim of EPFO in pur....
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....placed on record to show that claims were filed by EPFO on or by 22.06.2022. The claim was submitted by the EPFO on 06.03.2023 which date was however before the approval of the resolution plan by the CoC. It is also pertinent to note that the EPFO claim was premised on the AEOR report and it is admitted by the EPFO that the AEOR report was distinct from Section 7A order. It has also not been denied by the EPFO that the AEOR report was arrived at during moratorium period. 16. Having noted the above facts, we now would like to dwell upon the tenability of claims of EPFO. To arrive at our view, we need to first consider whether assessment proceedings could have been conducted by the EPFO under Sections 7A, 7Q and 14B of the EPF Act after imposition of moratorium under Section 14 of IBC and whether any claim on the basis of such assessment carried out by EPFO during moratorium could have been admitted by the Adjudicating Authority. 17. We are squarely guided by the precedent laid down by this Tribunal in CA Pankaj Shah Vs Employee Provident Fund Organisation & Anr. in CA (AT) (Ins) No. 17 of 2025 where this issue of whether assessment proceedings can be continued by EPFO after in....
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.... the Hon'ble Supreme Court in "(2020) 13 SCC 208 - Rejendra K. Bhutta vs. Maharashtra Housing and Area Development and Anr". In paragraphs 11, 12 & 13, following was laid down: - "11. The Hon'ble Supreme Court had occasion to consider effect and consequence of imposition of moratorium. The Hon'ble Supreme Court in (2020) 13 SCC 208 - Rejendra K. Bhutta vs. Maharashtra Housing and Area Development and Anr. held that after the imposition of moratorium, a statutory freeze takes place. In paragraph 25 of the judgment, following was held: "25. There is no doubt whatsoever that important functions relating to repairs and reconstruction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, hand over execution of any housing scheme under its own supervision. However, when it comes to any clash between MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the....
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....ion is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protect the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." 13. The plain reading of Section 14, sub-section (1) indicates ....
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.... basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP." 10. The above judgment clearly indicates that after initiation of the CIRP, no assessment can be initiated or continued against the Corporate Debtor so as to pass any pecuniary liability on the Corporate Debtor. In the present case, the EPFO has made demand on the basis of an alleged inspection report dated 10.05.2023 and assessment order dated 25.09.2023 which both were subsequent to initiation of CIRP on 17.02.2023. When no demand can be made on the basis of any inspection or assessment, we do not find any ground to allow the application IA No.409 of 2024 which was filed by EPFO where direction was sought to allow the entire claim of Rs. 1,37,17,837/-." 19. When we look at the above judgment, it is unequivocally clear that demand made by the EPFO on the basis of an inspection report made after initiation of moratorium is not enforceable as Section 14(1) of the IBC prohibits the initiation or continuation of assessment during the moratorium period. 20. Applying the ratio of the above judgment to the facts of the present case, even though th....