TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 530
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....MB/C-III/2019. The First appeal, Comp. App. (AT) (Ins.) No. 2319 of 2024 has been preferred by the Consortium led by Syonira Invecast Pvt. Ltd., the Successful Resolution Applicant, and the Second appeal, Comp. App. (AT) (Ins.) No. 141 of 2025 has been filed by the Employees' Provident Fund Organisation (EPFO). Both the parties are aggrieved by the impugned order passed by Adjudicating Authority in I.A. No. 1745 of 2022 and have assailed the same before this Appellate Tribunal. 2. The issue in I.A. No. 1745 of 2022 related to the portion of the claim of EPFO, which was submitted subsequent to the approval of the Resolution Plan on 09.11.2021 by the Adjudicating Authority. The appeals herein are cross appeals; the first filed by SRA against the enhanced claim made by the EPFO after the approval of resolution plan, and the second by the EPFO against the non-payment of additional amount of interest under Section 7(Q) of EPF Act and damages chargeable under Section 14B of EPF Act. As both appeals arise from the same impugned order, hence, both the appeals are being taken for disposal together. We would treat the first appeal as the main appeal for disposal of both the cases and the ....
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.... Rs. 1,13,482/- still remained unpaid in compliance with the said quasi-judicial order. vi. Respondent No. 1 thereafter issued a notice dated 29.04.2022 demanding payment of Rs. 1,13,482/- and further directed the Appellant to file an application for waiver of damages before the Central Board of Trustees, EPFO, failing which action under the provisions of the EPF & MP Act was threatened. vii. The Appellant issued a letter dated 17.05.2022 refuting its liability to pay any additional amounts claimed by Respondent No. 1 after approval of the Resolution Plan. viii. Respondent No. 1 issued summons dated 18.05.2022, claiming fresh dues amounting to Rs. 62,09,154/- for the period 01.04.2015 to 30.06.2019. This fresh claim of Rs. 62,09,154/- was not made at any occasion prior to approval of the resolution plan and accordingly was not reflected in the approved Resolution Plan. ix. The Appellant thereafter filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, on 22.06.2022, being I.A. No. 1745 of 2022 before the Adjudicating Authority, praying for following reliefs: "a. Squash and set aside the notice bearing Refer....
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....racted below: "46. It is noteworthy here that the claim filed by the EPFO Authorities before the interim Resolution Professional was only to the tune of Rs. 17.90 lakhs as against which an amount of Rs. 63.l5/ - lakhs has been paid to them. This amount of Rs. 63.15 lakhs which has been undisputedly received by the EPFO Authorities covers the entire amount of the PF dues u/s 7A as also the interest there on levied u/s 7Q and as are evident from all the documents and correspondence enclosed with the petition as also with the affidavit in reply arc satisfied. Thus, only amount which is remains outstanding is towards the damages. 47. It is the submission of the EPFO Authorities that after the amount under 7-A as also the amount of the interest is paid then the SRA could be advised to make a petition/application before the Central Board of Trustees EPFO for waiver of damages. 48. It is to note that the Respondent No. 1 has made various legal submission legal submissions vide various case laws, however, in respect of the same it is stated that no differential opinion or position is being taken here in this case. 49. As the entire amount u/s 7A and inte....
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.... refund which has been paid in consonance and in accordance with the plan approved by the Adjudicating Authority." 6. The Adjudicating Authority held that the amount payable under Section 7A stood crystallised at Rs. 34,23,474/- and that the remaining amounts claimed by the EPFO pertained only to interest under Section 7Q and damages under Section 14B. It was held that the total PF dues under Section 7A together with interest under Section 7Q amounted to Rs. 61,86,815/-, against which an undisputed payment of Rs. 63.15 lakhs had already been made by the Successful Resolution Applicant, thereby fully satisfying the PF dues and interest. The Adjudicating Authority further observed that the demand of Rs. 1,13,482/- arose only due to adjustment made by the EPFO and that even the differential amount could be treated as adjusted towards damages, leaving only damages under Section 14B as outstanding. With respect to the issue of damages, the Adjudicating Authority held that once the amounts under Sections 7A and 7Q stood fully paid, the Successful Resolution Applicant could be advised to approach the Central Board of Trustees, EPFO for waiver of damages under Section 14B. Relying upon ....
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.... Hon'ble NCLT, Mumbai Bench, be stayed; (d) Direct the Respondents herein lo consider the claim or the Appellant in priority as per the provision or me and IBC and EPF & MP Act, 1952; (e) Interim and ad-interim reliefs in terms of prayer clause (a) to (e) above; (f) Such other and further reliefs as this Hon'ble Court deem fit and proper;" 9. We would take up the first appeal and decision of the same would apply automatically to the second appeal as these are cross appeals filed against the same impugned order and relate to the same issue. Submission of the appellant 10. The Ld. Counsel for the Appellant submits that the present appeal has been preferred against the Impugned Order dated 09.10.2024 passed by the Adjudicating Authority. The Appellant, being the Successful Resolution Applicant, had inter alia sought quashing and setting aside of the notice dated 29.04.2022 and summons dated 18.05.2022 issued by Respondent No. 1 (EPFO Goa), on the ground that the said demands pertained to alleged dues raised after approval of the Resolution Plan and pursuant to proceedings initiated and orders passed during the CIRP period, despite no claim havin....
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..... Counsel submitted that the Impugned Order is contrary to the judgment of this Hon'ble Tribunal in 'Employees Provident Fund Organization v. Jaykumar Pesumal Arlani, [2025 SCC OnLine NCLAT 9]', wherein it was categorically held that no claim can be enforced on the basis of an assessment carried out during the moratorium under Section 14(1) of the IBC. Ld. Counsel for the Appellant further submitted that, in view of the judgment of the Hon'ble Supreme Court in 'Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., [(2021) 9 SCC 657]', any claim which does not form part of the approved Resolution Plan stands irrevocably extinguished. Accordingly, the amounts demanded by Respondent No. 1 vide notice dated 29.04.2022 and summons dated 18.05.2022 being absent from the approved Resolution Plan, cannot be revived or pressed against the Appellant. 15. Ld. Counsel for the Appellant submitted that, even the reply filed by Respondent No. 1 before the Ld. Adjudicating Authority does not disclose that Respondent No. 1 ever filed any claim before Respondent No. 2, the Resolution Professional, in respect of the amounts allegedly payable under the order dated 06.04.2....
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....damages imposed vide order passed prior to imposition of moratorium' the SRA had been directed to pray to the Central Board of Trustees, Employees Provident Fund' for waiver of the same. It is his submission that in this case order imposing damages was passed during the moratorium period and in accordance with the Manish Kumar Bhagat Judgment (supra) such damages need not to be paid by the SRA. 19. Summing up his arguments, Ld. Counsel submitted that the Impugned Order suffers from legal infirmities as detailed above, thereby necessitating interference by this Hon'ble Tribunal. Submissions of the Respondent No. 1 20. Ld. Counsel for EPFO submitted that the Appellant had filed I.A. No. 1745/2022 seeking four specific reliefs. The Hon'ble NCLT, however, rejected three of the prayers in their entirety and partially allowed only one, namely the direction restraining the EPFO from taking coercive steps for recovery of dues from the Successful Resolution Applicant (SRA), subject to the Appellant filing an application before the Central Board of Trustees, Employees Provident Fund, within 30 days of the Impugned Order. Despite the said liberty and recommendation of the Hon....
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....in priority over all other debts. Damages levied under Section 14-B operate as a statutory penalty to compensate for loss of interest caused by delayed payment of PF contributions. 26. Ld. Counsel submitted that the Supreme Court and several High Courts have consistently held that employees' dues are to be treated with highest priority. Reliance was placed on the following judgments: a. EPF Commissioner v. O.L. of Esskay Pharmaceuticals Ltd. (CA No. 9630/2011) b. Special Civil Application No. 19075 of 2007, Hon'ble Gujarat High Court c. SM Holding Finance Pvt. Ltd. v. Mysore Machinery Manufacturers Ltd., Karnataka High Court d. SBI v. Moser Baer Karmachari Union, NCLT, New Delhi e. Alchemist ARC v. Moser Baer India Ltd., NCLT, Delhi Principal Bench f. Precision Fasteners Ltd. v. EPFO, Thane [MA 576 & 752/2018] g. Hindustan Times v. Union of India (1998) h. Organo Chemical Industries v. Union of India, AIR 1979 SC 1803 27. The Respondent further relied on the decision of the NCLAT in 'Regional Provident Fund Commissioner-I, Ahmedabad v. Ramchandra D. Choudhary [Comp. App. (AT) (Ins.) No. 1001 of 2019], whe....
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....hat the liability arising under Sections 7Q and 14B of the EPF Act is statutory and compensatory in nature, and not penal. It was contended that neither the Resolution Professional nor the NCLT/NCLAT has the jurisdiction to grant or presume any waiver of such statutory dues. The direction permitting the Appellant to approach the Central Board of Trustees for waiver does not itself amount to a waiver, and the failure to file such an application cannot result in extinguishment of the EPFO's statutory rights. 34. It was submitted that the EPF Act is a self-contained code. Section 7A thereof empowers the Provident Fund Commissioner to determine provident fund dues, and Section 7I provides a specific statutory appellate remedy before the Central Government Industrial Tribunal (CGIT). It was contended that neither the Hon'ble NCLT nor the Hon'ble NCLAT exercises any appellate or supervisory jurisdiction over statutory orders passed under the EPF Act. Consequently, any challenge to notices, summons, or assessment orders issued under the EPF Act lies exclusively before the competent authority under the said statute and cannot be adjudicated within the insolvency framework. 35. He sub....
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....nd beyond the amounts provided under the approved Resolution Plan, which form the subject matter of challenge in the present proceedings. 40. It is further submitted that upon receipt of the additional demands raised by Respondent No. 1, the Appellant approached Respondent No. 2 seeking clarification with regard to the additional liability sought to be fastened upon it. Respondent No. 2, vide his letter dated 13.05.2022, gave the full chronology of the claim and stated that no further amount was payable to EPFO, which had not been mentioned earlier at any stage of the CIRP, in accordance with provisions of the Code and judicial precedents. The Appellant, thereafter, vide its letter dated 17.05.2022, denied its liability to pay the additional amounts claimed by Respondent No. 1. Thereafter, Respondent No. 1 issued summons dated 18.05.2022, claiming fresh dues amounting to Rs. 62,09,154/- for the period from 01.04.2015 to 30.06.2019, the demand for which was raised subsequent to the order dated 09.11.2021 passed by the Adjudicating Authority approving the Resolution Plan. 41. The RP's reply dated 13.05.2022 to the appellant captures the substance of the entire issue in detail, ....
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.... (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;" 44. It can be seen from the above that the moratorium encompasses a very sweeping definition and bars both initiation and continuation of any pending suit or proceedings against the CD. The proceeding may be before any court of law, Tribunal, Arbitration Penal or other authority. The proceedings before EPFO would fall in the category of "proceedings before other authority". The language of the Section 14 (1) (a) therefore clearly indicates a bar against initiation of proceeding by the EPFO Authorities during the moratorium period. 45. This Appellate Tribunal had examined the effect of Moratorium on EPFO proceedings in 'Employees Provident Fund vs. Jaykumar Pesumal Arlani [Comp. App. (AT) (Ins.) No. 1062 of 2024]'. The relevant paras 9 to 13 are extracted below: "9. From the submissions of learned Counsel for the parties, following issues arise for consideration: (1) Whether after imposition of moratorium under Section 14 of the IBC....
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.... law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period." 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, an....
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....all stakeholders, which would include workmen of the corporate debtor. Also, the judgment of this Court in Swiss Ribbons (P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] states the raison d'être for Section 14 in para 28 as follows : (SCC p. 55) "28. It can thus be seen that the primary focus of the legislation 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 corpora....
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....te the provisions of Section 14 or 33(5) of the IBC. In paragraph 42, following was held: "42. We are of the clear opinion that the demand notices to seek enforcement of custom dues during the moratorium period would clearly violate the provisions of Sections 14 or 33(5) of the IBC, as the case may be. This is because the demand notices are an initiation of legal proceedings against the Corporate Debtor. However, the above analysis would not be complete unless this Court examines the extent of powers which the Respondent authority can exercise during the moratorium period under the IBC." 48. This Appellate Tribunal in "CA Pankaj Shah Vs Employee Provident Fund Organisation and Another [Comp. App. (AT) (Ins.) No. 17 of 2025]", reiterated the decision of the Pesumal Arlani (supra) holding that after initiation of CIRP, and when the moratorium under Section 14(1) of the IBC was in force, no assessment can be initiated or continued against the Corporate Debtor or enforced on the basis of an assessment carried out during the period so as to pass any pecuniary liability on the Corporate Debtor. 49. It is undisputed that the CIRP of the Corporate Debtor commenced on 04.07.2....
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....id Judgment refers to the claims of the EPFO finalized during the liquidation of the company. Respondent has submitted that under Section 36 (4) (iii) of the Code the 'Provident Fund' and the 'Gratuity Fund' are not the assets of Corporate Debtor and therefore this Appellate Tribunal held that there is no conflict between Section 238 of I&B Code and the provisions of the EPF and MP Act, 1952. The Judgment was further upheld by the Hon'ble Supreme Court. 52. The ratio of the above Judgment in liquidation proceedings holds true as the moratorium under the liquidation proceedings does not bar initiation of proceedings. However, as we have seen in the Judgments of Hon'ble Supreme Court in P. Mohanraj (Supra) that the proceedings under Section 14 (1)(a) of the Code have a very wide and expansive scope and covers every type of proceedings including those by statutory authorities. 53. We note that the judgment of this Appellate Tribunal in "CA Pankaj Shah (supra) reiterated the decision of this Tribunal in Pesumal Arlani (supra) holding clearly that after initiation of the CIRP, no assessment proceedings can be initiated or continued against the Corporate Debtor so as to fasten any ....
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....de, 2016 (Coda) ed the CIRP Regulations and the Resolution Plan for Goa Invescasta Lid has been approved by the Adjudicating Authority viz., NCLT Mumbai Bench vide its order dated 8.11.2021. As per the said order, the monitoring agency for implementation of the Resolution Plan for Gos Invescast Lid. approved by the NCLT. has been constituted and the undersigned has been appointed as the Chairman of the Monitoring Agency. As such, the role of the undersigned as the Chairman of the Monitoring Agaricy is limited to monitoring the implementation of the Resolution Plan and submitting the report in this regard to the NCLT. However, as requested by you, following are the steps takon in respect of the claim of the provident fund duas of the workmen and employees of Goa Invescast Lid, during the CIRP: 1. The CIRP of Goa Invescast Ltd. was initiated by the NCLT's order dated 4" July, 2019 and Shef Vinit Gangwal was appointed as the interim Resolution Professional (IRP). 2. Shri Gangwal, the IRP, made a public announcement in the newspapers on 10.7.2019 Inviting the claima from the Creditors and the last date for submission of claim was 22.7.2019. 3. In response, Assistant Provide....
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....se 15 (a) of the Resolution Plan). 11. The NCLT's order dated 9.11.2021 at Page 15 and Page 23 also mentions that the Resolution Applicant will be paying Rs.53.15 lakhs as 100% payment of Statutory Liabilities of PF within 60 days. C 12. Thus, In view of the above, it is clear that after the payment of Ra.63.15 lakhs towards the provident fund dues, the entire liability towards the provident fund gats settled and no further claim from the EPFO survivors in view of the approval of the Resolution Pian by the NCLT vide its order dated 9.11.2021. 13. The relevant provisions of the Code and the judgements of the Honourable Supreme Court of India in this regard are as follows: a) Section 31(1) of the Code provides as follows: 31. Approval of resolution plan. - (1) If the Adjudicating Authority is satisfied that the resolution pian as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees,'members, creditors, [Including the Central Government, any State Goverment or an....