TaxTMI 
TaxTMI 
2026 (2) TMI 27
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.... (IB) No. 104/KB/2022, whereby the Resolution Plan submitted in respect of Power Max (India) Pvt. Ltd. (Corporate Debtor) was approved. In the present appeal, Ms. Rachna Jhunjhunwala, Resolution Professional and Chairperson of the Monitoring Committee of the Corporate Debtor, has been arrayed as Respondent No. 1, while Shyam Enterprises, the Successful Resolution Applicant (SRA) of the approved Resolution Plan, has been impleaded as Respondent No. 2. 2. The appeal arises from the grievance of the Appellant, that despite its statutory provident fund claim of Rs. 22,49,956/- having been duly admitted during the Corporate Insolvency Resolution Process, the approved Resolution Plan provides for payment of only Rs. 73,120/-, amounting to approximately 3% of the admitted provident fund dues, which, according to the Appellant, is contrary to the statutory scheme governing provident fund dues and the settled position of law. Brief facts of the case 3. The brief facts of the case are as given below: i. The Corporate Debtor, Power Max (India) Pvt. Ltd., a company incorporated under the Companies Act, 1956, having its registered office at Kolkata, was admitted into Corporate....
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....s. vii. It is an admitted position on record that no prior intimation or consultation was made with the Appellant regarding the drastic reduction in payment of provident fund dues, and the Appellant was informed of the reduced payout only after approval of the Resolution Plan, for the first time, through an email communication dated 07.06.2024 received from the Resolution Professional. viii. The Appellant contends that provident fund dues constitute employees' hard-earned money and are statutorily protected under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The PF dues are specifically excluded from the liquidation estate under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016, and therefore could not have been subjected to reduction or haircut under the Resolution Plan. ix. The appellant submits that approval of a resolution plan providing for partial payment of provident fund dues is in violation of mandatory statutory provisions, settled judicial precedents, and the binding nature of provident fund liabilities, rendering the impugned order legally unsustainable. x. It is in these circumstances, being a....
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....y interest leviable under Section 7Q of the said Act; and (c) Rs. 12,44,031/- towards statutory damages imposed under Section 14B of the said Act. Thus, the total outstanding provident fund dues lawfully payable by the Corporate Debtor stood crystallised at Rs. 22,49,956/-. 7. He submits that the aforesaid outstanding dues were not claimed arbitrarily, but were calculated strictly on the basis of a detailed computation chart placed on record in the appeal. It is further submitted that the claim of the Appellant is based upon the Enforcement Officer's Reports dated 12.05.2023, which are part of the appeal. These reports clearly establish the default committed by the Corporate Debtor in remitting provident fund contributions within time, and form the statutory basis for the levy of contribution, interest, and damages under the EPF & MP Act. 8. Ld. Counsel submits that the Resolution Professional, after due verification, admitted the entire claim of the Appellant towards provident fund dues. The approved list of creditors as on 20.07.2023, placed at page 134 of the appeal, categorically records that the Appellant's claim of Rs. 22,49,956/- was fully admitted. The list further re....
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.... remit provident fund dues within time automatically attracts the levy of interest and damages under the statute. Any Resolution Plan that seeks to waive or dilute these statutory liabilities is contrary to law and liable to be set aside. 12. Ld. Counsel further submits that the Respondents have sought to rely upon the judgment in 'Regional Provident Fund Commissioner, Vatwa, EPFO v. Manish Bhagat', [Company Appeal (AT) (Insolvency) No. 808 of 2022], decided on 11.10.2023, to claim exemption from payment of statutory dues. In this regard, Appellant made 3 submissions, the first being, that the said judgment was never relied upon before the Learned NCLT at the time of approval of the Resolution Plan and, therefore, cannot be pressed into service at the appellate stage to justify the illegality of the impugned order. Secondly, without prejudice, even the said judgment grants exemption only with respect to damages under Section 14B and does not exempt payment of statutory interest under Section 7Q. Hence, no exemption from payment of interest can be claimed. Thirdly, the said judgment is per incuriam, being contrary to the binding judgments of this Hon'ble Tribunal in Anuj Bajpai a....
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....tand concluded under the Code and also attempts to accord priority to claims which were neither crystallised nor finally adjudicated prior to commencement of the Corporate Insolvency Resolution Process. 17. It is the submission of Respondent No. 1 that the appeal is not maintainable either in law or on facts. The Appellant seeks to challenge the approval of a Resolution Plan under Section 31 of the IBC without demonstrating any violation of Section 30(2) of the IBC. The Appellant has failed to establish how the impugned order suffers from any jurisdictional error, material irregularity, or perversity warranting appellate interference. 18. It is his submission that the scope of interference by this Appellate Tribunal against an approved Resolution Plan is extremely limited. The Appellant has not demonstrated any non-compliance with mandatory statutory provisions, nor has it shown that any admitted statutory dues have been extinguished. 19. It is submitted by the RP that prior to the commencement of CIRP, the Appellant had not passed any final adjudication or determination order under either Section 7A or Section 14B of the Employees' Provident Funds and Miscellaneous Provis....
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....tion Plan does not extinguish any admitted provident fund dues and fully complies with statutory requirements. It is submitted that Section 30 does not mandate inclusion of contingent or unadjudicated statutory claims. The Appellant's attempt to treat interest and damages, without final adjudication, as mandatory dues is legally unsustainable. 26. Ld. Counsel places reliance on the judgment of the Hon'ble Appellate Tribunal in 'Regional Provident Fund Commissioner v. Shri Menish Kumar Bhagat & Anr.', dated 11.10.2023, wherein it has been categorically held that damages under Section 14B of the EPF Act are discretionary in nature and subject to waiver. It is submitted that with the repeal of the Sick Industrial Companies (Special Provisions) Act, 1985 and the advent of the IBC, the insolvency framework now governs corporate rehabilitation. The power to recommend waiver of damages, earlier vested with BIFR, can now be exercised within the insolvency regime. 27. Respondent No. 1 submits that in absence of any final order under Sections 7Q or 14B of the EPF Act, the Appellant's claim remains uncrystallised and cannot be accorded priority treatment under the IBC framework. It is s....
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....t represented 100% of the principal provident fund dues as determined under Section 7A of the EPF & MP Act. 34. Ld. Counsel further submits that the present appeal has been filed by the Employees' Provident Fund Organisation assailing the approval order dated 17th May, 2024 on an entirely misconceived and erroneous understanding of both facts and law. The Appellant has alleged that purported dues under Section 14B (damages) and Section 7Q (interest) of the EPFMP Act amounting to Rs. 21,76,836/- were not provided for in the Resolution Plan. 35. It is his submission that this allegation is wholly misleading and untenable, as the Resolution Plan categorically provides for payment of the entire principal provident fund dues amounting to Rs. 73,120/-, being the complete amount crystallised under Section 7A of the EPFMP Act. The relevant provisions of the Resolution Plan clearly reflect compliance with statutory obligations. 36. Ld. Counsel submits that the Appellant's claim towards damages and interest under Sections 7Q and 14B was based solely on a Form-B dated 18th May, 2023, wherein the Appellant relied upon a summon dated 10th May, 2023 accompanied by a calculation sheet fo....
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....ceedings under the EPFMP Act can be initiated or continued once moratorium is imposed. 43. In support of his submissions, Ld. Counsel places reliance on the following judgments: (i) 'Employees Provident Fund vs. Jaykumar Pesumal Arlani', [Company Appeal (AT)(Ins.) No. 1062 of 2024], order dated 03rd January, 2025, wherein this Hon'ble Tribunal held that uncrystallised EPF claims cannot be enforced during moratorium. (ii) 'Regional Provident Fund Commissioner vs. Harry Dhaul & Ors.', [Company Appeal (AT)(Ins.) No. 1752 of 2024], order dated 18th September, 2025, reiterating that assessment proceedings during moratorium are impermissible. (iii) 'The Regional Provident Fund Commissioner II vs. Vineeta Maheswari, RP of Bloom Dekor Ltd.', [Company Appeal (AT)(Ins.) No. 1618 of 2024], order dated 08th September, 2025, wherein it was held that claims under Sections 7Q and 14B must crystallise prior to insolvency commencement. (iv) 'Regional Provident Fund Commissioner, Vatwa, EPFO vs. Shri Manish Kumar Bhagat & Ors.', [Company Appeal (AT)(Ins.) No. 808 of 2022], order dated 11th October, 2023, affirming that moratorium bars EPFO assessment proceeding....
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....ly on a summons issued for initiation of proceedings and not on any final adjudicatory order. Respondent No.1 asserts that proceedings under EPFO Act had not culminated into any final determination prior to the imposition of moratorium and, therefore, the said amounts could not be treated as crystallised dues. It is further contended that once moratorium came into force, no assessment proceedings could legally continue, and the Resolution Professional was justified in recognising only those statutory dues which had attained finality. 49. It is the submission of the Respondent No.2/Successful Resolution Applicant that the Resolution Plan consciously and lawfully provides for 100% payment of provident fund contributions as determined under Section 7A of the EPF Act, thereby fully safeguarding employees' statutory rights. It is contended that the Appellant is seeking to impose liability towards interest and damages which had not been adjudicated or quantified prior to CIRP and which, therefore, remained contingent in nature. Respondent No.2 submits that fastening such undecided liabilities upon a Resolution Applicant would defeat the core objective of the IBC, which is to provide f....
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....n produced before this Tribunal. In fact, no such order passed by EPFO Authorities during the CIRP Process has been brought to our notice. 55. Subsequently, the appellant filed its claim before the IRP vide letter dated 15.05.2023. In this letter break up of PF claim under Section 7A; interest under Section 7Q and damages under Section 14B were specially mentioned. The total claim of PF dues was Rs. 22,49,956/-. The same amount was later filed in Form-B. The letter dated 15.05.2023 is extracted below: 56. We note from the aforesaid letter that (i) the dues of Provident Fund for the period 01.07.2022 to 30.04.2023 amounted to Rs. 73,120/- as per the report of Enforcement Officer dated 12.05.2023. The balance amount of the claim related to Interest under Section 7Q and Damages under Section 14B. (ii) The EPFO has further stated that the above said dues are not final and may increase, as the inspection of the establishment could not be completed. They have further stated that the final demand can be raised only after the completion of the inspection. 57. It is the admitted position from the documents that the claims of appellant under Section 7Q and Section ....
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....on was that the Corporate Debtor did not maintain separate funds with respect to pension fund and provident fund and therefore according to the appellant the claims of the respondents were to be treated under the waterfall mechanism as per the Section 53 of the Code. Respondents on the other hand submitted that interest under Section 7Q and damages under Section 14B are levied after following statutory procedures and are imposed due to delayed remittance of dues by the employers and that these dues are rights of workers which cannot be treated as assets of the Corporate Debtor and therefore stand in priority of payment as per statutory scheme provided in the EPF act and do not fall in the water fall mechanism. It was held in the Judgment that dues of the workmen and employees from Provident fund, and gratuity fund are not to form the assets of the liquidation estate and as such they cannot be treated under the Water Fall mechanism under Section 53. There are two distinguishing features in the present matter vis- à-vis Anuj Bajpai's case. Firstly, the case related to liquidation wherein the EPFO authorities can continue and complete the proceedings under the Act to determine ....
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....her. 10. In Company Appeal (AT) (Ins.) No.1062 of 2024, CIRP was initiated vide order dated 03.05.2021 and the assessment order under Section 7A was passed on 11.08.2023 and order under Section 14B and 7Q was issued on 16.08.2023. In Company Appeal (AT) (Ins.) No.1065 of 2024, the CIRP against the CD commenced on 12.07.2021 and assessment order under Section 7A was passed on 29.08.2022. It is an admitted position that in both the cases, assessment orders under Section 7A, 14B and 7Q were passed subsequent to initiation of CIRP against the CD. Moratorium under Section 14 was imposed by the Adjudicating Authority, initiation CIRP. Section 14(1) of the IBC provides as follows: "14. Moratorium. - (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumb....
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....ed under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management." 12. In (2021) 6 SCC 258 - P. Mohanraj and Ors. Vs. Shah Brothers ISPAT Pvt. Ltd., the Hon'ble Supreme Court had occasion to interpret the expression "proceeding" in Section 14. The object and purpose of moratorium has been captured in paragraph 30 of the judgment, which is as follows: "30. It can be seen that Para 8.11 refers to the very judgment under appeal before us, and cannot therefore be said to ....
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.... to proceedings before the Civil Court. The proceedings, which have the effect on the assets of the CD are all covered in the expression 'proceeding'. The question to be answered is as to whether after moratorium has been imposed, it was open for EPFO to proceed with the assessment proceeding. Learned Counsel for the parties state that during moratorium proceeding, no recovery proceeding can be initiated against the CD. However, submissions of the learned Counsel for the Appellant is that assessment proceedings against the CD may continue. Hence, the orders of assessment passed during moratorium period, were fully permissible and the claim on the basis of the said proceedings had to be admitted in CIRP." 66. Based on the questions framed in para 9 of the aforesaid Judgment of Pesumal Arlani (supra), this Appellate Tribunal gave the following findings in para 24 of the Judgment in relation to question (1) and (2), which is extracted below: "24. In view of the aforesaid, we answer Question Nos.(1) and (2) in following manner: (1) We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. ....
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.... that uncrystallised EPF claims cannot be enforced during the moratorium, has been consistently followed by this Tribunal in several cases. We are therefore not inclined to agree with this submission of the appellant. 70. In 'Regional Provident Fund Commissioner II vs. Vineeta Maheswari, RP of Bloom Dekor Ltd.' [Company Appeal (AT)(INS) No. 1618 of 2024, order dated 08.09.2025] this Tribunal clearly distinguished between provident fund contributions already determined and consequential liabilities such as interest and damages under Sections 7Q and 14B. It was held that while determined provident fund contributions are protected, claims towards interest and damages must attain finality, before the insolvency commencement date to be enforceable in CIRP. In the present case, only the Section 7A dues had been determined prior to 01.05.2023, whereas claims under Sections 7Q and 14B had not. The ratio of aforesaid decision also applies to the present factual matrix. 71. In 'Regional Provident Fund Commissioner, Vatwa, EPFO vs. Shri Manish Kumar Bhagat & Ors.' [Company Appeal (AT)(INS) No. 808 of 2022, order dated 11.10.2023], this Appellate Tribunal examined the effect of moratoriu....
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....2/18 EXPIRY DATE 31.12.28 M/a POWER MAX (INDIA) PRIVATE LIMITED, STEPHEN COURT, IBA, PARK STREET (5TH FLOOR). KOLKATA, 700071. * Sir/Madam, of India Whereas, M/s POWER MAX (INDIA) PRIVATE LIMITED is an establishment covered Gore Employees' Provident Funds and Miscellaneous Provisions Act. 1952 there referred to as the Act), with Establishment ID WBPR30024427000. And whereas, under the provisions of the section 6, 6% and 6C of the Act read with Para 38 of the Employees" Provident Fund Schene 1952, 3 of Employees' Pension Scheme 1995 and #(1) of Employees Deposit Linked Insurance Schene 1976, the employer of the establishment is required to remit the contributions along with the administrative charges within 15 days of the close of every month. And whereas, under section 148 of the Act, whage an employer makes default in payment of the contributions or any charges, the Commissioner is required to recover by way of penalty auch damages, not exceeding the amount of azsears and the rates of Damages at catas specified in Para 32A of the BPP Schane 1952, Pare $ of BPS 1995 and BA of KOLE Scheme 1976 (as given below) : Period of Delay Rate upto Rate from 26....
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.... within 15 days of receipt of this sunden payment should be made using the Challan generated on the ECR Portal by portal and using the Challan Entry option. The details of the interest entered In the fields for miscellaneous payment and the option should be selecry Interest v/s 70 for each account. Of India Issued under my algnature and seal on this _day of - ASSISTANT / REGIONAL PROVIDENT FUND COMMISSIONER SRO PARK STREET Document 3 128 करà¥à¤®à¤šà¤¾à¤°à¥€ à¤à¤µà¤¿à¤·à¥à¤¯ निधि संगठन EMPLOYEES'PROVIDENT FUND ORGANISATION शà¥à¤°à¤® à¤à¤µà¤‚ रोजगार मंतà¥à¤°à¤¾à¤²à¤¯, à¤à¤¾à¤°à¤¤ सरकार Ministry of Labour and Employment Government of India Te Azadika Ami Mahotsav -- No. EPFO/RO/PRB/LEGAL/NCLT/WB/PRB/2427/ 721 Date: 1 5:05.2023. To Shri Tarun Kumar Ray IRP of M/s Power Max(India) Pvt Ltd, IBBI Reg No.(IBBI/IPA-001/IP/P-01411/2018-19/12228) 29C, Bentinck Street, 2'" Floor, Kolkata:700069 Sub: Submission of claim in respec....