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2026 (4) TMI 1675
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....rh Bench, Chandigarh, Haryana ("Adjudicating Authority") in Company Petition (IB) NO. 93/CHD/HRY/2018. Mr. Vipul Garg, who is the Liquidator of the Corporate Debtor M/s Jai Laxmi Lighting Industries Pvt. Ltd. is the Respondent No.1 herein. Canara Bank, who is the financial creditor of the Corporate Debtor, is the Respondent No.2 herein. 2. The appellant stated that the Corporate Debtor was covered under the The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act,), with code no. HRFRD12517. The appellant submitted that on 02.04.2019, the EPFO Regional Office, Faridabad filed Form-B claiming Rs. 36,55,290/- before the Resolution Professional toward EPF dues which accrued from 05/2012, well before the CIRP period. The appellant further stated that several letters were thereafter sent to the Resolution Professional requesting payment of PF dues relating to the employees of the corporate debtor. 3. The appellant stated that on 11.11.2021, the Resolution Professional informed the appellant that its share had been calculated pari passu with financial creditors and came to Rs. 6,014/-, which, according to the appellant, is incorrect because the protectio....
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....over the assets of the company are merely property rights, the dues of workmen, particularly provident fund dues, are intrinsically linked to the fundamental right to life under Article 21. The Appellant asserted that equating such dues with other debts would unjustly dilute this inalienable right. 9. The Appellant further submitted that the Adjudicating Authority overlooked the provisions of Section 11(2) of the EPF Act, which clearly establish that provident fund dues shall have priority over all other debts. The Appellant stated that such dues are deemed to be the first charge on the assets of the establishment and must be paid in priority, notwithstanding anything contained in any other law. 10. The Appellant contended that the Adjudicating Authority failed to consider the judgment of the Hon'ble Gujarat High Court in Indian Overseas Bank vs. Employees Provident Fund Organization, wherein it was held that the statutory first charge created under the EPF Act would prevail over other enactments such as the SARFAESI Act. The Appellant emphasized that the said judgment clearly establishes the supremacy of provident fund dues over other secured debts. 11. The Appellant stat....
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....spondent No.1 stated that claims were received from various stakeholders, including Financial and Operational Creditors, out of which claims amounting to Rs. 32,40,44,966.32/- were admitted. The Respondent No.1 contended that the Corporate Debtor was not a going concern and its operations had ceased even prior to initiation of CIRP. The Respondent No.1 submitted that a liquidation estate was constituted under Section 36 of the Code, and assets including stock, plant and machinery, and immovable properties such as land and building were realized. The Respondent No.1 stated that a total amount of Rs. 1,70,49,610/- was realized and distributed in accordance with the waterfall mechanism prescribed under Section 53 of the Code. 18. The Respondent No.1 submitted that the Appellant had not filed any claim during the CIRP. The Respondent No.1 contended that only after the liquidation order dated 21.02.2019, the Appellant filed its claim for the first time on 02.04.2019 in Form B claiming Rs.1,42,463/- Rs. 11,85,552/- based on provisional assessment under Section 7A of the EPF Act Rs. 15,53,280/- towards penal damages and interest, and an additional Rs. 7,74,095/- in respect of another e....
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....d vide order dated 06.03.2023 and the Liquidator had been discharged from his duties. 23. The Respondent No.1 submitted that reliance is placed on the judgment of the Hon'ble Madras High Court in Czarnikow Group Ltd. vs. Commissioner of Customs (Preventive) (2023) ibclaw.in 565 HC, wherein it was held that a creditor's right to participate in distribution arises only upon submission of a claim, and failure to do so disentitles such creditor from claiming any share in the liquidation proceeds. The Respondent No.1 further contended that reliance is also placed on the judgment of this Appellate Tribunal in Parameshwara Udpa R.P. vs. Assistant PF Commissioner, Company Appeal (AT)(CH) No. 231 of 2021 dated 23.09.2022, wherein it was clarified that the exclusion under Section 36(4)(a)(iii) of the Code applies only where a separate provident fund is maintained under Section 16A of the EPF Act. 24. The Respondent No.1 submitted that the inquiry proceedings initiated by the Appellant under Sections 7A, 7Q and 14B of the EPF Act on 28.03.2019 were initiated after the commencement of liquidation on 21.02.2019 and are therefore hit by Section 33(5) of the Code. The Respondent No.1 conten....
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....sed operations even prior to the initiation of CIRP. It is submitted that the liquidation estate was duly formed under Section 36 of the Code, and assets including stock, plant, machinery, land and building were sold, realizing a total amount of Rs. 1,70,49,610/-. The Respondent No. 2 stated that the liquidation proceeds were distributed strictly in accordance with the waterfall mechanism under Section 53 of the Code after adjusting CIRP and liquidation costs. The Respondent No. 2 highlighted that it had claimed Rs. 29,57,51,882/- and was distributed Rs. 1,23,96,821/-, being 4.2% of the total realization. 31. The Respondent No. 2 submitted that the final report and compliance certificate were duly filed before the Adjudicating Authority, certifying that the liquidation process was conducted in accordance with the provisions of the Code. The Respondent No. 2 contended that the Corporate Debtor stood dissolved vide order dated 06.03.2023 and that the Respondent Bank was directed to pursue avoidance applications under Sections 43 and 66 of the Code. 32. The Respondent No. 2 submitted that it does not dispute the valuation of liquidation assets or the distribution made by the Liq....
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....e applicable IBBI Regulations, including the Appellant and the Respondent No.2. The Respondent No.2, being a secured financial creditor of the Corporate Debtor, duly filed its claim, which was admitted to the extent of Rs. 29,57,51,882/-. 38. We note that the impugned order in Company Petition (IB) NO. 93/Chd/Hry/2018 was passed after consideration of the Final Report submitted by the Liquidator that the liquidation process was duly conducted and no assets remained for distribution, and ordered dissolution of the Corporate Debtor, M/s Jai Laxmi Lighting Industries Pvt Ltd. 39. We take into consideration that the Appellant filed its claim which reads as under: 40. The Liquidator, after verification, admitted the claim of EPFO of Rs. 1,42,463/- and distributed a sum of Rs. 6,014/-. It is relevant to take into consideration that the total amount realized during liquidation was Rs. 1,70,49,610/-, and distribution was made as per the waterfall mechanism under Section 53 of the Code, wherein both the Appellant and the Respondent No.2 received approximately 4.2% of their admitted claims. In this connection we reproduce Para 6 of the Impugned Order including table which reads as u....
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....arate provident fund account or trust has been maintained by the Corporate Debtor, in the absence of which the Appellant cannot seek exclusion of its dues from the liquidation estate, and the claim has rightly been dealt by the Adjudicating Authority with in accordance with the provisions of the Code. 44. This position was examined by this Appellate Tribunal in the case of Parameshwara Udpa, RP vs. Assistant PF Commissioner, Company Appeal (AT) (CH) No. 23 of 2021 decided on 23/09/2022 (2023) 236 Comp Cas 198. The relevant finding of this Appellate Tribunal reads as under: "Therefore, the 'resolution professional' is not duty bound to make adequate provisions for 'provident fund' when the 'corporate debtor' did not have separate 'provident fund account'. It is again reiterated that the 'resolution professional' has to deal with the 'claims', if any, on this account, in terms of section 53 of the I and B Code, 2016, if warranted and provided as per 'law'." "In the present case .... There was no specific fund towards 'Provident Fund'.... The "Corporate Debtor' has not created any specific fund for the purpos....
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.... 46. We take into consideration the finding of the Hon'ble Supreme Court of India in the case of State of Jharkhand and Ors. vs Jitendra Kumar Srivastava and Ors. /MANU/SC/0801/2013/. The relevant paras 7 & 8 of the judgment reads as under: "7. It is an accepted position that gratuity and pension are not the bounties. An employee earns these benefits by dint of his 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." (Emphasis Supplied) 47. The issue of similar nature was extensively discussed 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 and this Appellate Tribunal held that: "68. The judgment of Hon'ble Supreme Court as relied by learned counsel for the Respondent also in Para 53 clearly held that Section 53(1) of the Code shall not be applicable to such sums, which are to be treated ou....
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....ss the amount already received under the resolution plan towards provident fund and gratuity. The corporate debtor having not deposited the statutory dues with the EPFO, the said statutory liability has to be discharged by the successful resolution applicant................. 134. In result, the appeal(s) are decided in following manner: (I) The appeal(s) of workmen and employees being Company Appeal (AT) (Insolvency) Nos. 643, 752, 801, 915 of 2021 and 771 of 2022 are partly allowed with following directions: (a) Successful resolution applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the resolution plan to the workmen. (b) The workmen are also entitled to payment of their gratuity dues as on insolvency commencement date, after adjusting any amount towards gratuity paid under the resolution plan. It is made clear that entitlement of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not been treated as termination of their services. (c) The employees are also entit....
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....e has been decided in this case." (Emphasis supplied) 49. We appreciate the arguments of the Appellant that the EPF Act is a welfare legislation, and belong to legitimate dues payable to the employees. The Appellant has submitted upon Form-B dated 02/04/2019 to claim an amount of Rs. 36,55,290 and said claim is based on provisional assessment, penal damages, interest, and other ancillary components. 50. Incidentally, we note that the Appellant has included outstanding provident fund dues from Sh. Gyaninder Sadana, M/s Laxmi Enterprises, of Rs.7,74,095 other than the Corporate Debtor indicating that the liability is not exclusively attributable to the Corporate Debtor, and belong to M/s Laxmi which is a separate and distinct entity and cannot be equated to the Corporate Debtor, i.e., M/s Jai Laxmi Lighting Industries Pvt. Ltd. Both entities are separate legal persons having distinct assets and liabilities. 51. We are conscious of the fact that the Corporate Debtor stands dissolved vide order dated 06.03.2023 of the Adjudicating Authority and vide the same order the Liquidator has been discharged from his duty and responsibilities as Liquidator of the Corporate Debtor. Ho....
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....F SH.GYANINDER SADANA. 5. DETAILS OF DOCUMENTS BY |1.calculation sheet of penal damages and True Copy 8 TRUB COPY Document 2 REFERENCE TO WHICH THE DEBT CAN BE SUBSTANTIATED interest (COMPUTER GENERATED SHEET) 2.PROVISIONAL ASSESSMENT UNDER SECTION 7A BY ENFORCEMNT OFFICER. 3.PENAL DAMAGE AND INTEREST ON ABOVE PROVISIONAL ASSESSMENT. 4.ORDER EIDER 7A DATED 08.09.32016 is RESPECT OF M/S-LAXMI ENTERPRISES 6. DETAILS OF ANY DISPUTE AS WELL AS THE RECORD OF PENDENCY OR ORDER OF SUIT OR ORDER OF SUIT OR ORDER OF SUIT OR ARBITRATION PROCEEDINGS. 1. INQUIRY UNDER SECTION 7A OF EPF & MP ACT, 1952 ONGOING AGAINST THE ESTABLISHMENT. 2. RECOVEY PROCEEDING UNDER SECTION 813 TO 80 ONGOING AGAINST ESTABLISHMENT /5- LAXMI ENTERPRISES, PLOT NO, 90-91, NEW DLF INDL, FARIDABABAD HERRING PS CODE NO. HR/FBD/13508 7. DETAILS OF HOW AND WHEN DEBT INCURRED PENAL DAMAGES AND MEREST UNDER SECTION 148 & 7Q FOR LATE PATMENTOF PF DUES FOR PERIOD FROM 04/2014 To 11/2016. 2. NOT DEPOSING THE DUES OF ALL FIVE ACCOUNT OF EPFO FOR ream 04/2015 TO 15/2015 3. PENAL DAMAGES AND INTEREST UNDER SECTION 14B & 7Q FOR LATE PAYMENT OF PF DUES FOR PERIOD FROM 04/2015 TO 15/2015. 4. NOT DEPOSI....