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IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH
AVINASH G. GHAROTE, ABHAY J. MANTRI, JJ.
Murli Industries Limited - Petitioner
Versus
Union of India, through its Secretary, Ministry of Labour and Employment, Government of India, New Delhi - Respondent
Writ Petition No. 693 of 2022
Decided On : 29-04-2025
(A) Insolvency and Bankruptcy Code, 2016 - Sections 5(11), 18, 30, 31, 36(4)(a)(iii) - Employees Provident Funds and Miscellaneous Provisions Act, 1952 - Section 10 - Claim for provident fund dues - Court held that the employer's contribution to the provident fund is not an asset of the corporate debtor and cannot be included in the resolution plan, thus the claim for provident fund dues is not extinguished by the approval of the resolution plan. (Paras 10, 21, 32)
(B) The court emphasized that the provident fund is the property of the employee and is protected from attachment under insolvency proceedings, reaffirming the principle that employee rights must be safeguarded during corporate insolvency. (Paras 10.10, 19.1)
(C) The court clarified that the exclusion of provident fund dues from the resolution plan is consistent with the intent of the Insolvency and Bankruptcy Code to protect employee interests. (Paras 10.11, 32)
Facts of the case:
The petitioners challenged the claim of the Provident Fund Department for dues not included in the resolution plan of Murli Industries, which underwent insolvency proceedings. The claim was initially communicated but not verified by the respondent.
Findings of Court:
The court found that the provident fund dues, including the employer's contribution, are not assets of the corporate debtor and thus cannot be claimed under the resolution plan.
Issues: The main issues were whether the provident fund dues could be included in the resolution plan and the implications of the approval of the resolution plan on such claims.
Ratio Decidendi: The court ruled that the employer's contribution to the provident fund is held in trust for the employee and cannot be treated as an asset of the corporate debtor, thus protecting the employee's rights.
Result: Petition dismissed.
Certainly. Here are the specific points from the provided document that support the statement, with each reference indicated separately:
The explanation to Section 18(1) of the IB Code states that assets owned by third parties in possession of the corporate debtor held under trust or contractual arrangements, including bailment, are excluded from the assets that can be included in the resolution process, indicating that only assets over which the debtor has ownership rights or dominion are relevant. (!) (!) (!)
The discussion on the employer’s contribution to the provident fund clarifies that, although it is a statutory liability and protected from attachment, it remains property held in trust for the employees and is not an asset of the corporate debtor that can be included in the resolution or liquidation estate. (!) (!) (!)
The analysis of the scope of assets under the IB Code emphasizes that statutory liabilities, even if crystallized, are not automatically assets of the corporate debtor that can be included or excluded from the resolution or liquidation estate, especially when they are protected from attachment. (!) (!) (!)
The detailed discussion on the protection of statutory dues, including the employer’s contribution to the provident fund, clarifies that these are liabilities owed to employees and are protected from attachment, but do not necessarily constitute assets that can be included or excluded from the estate by default. (!) (!) (!)
These references collectively support the view that a crystallized EPFO claim remains a statutory liability and does not automatically qualify as an asset of the corporate debtor for exclusion under Section 36.
JUDGMENT :
AVINASH G. GHAROTE, J.
1. Heard. Rule. Rule returnable forthwith. Heard finally with the consent of learned counsels for the respective parties.
2. On 10/2/2025, We had heard Mr. Bhangde learned Senior Counsel for the petitioners and had recorded his contentions as under :
2.1. The present petition questions the claim of the Provident Fund Department, to recover PF dues of the employees vis-a-vis the petitioner, which are not part of the resolution plan. Mr. Bhangde, learned Senior Counsel for the petitioners, submits that in respect of the original petitioner company/Murli Industries, one asset reconstruction company had filed Insolvency proceedings for initiation of Insolvency Regulation, in which by an order dated 5.4.2017 passed by the National Company Law Tribunal (NCLT for short hereinafter) in CP No.66/2017 one Mr. Vijaykumar Iyer was appointed as the Interim Resolution Professional (IRP for short hereinafter) (page 31). The said IRP by a public announcement dated 11.4.2017, called upon the creditors of the original petitioner company to submit proof of their claims on or before 19.4.2017 to him (p32). The respondent, by communication dated 4.10.2017 (p38) intimated a claim of Rs. 54,98,118/- with the IRP. By the communication 28.10.2017 (p39), the IRP, intimated, the respondent, to file a proof of claim in the relevant form as provided in the CIRP Regulations copy of which was enclosed as Annexure 2 to the communication. The respondent thereafter, it appears has not filed anything with the IRP. The proceedings went ahead as a result of which a resolution plan came to be submitted to NCLT by the IRP, in which though it was indicated that the EPFO/respondent had by their letter indicated a claim of Rs.54,98,118/- the verifiable amount was nil (pg.162). The resolution plan came to be approved by the order dated 22.7.2019 (pg. 210, para 12). An appeal came to be filed against this which came to be dismissed on 24.1.2020 (pg. 238), by NCALT. Challenge against the same before Hon’ble Apex Court in Civil Appeal Nos. 3169-3170/2020, came to be dismissed on 20.11.2020 (page 239), Civil Appeal No. 3956/2020 came to be dismissed on 12.2.21 (page 240) and Civil Appeal No.1701-1710/2021 came to be dismissed by the order dated 3.5.2021(page 241).
2.2. A claim by the Income Tax Department regarding statutory dues, came to be challenged by the petitioner, in this Court by way of Writ Petition No. 2948/2021 (Murli Industries Vs. Asstt. Commissioner of Income Tax) with Writ Petition No. 2965/2021 in which by the judgment dated 9.12.2021, it came to be held that the claims which are not a part of the Resolution Plan including recoverable statutory dues, stood extinguished, upon approval of the resolution plan (page 256).
2.3. Mr. Bhangde, learned Senior Counsel for the petitioner submits that since the intimation regarding EPF dues, as made by the respondent by its communication dated 4.10.2017 (pg 39) was not verified and made a part of the resolution plan, it was not permissible now for the respondent to raise a claim, as it stood extinguished. He invites our attention to the provisions of Rule 12(2) of the IB Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016 to contend that a creditor who fails to claim, with proof, within the time stipulated in the public announcement, may submit the claim with proof to the IRP on or before 90th day of insolvency commencement date, which was not done by the respondent. He also invites our attention to Rule 13 which requires the claims made to be verified by the IRP within 7 days from the last date of the receipt of the claims and thereupon maintain a list of the creditors indicating the amount of their claims admitted, security interest, if any, in respect of such claim and update it. He therefore, submit that once the respondent, fails to submit proof of claims, it is not now open for the respondent to raise the claim against the petitioner, as it stood extin
The employer's contribution to the provident fund is not an asset of the corporate debtor and cannot be included in the resolution plan, thus the claim for provident fund dues is not extinguished by ....
Provident fund dues do not have priority over other debts during liquidation under IBC; they are subject to waterfall mechanism provisions.
Moratorium under IBC Section 14 prohibits EPF quasi-judicial assessments post-CIRP; delayed claims post-CoC resolution plan approval inadmissible.
Claims filed post-moratorium under the IBC are inadmissible and cannot be considered, irrespective of statutory due priorities.
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