EPFO dues are excluded from liquidation assets and prioritized for payment over other claims in corporate insolvency proceedings.

JUDGMENT

(Hybrid Mode)

Per : Justice Sharad Kumar Sharma, Member (Judicial):

(A) Company Appeal (AT) (CH) (Ins) No.72/2024:

1. The Appellant herein, i.e., the Employees Provident Fund Organization, challenges the impugned order dated 19.01.2024 rendered by the Ld. NCLT, Chennai in IA (IBC)/1785 (CHE)/2023, which was preferred in IA (IBC)/1228(CHE)/2022 in IBA/42/2020 by the Appellant, under Section 60 (5) of the I & B Code, 2016.

2. In the aforesaid application, the Appellant had prayed for issuance of a direction to the Respondents in the Company Petition, i.e., the Liquidator of M/s. Abra Motors Private Limited, the Company under Liquidation, to recover and realize from the assets of the Corporate Debtor the amount due to be paid to the Appellant, and if the same has already been distributed, to recover it, and to pay the EPFO dues on a priority basis over other Creditors, and to furnish the complete payment details, address, and other contact details regarding the quantification and distribution of money, including to whom and when it was distributed.

3. The facts which emerged for consideration are that the Corporate Debtor was established under the provisions of the Companies Act and was covered as per the stipulations contained under the EPF & Miscellaneous Provisions Act of 1952, that the Corporate Debtor had defaulted in payment of the employees’ contribution, although the same had already been deducted for the Financial Years 2008–2019 from the salary of the employees and that the total EPF amount determined to be due was Rs. 26,16,268/-.

4. On filing of an application under Section 9 of the I & B Code, 2016 by the Operational Creditor against the Corporate Debtor, M/s. Abra Motors Private Limited, corporate insolvency resolution process (CIRP) was commenced in respect of the CD on 08.05.2020 in IBA/42(CHE)/2020. Subsequently, observing that there were no assets left with the Corporate Debtor to realize the defaulted amount due to be paid by the Corporate Debtor, the CD was placed into liquidation proceedings by an order passed by the Ld. Adjudicating Authority on 16.04.2021 in IA (CHE)/1228/2020.

5. On commencement of the aforesaid liquidation proceedings, the Respondent had invited claims, and the Appellant had submitted its claim amounting to ₹26,16,268/-, being its claim under 7A, 7Q and 14B of EP Act in the prescribed Form to the Liquidator with supporting documents to substantiate the claim. Since the liquidator raised various objections and did not include EPFO in the list of stakeholders, the Appellant had to file an application before the Ld. NCLT along with the claim form for a suitable amendment in the list of Stakeholders being IA No. 1027/2021 seeking directions for admission of the claim submitted by the Appellant and for a suitable amendment in the list stakeholders.

6. Ld. Tribunal rejected the said application by order dated 21.03.2022, observing that the Applicant had not filed any order passed by the EPF Authority under the provisions of the Provident Fund Act or any proof or evidence by way of issuance of a notice or order passed by the Provident Fund Authorities regarding fixation of liability payable to the workmen registered with the Appellant as per the Act of 1952 to support its claim. Then the Appellant approached the NCLAT against the order dated 21.03.2022 of the Ld. NCLT, wherein the NCLAT, while considering the claim in Company Appeal (AT) (CH) (INS) No. 176/2022, passed an order on 02.08.2023 allowing the Company Appeal and remanding the matter to the Ld. Adjudicating Authority to reconsider the Applicant’s claim. Consequently, the liquidat