Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLAT) 497

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
NARESH SALECHA, Member (Technical)
Regional P.F. Commissioner, Employees' Provident Fund Organisation Through Shri Udaya Gupta, RPFC (Legal) – Appellant
Versus
Vipul Garg, Liquidator Representing Jai Laxmi Lighting Industries Pvt. Ltd. – Respondent
Comp. App. (AT) (Ins) No. 840 of 2023 & I.A. No. 2662, 2856, 2858 of 2023 | CP(IB) No. 93/chd/Hry/2018

Advocates:
For the Appellants/Petitioners:Mr. Braja Bandhu Pradhan, Advocate
For the Respondents: Mr. Ashwani Sharma, Mr. PBA Srinivasan, Mr. Barnali Paul, Mr. Rajshree Dhapola

Provident fund dues excluded from liquidation estate under IBC Section 36(4)(a)(iii), not subject to Section 53 distribution, irrespective of separate fund maintenance; payable in priority from available assets to protect workmen rights.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 36(4)(a)(iii), 33(5), 53, 61 - Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 - Section 11 - Liquidation estate - Provident fund dues - Exclusion from liquidation estate - All sums due to workmen or employees from provident fund, pension fund, and gratuity fund are excluded from liquidation estate under Section 36(4)(a)(iii) and not subject to distribution under Section 53 waterfall mechanism, irrespective of whether separate identifiable fund or trust is maintained by corporate debtor - Such dues to be paid in priority from available liquidation proceeds - EPF Act creates first charge over employer’s assets with priority over other debts, not displaced by Code - Legislative intent protects workmen’s lifelong savings linked to right to life - Corporate debtor statutorily obliged to deposit PF contributions, liability discharged from existing funds even if not separately maintained. (Paras 41, 42, 44, 45, 47, 48)

(B) Liquidation process - Claims verification - Late or defective claims - Appellant’s claim filed post-liquidation commencement in incorrect form admitted partially as government dues and distributed pari passu - Subsequent claims based on post-liquidation assessments void under Section 33(5) - However, principal PF dues protected outside liquidation estate. (Paras 18-22, 37-40)

Facts of the case:
Corporate debtor admitted to CIRP, later ordered into liquidation - Liquidator realized assets worth Rs. 1,70,49,610/- and distributed per Section 53 - Appellant filed delayed claim for PF dues pre-dating CIRP, admitted partially at Rs. 1,42,463/-, distributed Rs. 6,014/- - Corporate debtor dissolved, liquidator discharged - Appellant challenged impugned dissolution order contending PF dues wrongly treated as liquidation assets.

Findings of Court:
Impugned order set aside - Adjudicating Authority directed to re-examine issues afresh in accordance with law - Parties to appear on specified date.

Issues: Whether PF dues excluded from liquidation estate under Section 36(4)(a)(iii) absent separate fund; priority of PF dues over Section 53 distribution; validity of treating such dues as government dues pari passu with financial creditors.

Ratio Decidendi: Exclusion under Section 36(4)(a)(iii) applies to all PF dues regardless of separate fund maintenance - To be paid from corporate debtor’s funds before waterfall - Upheld by larger bench overruling contrary view; protects employee social security as property right.

Result: Appeal allowed.

Table of Content
1. background of cirp, liquidation, and claims process. (Para 1 , 2 , 17 , 29)
2. epf dues priority under epf act over ibc liquidation. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15)
3. liquidator's claim verification and procedural compliance. (Para 16 , 18 , 19 , 20 , 21 , 22 , 26 , 27)
4. section 36(4)(a)(iii) requires separate pf fund. (Para 23 , 24 , 25)
5. bank supports liquidation distribution under section 53. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36)
6. liquidation process and admitted claims overview. (Para 37 , 38 , 39 , 40)
7. pf dues excluded from liquidation estate per section 36(4). (Para 41 , 42 , 43)
8. judicial precedents affirm pf priority regardless of separate fund. (Para 44 , 45 , 46 , 47 , 48)
9. epfo claim validity despite dissolution. (Para 49 , 50 , 51)
10. appeal allowed; remand for fresh consideration. (Para 52 , 53)

J U D G E M E N T

(24.04.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e., Regional P.F. Commissioner, Employees' Provident Fund Organisation Through Shri Udaya Gupta, RPFC (Legal) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“Code”) against the Impugned Order dated 06.03.2023 passed by National Company Law Tribunal, Chandigarh 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 protection under Section 36(4)(a)(iii) of the Code was ignored. The appellant submitted that PF dues cannot be included in the liquidation estate or used for recovery in liquidation. The appellant also stated that on 02.12.2022, it submitted another letter claiming EPF dues as per assessment order for the period 04/2015 to 12/2015 amounting to Rs. 12,63,622/-, but received no response from the Resolution Professional.

4. The appellant submitted that only on 25.03.2023, it received an email from the Resolution Professional enclosing the order dated 06.03.2023 for dissolution of the company, and from that communication it learnt that only the amount of Rs. 6,014/- had been considered from the original claim filed before the IRP.

5. The appellant contended that the Adjudicating Authority failed to appreciate the welfare object of the EPF Act, and the settled legal position that provident fund dues enjoy priority over other debts. The appellant submitted that Section 11 of the EPF Act creates a first charge over the employer’s assets for PF-related liabilities, including contributions, damages, interest, and other statutory dues. The appellant further stated that this priority is not displaced by the waterfall mechanism under Section 53 of the Code.

6. The appellant contended that the Adjudicating Authority failed to appreciate that provident fund dues are not to be treated as ordinary liquidation claims and are to be paid outside the liquidation estate itself. The appellant stated that the Resolution Professional was duty-bound to place

Click Here to Read the rest of this document