IN THE NATIONAL COMPANY LAW TRIBUNAL

COURT VI, NEW DELHI

I.A. 5939/2022
IN
Company Petition No. (IB) – 694/(PB)/2018

Under Section 60(5) of the Insolvency and Bankruptcy

Code, 2016.

IN THE MATTER OF:

M/S. L & T FINANCE LTD

…. PETITIONER

VERSUS

M/S ZILLION INFRAPROJECTS PVT. LTD.

….. RESPONDENT
AND IN THE MATTER OF-
EMPLOYEE PROVIDENT FUND ORGANISATION
(Through Assistant Provident Fund Commissioner)
.... APPLICANT
VERSUS

RESOLUTION PROFESSIONAL FOR M/S ZILLION

INFRAPROJECTS PVT. LTD.

…RESPONDENT

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CORAM:
SHRI. BACHU VENKAT BALARAM DAS, MEMBER(JUDICIAL)
SHRI. RAHUL BHATNAGAR, MEMBER (TECHNICAL)

For the Applicant: Mr. Kaushik Kumar Dey

ORDER
PER- BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)

Order Pronounced on: 24.05.2023

1. This application has been filed under Section 60(5) of the

Insolvency and Bankruptcy Code, 2016 read with Rule 11 of

the National Company Law Tribunal Rules, 2016 against

rejection of claims of the applicant by the Resolution

Professional. The applicant in the present application has

prayed for the following reliefs: -

a) Allow the present application and condone the delay in

filing claim;
b) Direct the Resolution Professional to accept the dues of
the Applicant and release the payment amounting to Rs.
9,38,64,181/-; and
c) Pass any other order which this Hon'ble Tribunal may
deem fit and proper in favour of the applicant,
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2. Briefly stated the facts of the case as mentioned in the

instant application, which are necessary for adjudication, are

as follows: -

i. That the Corporate Debtor came under the purview of

Employees Provident Fund and Miscellaneous

Provisions Act. 1952 and was required to pay the

contribution and allied dues under code no. DL/15128

pertaining to the Employees' Provident Fund

contributions.

ii. That the establishment defaulted to pay the

contributions and other allied dues for the period

04/2018 to 01/2019, within the prescribed time in

respect of various employees.

iii. That the Applicant organization issued a notice u/s 7A

of the EPF Act bearing No. E/DL/15128/Comp-

4/10066 dated 12.02.2019.

iv. That subsequently, vide email letter dated 01.11.2021

the

respondent informed the applicant that company is in

CIRP and most of staff has left the corporate debtor and
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 records are not in synchronized manner and therefore

company requested to provide a time period of 15 days

to collate and compile all the remaining required

documents.

v. That vide letter dated 13.04.2022, the applicant

informed the respondent /establishment and made

demand of payment of Statutory EPF & allied dues

amounting to Rs.5,22,37,018/- (considering tentative

date as on 13.04.2022 of deposit of assessed dues vide

7A order dated 13.12.2021). It was communicated to

respondent to make the payment of dues pertinent to

workmen of the establishment.

vi. That vide email communication dated 02.05.2022, the

Respondent denied to recognize the outstanding dues of

the establishment under the garb of the section 14 and

238 of IBC, 2016.

vii. That this Tribunal has not approved the resolution plan.

Hence, the applicant may be permitted to file the claim

or PF due may be cleared by the

establishment/resolution professional. Further, the PF

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 contribution shall be deemed to the first charge on the

assets of the establishment.

viii. That Section 11 of the Employee Provident Fund Act,

1952 clearly states that the EPF dues have priority of

payment of contributions over other debts of the

insolvent company.

3. The resolution professional of the Corporate Debtor had

filed his reply to the averments of the applicants. The defence

taken by the resolution professional, respondent herein, are

stated in brief as below: -

i. That, the RP made public Announcement on 07.02.2019

for inviting the claims of the Creditors of the CD,

wherein no claim was received by the RP from the

Applicant even after the expiry of 90 days from the date

of CIRP in view of Regulation 12(2) of IBBI (Insolvency

Resolution Process for Corporate Person) Regulation,

2016 (hereinafter referred to as “CIRP Regulations”).

ii. That in the 23rd CoC meeting held on 03.07.2020, the

CoC members approved the Resolution Plan with 88%

voting shares. Thereafter the RP submitted the

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 Resolution Plan before this Tribunal on 25.07.2020 vide

IA 3018/2020.

iii. The Applicant was required to submit its claim before

the RP on or before 19.02.2019 (90 days from Insolvency

Commencement date). However, the Applicant has not

filed its claim till date.

iv. That admitting the claim at a belated stage will not only

affect the stakeholders but CIRP would be jeopardized.

v. It is submitted that CIRP is a time bound process and

there are various duties which are entrusted to the RP

and the CoC.

4. We have gone through the rejoinder and documents on

record filed by both the parties and arguments advanced by

counsels of both the parties.

5. Employee Provident Fund (“EPF”) dues pertain to

contributions that are to be made by the employer on behalf

of the employee as a part of the employee welfare scheme

mandated by the Employees Provident Fund and

Miscellaneous Provisions Act, 1952 (“EPF Act”). Accordingly,

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Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code,

2016 provides that all sums due to any workmen or employee

from the provident fund are assets owned by a third party

which are in possession of the Corporate Debtor held in trust,

and will therefore not form part of the liquidation estate of the

Corporate Debtor. The intent of the legislature can be further

ascertained by referring to para 5.5.5 of the Bankruptcy Law

Reforms Committee (BLRC) Report, wherein the Committee

observed that assets held in trust such as pension funds will

not include assets of the Corporate Debtor and could

therefore not be used to realize the dues of the creditors.

Therefore, it is clear from the scheme of the Code that EPF

dues are not to be included in the assets of the Corporate

Debtor.

6. Payment of EPF dues is a statutory liability that needs to

be undertaken by the management of the establishment.

Since the management of the Corporate Debtor passes over

from the Suspended Directors to the Resolution

Professional (“RP”) upon commencement of the Corporate

Insolvency Resolution Process (“CIRP”), the RP is tasked with

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making payment of EPF dues during the tenor of the CIRP.

Once a Resolution Plan has been received, the Resolution

Applicant must provide for payments to the outstanding EPF

dues under the Resolution Plan.

7. The Hon’ble NCLAT in Tourism Finance Corporation of

India Pvt. Ltd. v. Rainbow Papers Ltd & Ors, Company Appeal

(AT) (Insolvency) No. 354 of 2019, allowed an appeal filed by

the Regional Provident Fund Commissioner for non-payment

of entire EPF dues along with interest calculated as per the

provisions of the EPF Act, by concluding that there was no

inconsistency between the EPF Act and the Code since EPF

dues have been categorically treated as assets not forming

part of the liquidation estate under Section 36(4)(a)(iii) of the

Code. The NCLAT partially modified the approved Resolution

Plan while making the following observation:

“45. Therefore, we direct the ‘Successful Resolution

Applicant’- 2nd Respondent (‘Kushal Limited’) to release
full provident fund and interest thereof in terms of the
provisions of the ‘Employees Provident Funds and
Miscellaneous Provision Act, 1952’ immediately, as it
does not include as an asset of the ‘Corporate Debtor’.
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 The impugned order dated 27th February, 2019
approving the ‘Resolution Plan’ stands modified to the
extent above.”

8. Further, the Hon’ble NCLAT in Jet Aircraft Maintenance

Engineers Welfare Association v. Ashish Chhawchharia

Resolution Professional of Jet Airways (India) Ltd. & Ors

Company Appeal (AT) (Insolvency) No. 628 of 2020 held as

follows:

“The workmen and employees are entitled for payment of

full amount of provident fund and gratuity till the date of
commencement of the insolvency which amount is to be
paid by the Successful Resolution Applicant consequent to
approval of the Resolution Plan in addition to the 24
months workmen dues as the workmen is entitled to
under Section 53(1)(b) of the Code. It is made clear that in
addition to part amount of provident fund and gratuity as
proposed in Resolution Plan to workmen, Successful
Resolution Applicant is obliged to make payment of
balance unpaid amount of provident fund and gratuity to
workmen and employees.”

9. In light of the above judgements, we are of the view that

the EPF dues being a statutory liability of the Corporate

Debtor cannot be escaped. The delay in claiming the EPF

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dues was on account of delay in adjudication of Section 7A

proceedings under The Employees’ Provident Funds and

Miscellaneous Provisions Act, 1952. Section 36(4) of IB Code,

2016 states that all sums due to any workmen or employee

from the provident fund, the pension fund and gratuity fund

will not be included in the liquidation estate assets and shall

not be used for recovery in the liquidation. Since the EPF

dues are not a part of the assets of the Corporate Debtor and

are merely in possession of Corporate Debtor, we are of the

view that the Applicant was not required to file his claim.

Rather, the Resolution Professional was duty bound to release

the dues of the Applicant. The EPF dues are to be given

priority over all the other creditors during Liquidation. We

thereby direct the Respondent/Resolution Professional to

consider the claim of the Applicant. Further, since the

Resolution Plan has already been approved by the CoC, the

Resolution Professional should take steps to apprise the

Successful Resolution Applicant (“SRA”) about the claim of

the Applicant to enable the SRA to make amends in the

Resolution Plan to provide for the claim of the Applicant. In

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the alternative, the SRA may file an additional affidavit

undertaking to settle the claim of the Applicant.

10. I.A. 5939/2022 stands allowed and disposed off.

Let copy of the order be served to the parties concerned.

Sd/- Sd/-
(RAHUL BHATNAGAR) (BACHU VENKAT BALARAM DAS)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)

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