NCLT Kochi (18.02.2021) in V-Con Integrated Solutions Pvt. Ltd vs. Acharya Techno Solutions (India) Pvt. Ltd. & Anr.. [I.A/176/KOB/2020 In MA/05/KOB/2020 in TIBA/01/KOB/2019] held that;
it is clear that the contribution, interest and damages payable are statutory dues and not claims which can be submitted to the Liquidator in Form G. Hence the EPFO need not file Form G before the Liquidator. It is also seen that the EPFO has got first charge over the Assets of the defaulter and its priority of payment over other debts is as per Section 11 of the EPF &MP Act 1952.
Excerpts of the order;
This IA/176/KOB/2020 has been filed by the Liquidator in the matter of Achariya Techno Solutions(India) Pvt Ltd under Sections 35 (1) (n) and 60 (5) of Insolvency and Bankruptcy Code 2016 [hereinafter referred to as ‘I&B Code,2016’] seeking the following relief:
To issue appropriate directions for dealing with the claim of EPFO department, under Section 35 (1) (n) and 60 (5) of I&B Code,2016 to discharge the duties of the Liquidator.
# 2. This Tribunal vide order dated 19.02.2020 in MA/05/KOB/2020 ordered liquidation of M/s. Achariya Techno Solutions (India) Pvt Ltd [Corporate Debtor] under Section 33(2) of I&B Code,2016. The Resolution Professional Shri. Shawn Jeff Christopher appointed as Liquidator of the Corporate Debtor under Section 34 of I&B Code,2016.
# 3. When the commencement of Liquidation process was notified to all concerned authorities, on 06.05.2020 the EPFO sent letter to the Liquidator stating that the dues under Employees Provident Funds and Miscellaneous Provisions Act, 1952 do not form part of the Liquidation Estate under Section 36 (4) (a) (iii) of the I&B Code,2016. Upon verification by the Liquidator, it was found that Corporate Debtor was not maintaining any kind of funds earmarked for Provident Fund payments. Therefore, the Liquidator sent a letter dated 03.06.2020 to the EPFO requesting to submit their claims in Form G and another letter on 24.07.2020 requesting to provide proof to substantiate their claim. However, no intimation has been received till date.
# 4. The Liquidator further stated that he has received claims of Provident Fund dues from the employees of the Corporate Debtor along with their salary dues, which amounts to ₹73,83,186/-. Besides that, the Liquidator has also received claims from the Operational Creditor ₹1,97,86,039, Unsecured Financial Creditors of ₹1,00,56,824.57 and statutory Authorities (without EPF dues) amounting to ₹1,08,49,474/-.
# 5. When the application was filed the Liquidator did not make the EPFO authorities as party to the application. Hence, the Liquidator was directed file an IA making EPFO as a party in this IA. Hence, the Liquidator filed MA/197/KOB/2020 to implead the EPFO as additional Respondent in this IA. That MA was allowed wide order dated 14.12.2020 and the Commissioner, EPFO was impleaded as 2nd Respondent and he was directed to file a counter to this application.
# 6. In the reply statement the 2nd Respondent stated that EPFO is a statutory body and the contribution, interest and damages payable under Section 7A, 7Q and 14 B of the Employees Provident Funds and Miscellaneous Provisions Act,1952[hereinafter referred to as the ‘EPF &MP Act 1952’] are statutory dues and not claims which can be submitted to the Liquidator in Form
# 7. It is further stated that Section 53 of the I&B Code 2016 is not applicable to the recovery of dues which do not form part of the Liquidation Estate under the I&B Code 2016, by virtue of Section 36 (4) (a) (iii). They have referred to the decision of the Hon’ble Supreme Court in the matter Kushal Ltd V. Regional Provident Fund Commissioner -1, and others [Civil Appeal No. 1920 of 2020] to buttress their contentions.
# 8. It is also stated that the EPFO has got first charge over the Assets of the defaulter and its priority of payment over other debts is as per Section 11 of the EPF &MP Act 1952. Thus the defaulted contribution statutorily due up to the month of June 2018 alone has to be determined under Section 7 A of EPF &MP Act 1952. Therefore, only after the actual payment or recovery of the defaulted contribution, the quantum of interest and penal damages under Section 7 Q and 14 B of the EPF &MP Act,1952 respectively can be ascertained. The defaulted statement has already been communicated to the Liquidator in Annexure III and V. Hence the Respondent prayed for dismissal of the Application.
# 9. I have heard the Learned Liquidator and had gone through the documents produced by the Liquidator and the reply of Respondent. I have also gone through the provisions under Section 7A, 7Q and 14 B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 relied on by the Respondent, which is quoted as under:
# 10. From a reading of the above Sections, it is clear that the contribution, interest and damages payable are statutory dues and not claims which can be submitted to the Liquidator in Form G. Hence the EPFO need not file Form G before the Liquidator. It is also seen that the EPFO has got first charge over the Assets of the defaulter and its priority of payment over other debts is as per Section 11 of the EPF &MP Act 1952.
# 11. . In view of the above, the Liquidator is directed to consider the Claims of EPFO made by them vide Annexure A III dated 6th May 2020 and Annexure V dated 12th June 2020 in which the amount due from M/s. Achariya Techno Solutions Private Limited with P.F Code No. KR/TVM/1188107 for the period up to June 2018 has been indicated, while determining the amount payable to the stakeholders in this matter.
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Blogger’s Comments; PF, Pension & Gratuity are terminal benefits that are basically employees’ dues under statutory provisions which are provided through contributions to the dedicated funds, out of expenditure head - “workmen/employees cost” by a company. For PF, the contributions are placed with the EPFO or with the exempted PF Trust. For Pension, Gratuity, dedicated funds are created either internally (plan funds) or with trust created for management of these funds. Liability of the company towards these plan funds/trusts is calculated as per “Accounting Standard 15 (AS 15): Employee Benefits”
As per Liquidation Regulation 19(4), Liquidator is required to admit claims of a workman or an employee on the basis of the books of account of the corporate debtor if such workman or employee has not made a claim.
However, interest and penal damages under Section 7 Q and 14 B of the EPF & MP Act,1952, can be termed as statutory dues, which falls under the definition of operational dues, for which the concerned authorities are required to file a claim with the Liquidator. Here it is important to note that the EPFO has got first charge over the Assets of the defaulter and its priority of payment over other debts is as per Section 11 of the EPF & MP Act 1952.
Insolvency and Bankruptcy Code, 2016.
# Section 5. Definitions. –
(20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;
(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;
# Section 36. Liquidation estate. -
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(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation: -
(a) assets owned by a third party which are in possession of the corporate debtor, including -
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(iii) all sums due to any workmen or employee from the provident fund, the pension fund and the gratuity fund;
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
# Regulation 19. Claims by workmen and employees.
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(4) The liquidator may admit the claims of a workman or an employee on the basis of the books of account of the corporate debtor if such workman or employee has not made a claim.
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