NCLAT Sets Precedent; EPFO Can't Claim Dues Based on Post-CIRP Inspection

NCLAT Sets Precedent; EPFO Can't Claim Dues Based on Post-CIRP Inspection

Introduction

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench has held that the claims of the Employees Provident Fund Organisation (EPFO) based on inspection conducted subsequent to initiation of the Corporate Insolvency Resolution Process (CIRP) are unenforceable and cannot be admitted.

Factual Background

The Resolution Professional (RP) and EPFO filed applications before the National Company Law Tribunal (NCLT), which were dismissed. The EPFO claimed a demand of Rs. 1,37,17,837/- based on an inspection report dated 10.05.2023, and assessment order dated 25.09.2023, both of which were subsequent to the initiation of CIRP on 17.02.2023.

Procedural Background

The RP submitted that the EPFO had no jurisdiction to pass any order under the moratorium period to fasten any liability on the Corporate Debtor. The EPFO submitted that the direction of the Adjudicating Authority to give the name of employees and detailed computation was uncalled for and beyond the jurisdiction.

Issues

1. Jurisdiction of EPFO: Whether the EPFO has jurisdiction to pass any order under the moratorium period.

2. Admissibility of Claims: Whether the claims of the EPFO based on inspection conducted subsequent to initiation of CIRP are enforceable.

Reasoning & Analysis

The bench of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) observed that after initiation of CIRP, no assessment can be initiated or continued against the Corporate Debtor so as to pass any pecuniary liability on the Corporate Debtor. It held that the demand made by EPFO on the basis of inspection report and assessment order, both of which were subsequent to initiation of CIRP, was unenforceable.

Decision

The NCLAT allowed the appeal of the RP and set aside the impugned order, holding that the claims of the EPFO based on post-CIRP inspection are unenforceable.

Implications

The decision clarifies the jurisdiction of EPFO during the moratorium period and the admissibility of claims based on post-CIRP inspection.

Conclusion

The NCLAT's judgment in this case provides clarity on the enforceability of EPFO claims during CIRP and the jurisdiction of EPFO during the moratorium period. The decision is significant for Resolution Professionals, EPFO, and Corporate Debtors.

In this case the appellant was represented by Mr. Pratik Tripathi, Advocate. Meanwhile the respondent was represented by Mr. Gaurav Varma, Advocate