NCLT Bengaluru: EPFO Cannot Enforce PF Dues During Moratorium Without Admitted Claim In CIRP

NCLT Bengaluru: EPFO Cannot Enforce PF Dues During Moratorium Without Admitted Claim In CIRP

Introduction

The National Company Law Tribunal Bengaluru Bench has dismissed an application filed by the Regional Provident Fund Commissioner (Legal) in the insolvency proceedings of Dunlop Polymers Private Limited. A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada held that the Employees’ Provident Fund Organisation (EPFO) cannot seek remittance of provident fund dues during the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), particularly when its claim has not been admitted in the Corporate Insolvency Resolution Process (CIRP).

Factual Background

The EPFO alleged that Dunlop Polymers Private Limited had defaulted in remitting provident fund contributions. Proceedings were initiated under Sections 7A, 14B and 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, culminating in determination of dues along with damages and interest.

CIRP against the company commenced on June 25, 2019. EPFO claimed to have submitted its claim in Form B before the Interim Resolution Professional (IRP) on January 29, 2020, and relied on subsequent communications. It contended that the IRP failed to recognise its statutory dues. EPFO sought payment of ₹2,77,83,833 towards provident fund dues, damages, and interest, asserting that provident fund dues are excluded from the liquidation estate under Section 36(4) of the IBC.

Procedural Background

The IRP opposed the application, submitting that no valid claim in Form B, supported by requisite documents and acknowledgment, had been filed within the prescribed timeline pursuant to the public announcement dated June 29, 2019. It was further submitted that the resolution plan had already been approved by the Committee of Creditors and was pending consideration before the Tribunal.

Issues

1. Whether EPFO had validly lodged its claim within the timeline prescribed under the CIRP Regulations.

2. Whether provident fund dues can be enforced during the moratorium under Section 14 of the IBC.

3. Whether Section 36(4) of the IBC entitles EPFO to immediate remittance of dues during CIRP.

Contentions

EPFO argued that its claim was statutory in nature and that provident fund dues are excluded from the liquidation estate under Section 36(4) of the IBC. It contended that the IRP failed to properly acknowledge and recognise its claim.

The IRP countered that no valid claim had been filed within the prescribed time and that mere assertions of having sent letters or emails did not amount to compliance with statutory procedure.

Tribunal’s Observations and Analysis

The Tribunal observed that EPFO failed to produce any acknowledgment or contemporaneous material demonstrating that a valid claim had been lodged within the prescribed timeline. It held that mere assertion of having sent communications cannot substitute compliance with the statutory procedure for filing claims under the CIRP Regulations.

Rejecting reliance on Section 36(4), the Bench clarified that exclusion of provident fund dues from the liquidation estate operates in the context of liquidation and does not override the procedural discipline mandated during CIRP. It does not ipso facto entitle EPFO to immediate remittance or enforcement in the absence of an admitted claim.

The Tribunal further clarified that if any portion of the claimed amount represents employees’ contributions already deducted from wages but not remitted, such amounts would not constitute assets of the corporate debtor and must be appropriately segregated before distribution under Section 53 of the IBC. However, directing payment at this stage would amount to enforcement of statutory dues during the subsistence of the moratorium, which is impermissible under Section 14.

Decision

The NCLT Bengaluru dismissed EPFO’s application. It clarified that the order would not preclude EPFO from availing any other remedy available under the EPF Act or otherwise, subject to the limitations imposed by the IBC.

In this case the applicant was represented by Advocate B V Vidyulatha. Meanwhile the IRP was represented by Advocate Hemanth Rao.