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2019 (3) TMI 352 - Tri - Insolvency and BankruptcyDues towards Employees provident fund - Applicant has submitted that Section 11 (2) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 declares that the amount due as contribution to the employees provident fund shall be made a first charge on the assets of the establishment - Corporate debtor in liquidation - Corporate Debtor defaulted in payment of dues/damages/interest including the Employees share of contributions, which were deducted from the wages of the poor employees Held that - The verification and admission of the claim of the applicant viz., EPFO has correctly been recorded by the liquidator vide his statement of verification, admission, rejection and determination of quantum of claim dated 23.04.2018. Therefore, the application filed by the applicant viz., EPFO is devoid of merits and stands rejected.
Issues Involved:
1. Priority of EPFO dues over other dues. 2. Responsibility for missing machinery. 3. Claims for ESIC Receivership period. 4. Categorization of EPFO dues under Section 53(1)(f) of IBC. 5. Timeliness of EPFO's application against the liquidator's decision. Issue-wise Detailed Analysis: 1. Priority of EPFO dues over other dues: The Applicant, Regional Provident Fund Commissioner-I, argued that EPFO dues should be accorded first priority over all other dues as per Section 11(2) of the EPF & MP Act, 1952, and referenced the Supreme Court's order in SLP (Civil) No. 7642 of 2011. The Applicant contended that the legislature intended to secure the terminal social security benefit for employees, making EPFO dues a first charge on the assets of the establishment. However, the Tribunal concluded that the Insolvency and Bankruptcy Code (IBC) 2016, which contains a non-obstante clause in Section 238, overrides any inconsistent provisions in other enactments, including the EPF & MP Act, 1952. The Tribunal referenced the Supreme Court's judgment in PR. CIT v. Monnet Ispat and Energy Ltd., which affirmed that the IBC prevails over other laws. 2. Responsibility for missing machinery: The Applicant argued that it was incorrect for the liquidator to conclude that EPFO should be responsible for the missing machinery, especially since a police complaint regarding the missing machinery was still under investigation. The liquidator countered that EPFO had attached the machinery for recovery of dues and allowed ESIC to use it under certain conditions. The Tribunal found that EPFO had neglected to monitor the machinery's usage and did not recover dues during ESIC's receivership. Thus, the liquidator was justified in adjusting the loss caused by the missing machinery against EPFO's claim. 3. Claims for ESIC Receivership period: The Applicant claimed that EPFO dues for the ESIC receivership period should be paid from the liquidation proceedings. The liquidator rejected part of the claim for the period from June 2015 to June 2017, stating that the corporate debtor was under ESIC's control during this time. The Tribunal noted that EPFO had permitted ESIC to use the machinery and should have taken action against ESIC for non-fulfillment of conditions. Therefore, the liquidator's rejection of the claim for this period was upheld. 4. Categorization of EPFO dues under Section 53(1)(f) of IBC: The Applicant contested the categorization of EPFO dues as "other remaining debts and dues" under Section 53(1)(f) of IBC. The liquidator maintained that EPFO's claim was classified correctly, considering the dues included contributions, interest, and damages for a period beyond 24 months preceding the liquidation commencement date. The Tribunal upheld the liquidator's classification, noting that the IBC's provisions take precedence over the EPF & MP Act. 5. Timeliness of EPFO's application against the liquidator's decision: The liquidator argued that EPFO's application was time-barred, as it was filed 21 days after the decision, exceeding the 14-day limit specified in Section 42 of IBC. The Tribunal agreed with the liquidator, noting that EPFO's application was indeed filed late and thus was not legally sustainable. Conclusion: The Tribunal concluded that the liquidator had correctly verified and admitted EPFO's claim, and the application filed by EPFO was devoid of merits. Consequently, the application was rejected, and there was no order as to costs.
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