2022 (5) TMI 485 - Tri - Insolvency and Bankruptcy

Mandatory injunction directing Respondent Nos. 1, 2 and 4 to take appropriate steps for de-freezing the ODCC account of the applicant maintained with HDFC Bank Limited - section 8-F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - HELD THAT - After a lot of discussion on the demand and the liability of the Daaksh Jute Mill LLP and that of the Corporate Debtor, finally the Ld. Counsel for the applicant submitted that from the date Daaksh Jute Mill LLP came into possession, pursuant to lease in its favour, the amount of the employer and employee's contribution has already been paid. Since the total amount being claimed by the PF authorities Rs. 1,92,75,853/- includes the dues from 2004 onwards, the amount from 2004 till the date of the CIRP have already been claimed by the PF Authorities, who have submitted their claim with the liquidator. The Ld. Counsel for the Daaksh Jute Mill LLP, however, submitted that even though all the amounts relating to the employer and employees working with the Daaksh Jute Mill LLP have already been deposited with the authorities but even if there is anything pending in that regard that shall be deposited by Daaksh Jute Mill LLP and no liability will fall on the Corporate Debtor or for that matter on the liquidator. Since the amount claimed by PF Authorities, a major portion whereof is stated to have already been paid by Daaksh Jute Mill LLP, and the remaining amount has already been claimed by the PF Authorities by submitting their claim before the Liquidator, there is hardly anything left to be argued in this matter. In these circumstances, the prayer of the applicant in the IA 849/2022 is allowed in terms of the prayer made in the application. Application disposed off.

Issues Involved:
1. Legality of the notice dated 21st September 2021 issued under Section 8-F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.
2. Legality of the attachment of the ODCC account.
3. Responsibility for Provident Fund dues prior to the lease agreement dated 1st August 2016.
4. Applicability of Section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.
5. Maintainability of the application by Daaksh Jute LLP.

Issue-wise Detailed Analysis:

1. Legality of the notice dated 21st September 2021 issued under Section 8-F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952:
The applicant, Daaksh Jute LLP, challenged the notice dated 21st September 2021, claiming it to be illegal, null, and void. They argued that the notice wrongfully demanded Rs. 1,92,75,853/- for dues from 2004 to November 2019, which included periods before their lease commenced on 1st August 2016. The applicant maintained that they had been operating the Jute Mill since 1st August 2016 and had paid all Provident Fund dues accruing from their operations, except Rs. 41,85,955/- for May to November 2019.

2. Legality of the attachment of the ODCC account:
The applicant contended that the ODCC account, being neither a savings nor a current account, should not be subject to attachment. They argued that the credit facilities availed through the ODCC account are repaid with interest, and freezing this account would hinder their ability to pay wages, salaries, and other operational expenses, potentially causing the Jute Mill to close. The applicant cited several judgments supporting the non-attachment of such accounts.

3. Responsibility for Provident Fund dues prior to the lease agreement dated 1st August 2016:
The applicant asserted that they should not be held liable for Provident Fund dues prior to 1st August 2016, the date they took over the Jute Mill's operations. They argued that the claim for dues before this date should be directed at the Corporate Debtor, not them. The applicant emphasized that they had made all necessary payments for dues arising after the lease agreement.

4. Applicability of Section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952:
The applicant argued that Section 17B, which deals with the transfer of establishment and joint liability for dues, was not applicable in their case. They maintained that there was no transfer of the Jute Mill's title or assets to them; they were merely operating the mill on a lease basis. The applicant cited various judgments to support their position that no transfer, as contemplated under Section 17B, had occurred.

5. Maintainability of the application by Daaksh Jute LLP:
Respondent No. 1 and 2 (Regional Provident Fund Commissioner-II) and Respondent No. 3 (Liquidator) argued that the application was not maintainable. They contended that the applicant, as a lessee, was jointly and severally liable for Provident Fund dues under Section 17B. The Liquidator further argued that the application was not maintainable under Section 60 of the Insolvency and Bankruptcy Code, 2016, as Daaksh Jute LLP was not the Corporate Debtor.

Judgment:
The Tribunal noted that the major portion of the amount claimed by the Provident Fund Authorities had already been paid by Daaksh Jute LLP, and the remaining amount was claimed before the Liquidator. The Tribunal referred to an order by the Hon'ble High Court of Calcutta, which allowed the operation of the Overdraft Cash Credit Account, staying the operation of notices issued by the Provident Fund Authorities. Consequently, the Tribunal allowed the application in terms of the prayer made by the applicant, directing Respondent No. 4 Bank to defreeze the ODCC account and permit its usual operations.

Conclusion:
The Tribunal concluded that the notice dated 21st September 2021 was not sustainable, the attachment of the ODCC account was improper, and Daaksh Jute LLP was not liable for Provident Fund dues prior to 1st August 2016. The application by Daaksh Jute LLP was deemed maintainable, and the Tribunal directed the defreezing of the ODCC account. The application was disposed of with the necessary directions.

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