2022 (8) TMI 879 - Tri - Insolvency and Bankruptcy

Lifting of lien from the account belonging to the Corporate Debtor - whether the amount of Rs. 62,24,082/- and also the subsequent demands arising out of the proceedings under the EPF and MP Act, 1952 are recoverable from the corporate debtor? - Section 8F of EPF MP Act, 1952 - HELD THAT - The records indicate that an enquiry under section 14B/7Q of the EPF and MP Act, 1952 was concluded and demand of 62,24,082/- was issued against the Establishment for the dues for the period from 09-02-2018 to 20-12-2019 and also for failure to deposit the PF amount. This amount also included damages under Section 14-B and interest under section 7Q of the Act. As the same was not deposited in time by the establishment, an attachment order under Section 8F was issued on 02.07.2019 to Kotak Mahindra Bank., which in turn marked a lien for Rs. 62,24,082/- but did not deposit the amount with the office of the EPFO - it is a settled issue that when it comes to non-payment of the EPF arrears by the Corporate Debtor the issue is one of compliance of Law . As clarified in the extracts, all the dues raised by the EPFO under various sections, including interests and penalties are to be paid by the new establishment under Section 17B of the Employees Provident Funds and Miscellaneous Act, 1952. Furthermore, under Section 30(2)(e) of the Resolution Plan, in order to be legitimate, the resolution plan cannot contravene any of the provisions of any law in force. Thus, in the present context, it is incumbent on the RP/SRA to ensure that Section 17B of the EPF and MP Act, 1952 are complied with. As mentioned, Section 17B lays down that in case of a transfer of Establishment, the person to whom the establishment is transferred is liable to pay the contributions and other sums due from the employer under any provision of the EPF and MP Act, 1952. Thus, the amount of Rs. 62,24,082/- demanded by the authorised officer of EPFO by letter dated 13.06.2019 and served on the Kotak Mahindra Bank on 05.07.2019 to be fully complied. The applicant's prayer to lift the lien from the account bearing No. 1211116245 belonging to the Corporate Debtor for an amount of Rs. 62,24,082/-, which was imposed in view of the order dated 02.07.2019 passed by respondent No. 2 i.e. Authorised Officer of the EPFO cannot be acceded to - Application dismissed.

Summary

Issues Involved:
1. Lifting of lien on the corporate debtor's account by Kotak Mahindra Bank.
2. Compliance with the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPF and MP Act, 1952).
3. Interaction between the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) and the EPF and MP Act, 1952.
4. Jurisdiction and authority of the Resolution Professional under IBC, 2016.

Issue-wise Detailed Analysis:

1. Lifting of lien on the corporate debtor's account by Kotak Mahindra Bank:
The applicant, the Resolution Professional of the corporate debtor, requested directions for Kotak Mahindra Bank to lift the lien on account No. 1211116245, which held Rs. 62,24,082/-. This lien was imposed following an order dated 02.07.2019 by the EPFO's Authorised Officer. Despite the moratorium declared under Section 14 of the IBC, 2016, the bank did not lift the lien, and the EPFO did not file its claim with the Resolution Professional. The Tribunal concluded that the lien could not be lifted as the EPFO's actions were in compliance with the EPF and MP Act, 1952, and thus, the applicant's request was denied.

2. Compliance with the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPF and MP Act, 1952):
The EPFO determined that the corporate debtor owed Rs. 62,24,082/- for PF dues, damages under Section 14B, and interest under Section 7Q of the EPF and MP Act, 1952. The EPFO issued an attachment order under Section 8F to Kotak Mahindra Bank, which marked a lien but did not deposit the amount. The Tribunal emphasized the necessity of compliance with the EPF and MP Act, 1952, and referenced Section 17B, which holds the transferee of an establishment liable for PF dues. The Tribunal directed that all dues under the EPF and MP Act, 1952, including interests and penalties, must be paid by the new establishment.

3. Interaction between the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) and the EPF and MP Act, 1952:
The Tribunal discussed the precedence of the IBC, 2016 over other laws, as established by the Hon'ble Supreme Court and the Hon'ble NCLAT. However, it was noted that the EPF dues are not considered assets of the corporate debtor under Section 36(4)(a)(iii) of the IBC, 2016. The Tribunal referenced the decision in Sikander Singh Jamuwal vs. Vinay Talwar, which clarified that compliance with the EPF and MP Act, 1952, is mandatory and not in conflict with the IBC, 2016. Therefore, the provisions of the EPF and MP Act, 1952, must be adhered to despite the moratorium under the IBC, 2016.

4. Jurisdiction and authority of the Resolution Professional under IBC, 2016:
The Tribunal addressed the Resolution Professional's authority, emphasizing that the RP cannot contravene the EPF and MP Act, 1952. The Tribunal highlighted that the RP's request to lift the lien was beyond his jurisdiction and against the provisions of both the EPF and MP Act, 1952, and the IBC, 2016. The Tribunal directed the RP to comply fully with the EPF and MP Act, 1952, and to use the appellate proceedings within the Act to address any grievances.

Conclusion:
The Tribunal dismissed the application, stating that the lien on the corporate debtor's account could not be lifted, and the EPFO's proceedings could not be halted. The Tribunal reinforced the necessity of compliance with the EPF and MP Act, 1952, and directed the Resolution Professional to adhere to its provisions and seek redress through the appropriate appellate mechanisms within the Act.