2025 (1) TMI 352 - AT - IBC

Assessment proceedings can be carried on by the EPFO under Section 7A, 14B and 7Q of the EPF MP Act, 1952 after imposition of moratorium under Section 14 of the IBC - claim on the basis of assessment, subsequent to imposition of moratorium, can be admitted in the CIRP - claims, which were filed by the Appellant(s), subsequent to the approval of Resolution Plan by the CoC, could have been admitted in the CIRP. Whether after imposition of moratorium under Section 14 of the IBC, assessment proceedings can be carried on by the EPFO under Section 7A, 14B and 7Q of the EPF MP Act, 1952? - Whether any claim on the basis of assessment, subsequent to imposition of moratorium, can be admitted in the CIRP? - HELD THAT - The plain reading of Section 14, sub-section (1) indicates that expression suits or proceedings against the corporate debtor has been used. The word proceeding is not qualified, so as to confine it to proceedings before the Civil Court. The proceedings, which have the effect on the assets of the CD are all covered in the expression proceeding . The question to be answered is as to whether after moratorium has been imposed, it was open for EPFO to proceed with the assessment proceeding. Learned Counsel for the parties state that during moratorium proceeding, no recovery proceeding can be initiated against the CD. However, submissions of the learned Counsel for the Appellant is that assessment proceedings against the CD may continue. Hence, the orders of assessment passed during moratorium period, were fully permissible and the claim on the basis of the said proceedings had to be admitted in CIRP. In the case before the Hon ble Supreme Court in Sundresh Bhatt, Liquidator of ABG Shipyard 2022 (8) TMI 1161 - SUPREME COURT , demand notice was issued subsequent to initiation of CIRP and that was not the case of any assessment carried out by Customs Authorities and the liquidation order was passed on 25.04.1999 and notice under Section 72 was issued on 11.07.2019, i.e. after the liquidation - It is well settled law that a judgment of the Court has to be read in the context of the facts and ratio of judgment has to be read in reference to the facts, which have come for consideration before the Court. It is well settled that ratio of a judgment cannot be read as statute and above judgment of the Hon ble Supreme Court, does not support the submission of the Appellant that after imposition of moratorium under Section 14, sub-section (1), it was open for the EPFO Authority to proceed with the assessment and conclude the assessment. In the present case, admittedly assessment has been completed after initiation of the moratorium. We, thus, are of the view that once order of liquidation is passed, moratorium under Section 14 comes to an end and moratorium under Section 33(5), which is differently worded, comes into play. Under Section 33(5), the expression used are suit or other legal proceeding , which occurs in Section 446 of sub-section (1) noticed above. Thus, bar is only against suit or legal proceeding and there is no bar against assessment proceeding to be conducted by statutory Authorities, including the EPFO. Thus, after the liquidation, it is open for EPFO to carry on the assessment. Section 33(5), cannot be held to apply on assessment proceedings. However, while looking to the expression used in Section 14(1), assessment proceedings before the EPFO, cannot be continued after initiation of CIRP. Whether claims filed by the appellants subsequent to the approval of the Resolution Plan by the Committee of Creditors (CoC) could have been admitted in the CIRP? - HELD THAT - It is an admitted fact that claims were filed by the Appellant subsequent to approval of Resolution Plan by the CoC. The Adjudicating Authority has relied on the judgment of the Hon ble Supreme Court in RPS Infrastructure Ltd. Vs. Mukul Kumar Anr. 2023 (9) TMI 516 - SUPREME COURT , which judgment squarely applies to the facts of the present case. More so, when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium is hit by Section 14, sub-section (1) of the IBC, no such claim can be admitted in the CIRP. Conclusion - After initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings. No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP. When the claim on the basis of assessment, which has been made subsequent to initiation of moratorium is hit by Section 14, sub-section (1) of the IBC, no such claim can be admitted in the CIRP. There are no error in the order impugned in the present Appeal(s) passed by Adjudicating Authority - appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core legal questions:

• Whether after the imposition of a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), assessment proceedings can be carried on by the Employees' Provident Fund Organization (EPFO) under Sections 7A, 14B, and 7Q of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952.
• Whether any claim based on assessments made subsequent to the imposition of a moratorium can be admitted in the Corporate Insolvency Resolution Process (CIRP).
• Whether claims filed by the appellants subsequent to the approval of the Resolution Plan by the Committee of Creditors (CoC) could have been admitted in the CIRP.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 and 2: Continuation of Assessment Proceedings and Admission of Claims Post-Moratorium

• Relevant Legal Framework and Precedents: The judgment examines the provisions of Section 14 of the IBC, which imposes a moratorium on proceedings against the corporate debtor. It also considers precedents such as the Supreme Court's rulings in S.V. Kindaskar v. V.M. Deshpande and Sundresh Bhatt, Liquidator of ABG Shipyard.
• Court's Interpretation and Reasoning: The court interprets Section 14 to mean that no proceedings, including assessment proceedings that affect the corporate debtor's assets, can continue once a moratorium is imposed. The court distinguishes between the continuation of assessment proceedings and the enforcement of claims.
• Key Evidence and Findings: The court notes that in both appeals, assessment orders were passed after the initiation of the CIRP, during the moratorium period.
• Application of Law to Facts: The court applies the principle that assessment proceedings cannot continue during the moratorium as they affect the debtor's assets and create new liabilities.
• Treatment of Competing Arguments: The appellants argued that assessment proceedings could continue despite the moratorium, relying on Supreme Court judgments. The respondents contended that any proceedings affecting the debtor's assets during the moratorium are prohibited.
• Conclusions: The court concludes that assessment proceedings cannot continue during the moratorium, and claims based on such assessments cannot be admitted in the CIRP.

Issue 3: Admission of Claims Post-Approval of Resolution Plan

• Relevant Legal Framework and Precedents: The court references the Supreme Court's decision in RPS Infrastructure Ltd. v. Mukul Kumar, which emphasizes the finality of the Resolution Plan once approved by the CoC.
• Court's Interpretation and Reasoning: The court reasons that claims filed after the approval of the Resolution Plan cannot be considered as the plan's approval marks the conclusion of the claims process.
• Key Evidence and Findings: The appellants filed their claims after the CoC had approved the Resolution Plan, which was a key factor in the court's decision.
• Application of Law to Facts: The court applies the principle that claims must be filed before the approval of the Resolution Plan to be considered in the CIRP.
• Treatment of Competing Arguments: The appellants argued that their claims should be admitted despite the timing, but the court upheld the finality of the Resolution Plan.
• Conclusions: The court concludes that claims filed post-approval of the Resolution Plan cannot be admitted in the CIRP.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC, the Respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The Respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act."
• Core Principles Established: The court establishes that the moratorium under Section 14 of the IBC prohibits the continuation of assessment proceedings that affect the corporate debtor's assets. It also affirms the finality of the Resolution Plan once approved by the CoC.
• Final Determinations on Each Issue: The court determines that assessment proceedings cannot continue during the moratorium, claims based on such assessments cannot be admitted, and claims filed post-approval of the Resolution Plan are inadmissible.

The judgment dismisses both appeals, affirming the decisions of the Adjudicating Authorities and reinforcing the principles of the IBC regarding the moratorium and the finality of the Resolution Plan.