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2022 (8) TMI 417 - Tri - Insolvency and BankruptcyLegality of impugned orders and the recovery notices issued by the Respondent - breach of moratorium period admittedly, during the time when moratorium was imposed by Adjudicating Authority - HELD THAT - The purpose of imposition of a moratorium has been expounded by the Hon ble Supreme Court in the case of P. Mohanraj and Others vs. Shah Brothers Ispat Pvt. Ltd, 2021 (3) TMI 94 - SUPREME COURT wherein the Hon ble Supreme Court has held that the moratorium is imposed to shield the Corporate Debtor from pecuniary attacks to enable it to get a breathing space so that it can continue as a going concern to ultimately rehabilitate itself. A plain reading of section 14 of the Code shows that there is complete prohibition imposed by the legislature on the institution of suits or continuation of proceedings against the Corporate Debtor including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel or other authority. Section 14 of the Code does not differentiate between any proceedings, whether they are assessment, quasi-judicial or judicial in nature. In fact, a moratorium is imposed on all proceedings irrespective of the nature. The object as succinctly put by the Hon ble Supreme Court is clearly to shield the Corporate Debtor from all pecuniary attacks - In the case at hand, the proceedings initiated by the Respondent are not mere assessment proceedings as contented by the Respondent. The proceedings are legal proceedings as provided for in the circular dated 14.02.2020 issued by the Respondent, which encompass evidence to be led by parties to reach to a conclusion whether there is any amount which is due or payable under the EPF MP Act. This is also evident from a reading of provision 7A of the EPF MP Act, which describes the proceedings under the said section as judicial proceedings within the meaning of sections 193 and 228, and for the purpose of section 196, of Indian Penal Code. The benefits such as provident fund and gratuity fund are required to be protected and prioritised which is also the intent of the Code. It therefore goes without saying that the setting aside of the orders passed by the Respondent will not come in way of the respective employees or workmen to file their respective claims, if any, with the Applicant under the provisions of the Code in respect of dues toward provident fund, pension fund and gratuity fund. The Applicant is duty bound, as per the Law laid down to ascertain and prioritise the payments of the social welfare dues. Without expressing any opinion on the merits of the Orders passed by the Respondent, the orders being in violation of the moratorium imposed are liable to be set aside - Application allowed.
Issues Involved:
1. Legality of orders and notices issued by the Respondent under the EPF & MP Act during the moratorium period. 2. Validity of the inquiry under Section 7A of the EPF & MP Act. 3. Priority and exclusion of Provident Fund dues from the Liquidation Estate. Detailed Analysis: 1. Legality of Orders and Notices Issued During Moratorium: The Liquidator of the Corporate Debtor challenged the orders dated 28.06.2019 and 05.07.2019 issued by the Respondent under Sections 7A, 7Q, and 14B of the EPF & MP Act, demanding payments totaling Rs. 34,86,69,378/-. The Liquidator also contested the recovery notices dated 28.06.2020 and 07.07.2020. The primary ground for the challenge was that these orders and notices were issued in violation of the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code (IBC). The Respondent argued that the assessment proceedings for determining Provident Fund dues are not barred under Section 14 of the Code. However, the Tribunal held that Section 14 imposes a complete prohibition on the institution or continuation of proceedings against the Corporate Debtor, including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or other authority. The Tribunal cited various judgments, including P. Mohanraj and Others vs. Shah Brothers Ispat Pvt. Ltd, to emphasize that the moratorium aims to shield the Corporate Debtor from pecuniary attacks during the moratorium period to enable it to rehabilitate itself. 2. Validity of the Inquiry Under Section 7A of the EPF & MP Act: The Liquidator argued that the inquiry initiated under Section 7A of the EPF & MP Act was baseless and amounted to a roving and fishing inquiry, as there was no outstanding liability of Provident Fund dues. The Respondent contended that the assessment proceedings are necessary to determine the dues and are not barred by the moratorium. However, the Tribunal noted that the proceedings under Section 7A are judicial proceedings, as defined under Sections 193 and 228 of the Indian Penal Code, and entail the imposition of pecuniary liability on the Corporate Debtor. The Tribunal rejected the Respondent's contention, stating that the initiation of such proceedings during the moratorium period is prohibited by the Code. 3. Priority and Exclusion of Provident Fund Dues from the Liquidation Estate: The Respondent argued that Provident Fund dues are required to be paid in priority over other dues under Section 11 of the EPF & MP Act and are excluded from the Liquidation Estate under Section 36 of the IBC. The Liquidator countered that Section 36(4) of the IBC provides protection to employee and workmen dues "from" the Provident Fund, Gratuity Fund, and Pension Fund, not dues payable "to" these funds from the Corporate Debtor's accounts. The Tribunal agreed with the Liquidator, noting that the orders issued by the Respondent did not provide details of the employees, their P.F. numbers, or names of the workmen against whom such dues were claimed. The Tribunal emphasized that the dues must be relatable to employees and workmen, which was absent in the present case. Conclusion: The Tribunal concluded that the orders and recovery notices issued by the Respondent during the moratorium period were in violation of Section 14 of the IBC and were therefore liable to be set aside. The Tribunal also noted that the setting aside of these orders would not prevent the respective employees or workmen from filing their claims with the Liquidator under the provisions of the IBC. The Tribunal disposed of the applications IA No. 1694/2020, IA No. 1086/2020, and IA No. 1089/2020, allowing them in the terms mentioned above.
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