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2022 (9) TMI 857 - Tri - Insolvency and BankruptcySeeking respective attachment/lien/prohibition order over the Bank account of the Corporate Debtor maintained with Axis Bank, Rajam Branch - seeking to allow the Applicant to take control of the bank account - seeking to direct both the Respondents to remove their attachment/lien/prohibition order on the account of the CD - seeking to refrain from doing so during continuance of the Corporate Insolvency Resolution Process (CIRP) of the CD - HELD THAT - As regards the PF of the employees also, the Counsel for the Applicant submits that during the pendency of this Application they have submitted their claim and it is totally admitted. The Counsel for the Respondent No. 2 however submits that the employees have to be given preference in respect of the distribution of the assets of the CD. Section 53 (1)(b)(i) of IBC, 2016. In view of the IBC carving out a preference for the employees dues and the Government dues and in view of the fact that the claims of GST and EPFO were totally admitted, the prohibitory orders dated 19.02.2020 and 07.03.2022 issued by the respective departments to the Axis Bank are liable to be set-aside. Appeal allowed.
Issues:
Interim Resolution Professional seeking release of attachment orders by Assistant Commissioner of State Tax and Employees Provident Fund Organization over Corporate Debtor's bank account during Corporate Insolvency Resolution Process. Analysis: The Interim Resolution Professional (IRP) filed an application seeking the removal of attachment orders by the Assistant Commissioner of State Tax (ACST) and the Employees Provident Fund Organization (EPFO) over the Corporate Debtor's (CD) bank account maintained with Axis Bank. The IRP requested control of the account to facilitate the Corporate Insolvency Resolution Process (CIRP) without hindrance from the attachment orders. The facts presented in the application outlined that the CIRP of the CD commenced by the Tribunal's order, with an IRP appointed and a Committee of Creditors (CoC) constituted after no claims were received from EPFO. The ACST had attached the bank account for dues, while EPFO issued a Prohibitory Order seeking payment of default amounts from the bank. Respondent No. 2, EPFO, contended that under Section 11 of the Employees Provident Fund and Miscellaneous Provision Act, the amount due towards Provident Fund is deemed a first charge on the assets of the establishment in case of insolvency. However, the IRP argued for the removal of attachment orders as the claims by both EPFO and ACST were admitted, citing the settled legal position that no recovery actions should be initiated against a CD undergoing CIRP. The Counsel for the IRP highlighted the admission of claims by both EPFO and ACST, emphasizing the preference given to employees' dues under Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC). The section specifies the order of priority for distribution of assets, giving precedence to workmen's dues and government dues, including GST claims. As the claims by EPFO and ACST were admitted, the Tribunal ruled in favor of setting aside the prohibitory orders, allowing the IRP to take control of the bank account during the CIRP. In conclusion, the Tribunal allowed the application, emphasizing the preference for employees' and government dues under the IBC and the admitted claims by EPFO and ACST, leading to the setting aside of the attachment orders. The judgment provided clarity on the priority of dues during the CIRP, ensuring a smooth resolution process for the Corporate Debtor.
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