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TMI Blog2019 (3) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent (s) : G. Gunasekaran, Liquidator ORDER CH MOHD SHARIEF TARIQ, MEMBER MEMBER (JUDICIAL) 1. Under adjudication is MA/99/2018 filed in TCP/225(IB)/CB/2017. The Application has been filed by the Applicant viz., The Regional Provident Fund Commissioner-I with the prayers as follows: i. Accord first priority to EPFP dues over all other dues as envisaged in Section 11(2) of the EPF MP Act, 1952 and as per Hon'ble Supreme Court order dated 08.11.2011 in SLP (Civil) No. 7642 of 2011 and NCLT's own corrigendum in the matter of M/s. Moka Technology Services Limited order dated 12.12.2017 ii. Direct the RP to drop the conclusion that BPFO should he made responsible for missing machinery. iii. Direct the RP to accept the claim of EPFO for ESIC Receivership period (i.e from 08.06.2015 to Oct 2017) as a charge on liquidation process. iv. Direct the RP to drop the categorization of EPFO dues under 53(1 )(f) as 'other remaining debts dues' v. Direct the RP to rectify the errors as pointed above and revise the statement and thus render justice. 2. The factual matrix of the case is that the Respondent Mill viz., M/s. Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery that are already missing. Besides that, in the liquidator's complaint itself, when the EPFO was not made a party against whom the complaint was made, it bears no meaning to imply so at this juncture. Applicant has further submitted that EPFO is bound by its statute and its recovery protocols and has taken all the steps according to them. 8. The Applicant has submitted that Section 11 (2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 declares that the amount due as contribution to the employees provident fund shall be made a first charge on the assets of the establishment and that, notwithstanding anything contained in any other law for the time being in force, it shall be paid in priority against all other dues. The reason for this is obvious. The legislature intended to secure the terminal social security benefit made available by the statute to the working class. Taking into consideration that Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is a social benefit legislation, and the evil consequences of Provident Fund dues being defeated by prior claim of the secured and unsecured creditors, the legislature took care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of the Corporate Debtor on 08.06.2015 and appointed a receiver. The Recovery officer, EPFO, Tirunelveli vide letter dated 16.10.2015 permitted the Recovery officer, ESIC, Tirunelveli to use the movable property (Machinery) under the attachment of EPFO, for the purpose of running the Mill and laid down the conditions for the same. The conditions laid down in the above mentioned letter of EPFO are extracted as follows;- (1) That the attached properties of the mill shall not be sold/taken out/ removed from the respective place/altered at any point of time without the prior permission of the Recovery officer (2) That the properties shall be used without causing for wear and tear . (3) That the payments related to the PF dues paid to the EPFO, SRO, Tirunelveli periodically without any interruption. (4) That the permission accorded to the use of machinery shall be disaccorded at any time due to non payment of dues or failure to comply the conditions. (5) That the attached properties shall be handed to recovery officer of the EPFO, SRO, Tirunelveli after completion of lease/conversion job work etc. on as is where is basis. (6) That the payment of recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by EPFO has been classified under section 53(l)(f) of the IBC, 2016 as other remaining debts and dues in the waterfall mechanism provided for distribution of proceeds from the sale of liquidation assets. The claim consists of 7A Contribution, Interest u/s 7Q damages for the period from August, 1992 to June, 2017. The date of commencement of liquidation was 22.02.2018 and for the claims for the period 08.06.2015 to June, 2017, the ESIC is responsible and the balance amount in the claims are relating to the period beyond twenty four months/two years from the commencement of the date of liquidation of the CD. 17. In Rejoinder the Applicant has submitted that Mr. Thirumalaippan was appointed as receiver by ESIC on 08.06.2015 and on the very same day the ESIC attached the properties of the company in liquidation through attachment of business. The said Mr. Thirumalappan also took charge as receiver on the very same day, along with all assets and machineries of the company in liquidation. The Applicant has further submitted that the notice of appointment of receiver was informed by ESIC after his appointment and taking charge on 08.06.2015 by letter dated 14.10.2015 seeking for misp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 20.10.2017 and stated that the attachment of the land and machineries of the company continues to he with ESIC and cautioned the public not to deal with Mr. Thirumalaippan. However, it has been noticed by this authority that the public announcement did not contain the word machineries as has been stated by the applicant. 22. It has been submitted by the Applicant that the conditions imposed by letter dated 16.10.2015 has not been complied with and requested ESIC to ensure fulfilment of the conditions before handing over the machineries. EPFO also by the said letter had stated that it will repossess the machineries only upon satisfaction that the machineries has been returned in original conditions, as it was handedover and not altered or tampered in anyway. 23. The Applicant has submitted that the default arrears committed is a continuous one and thus there can be no limitation restricting to due for 24 Months alone prior to the order of winding up. The Applicant has placed reliance on the judgment of Hon'ble Supreme Court given in the case of M/S Hindustan Times Ltd. v. Union Of India [1998] 2 SCC 242, wherein it was held that Limitation Act would not be applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) On receipt of a report from the attaching officer under sub-rule (1), the Tax Recovery Officer may either order the removal of the property to a place which he shall specify or sanction its maintenance and custody at the place of attachment under such conditions as he may think fit. 28. The Liquidator has also submitted that as per Rule 28 of the Income Tax (Certificate Proceedings) Rules, 1962, when the property remains at the place where it is attached in the custody of the attaching officer, and any person other than the defaulter claims the same, or any part thereof, the officer shall nevertheless remain in possession and shall direct the claimant to prefer his claim to the Tax Recovery Officer. 29. The liquidator has submitted that the attachment of the movable properties of the corporate debtor were made by the Recovery officer of the EPFO on 07.03.2012. He should have taken steps for safe custody of the attached properties as per the provisions laid down in the second Schedule to the Income-tax Act 1962. However, instead of safeguarding the attached machinery and recover the dues by sale, permitted the recovery officer, ESIC to use the machinery for running t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ESIC's receivership the EPFO did not bother to recover the dues for the said period. 34. The liquidator has submitted that as per Rule 29 of the Income Tax (Certificate Proceedings) Rules, 1962, the attached movable property to be returned to the defaulter/corporate debtor and the defaulter becomes entitle to receive back the movable property attached on payment of dues/cancellation of attachment. In this case some of the machinery attached by the EPFO was missing while being under its attachment and possession. The EPFO was unable to replace the machinery and only handedover the remaining machinery to the Resolution professional on 01.12.2017. Therefore, while determining the claim under Section 39 of IBC 2016, the loss caused to the machinery by the EPFO has correctly been deducted by the Liquidator from the claim filed. 35. The Liquidator has properly submitted that it is the duty of the Recovery Officer of the EPFO to take suitable action against the ESIC for non-fulfilment of the terms and conditions laid down in the letter No. MD/TNY/20247/enf.I/C. 13/51103/2015 dated 16.10.2015, by which permission was granted to the ESIC to use the machineries and recover the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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