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TMI Blog2024 (7) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2019 under Section 61(2) of the Insolvency & Bankruptcy Code, 2016 (in short 'Code'). 2. Heard the Counsel for the Parties and perused the records made available including the cited judgements. 3. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (in short 'CIRP') vide order of the Adjudicating Authority dated 26.02.2020 and the Respondents had filed their claims before the Interim Resolution Professional (in short 'IRP') of Rs. 1,24,86,750/-. The Corporate Debtor was subsequently directed to be liquidated vide the Adjudicating Authority's order dated 22.12.2021 and the Appellant was appointed as the Liquidator, who asked the Respondents to file the claims during liquidation period. 4. It is the case of the Appellant that the Erstwhile Management of the Corporate Debtor did not maintain separate funds w.r.t. pension fund and provident fund and therefore according to the Appellant the claims of the Respondents as to be treated under the waterfall mechanism as per Section 53 of the Code. 5. Section 53 of the Code is reads as under : - " 53. Distribution of assets. - (1) Notwithstanding anything to the contrary contained in any law enacted by the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 2013 (18 of 2013). " ( Emphasis Supplied ) 6. It has been brought out that the Respondent No. 2 vide order dated 20.06.2022 directed the Respondent No. 1 to issue sale proclamations for the assets of the Corporate Debtor and started recovery in terms of provision of the Employees Provident Funds & Miscellaneous Provisions Act, 1952 (in short 'EPF Act'). 7. Aggrieved by this, the Appellant preferred I.A. No. 2229 of 2022 before the Adjudicating Authority and during hearing the Appellant issued public notice for auction of a certain property and during such e-Auction Notice, the Appellant came to know charge created by the Respondents on the said property. The Appellant, therefore, again preferred an I.A. before the Adjudicating Authority against such charges created by the Respondents and the Adjudicating Authority gave interim relief to the Appellant which was pronounced in open court during hearing on 13.12.2022 and directed the Appellant to create a fixed deposit to the extend of Rs. 1,24,86,750/- as claimed by the Respondents and directed Sub-Registrar Office to register the Sale Certificate and/ or sale document as a result of e-Auction. 8. The Appellant su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 is Partly allowed to the extent that separate recovery proceedings against the Corporate Debtor shall not be continued any further and the attachment imposed by the Respondents over the assets of the Corporate Debtor shall stand discharged considering the fact that an amount of Rs. 1,24,86,750/- equivalent to the claimed amount on account of EPF has already been secured in the shape Fixed Deposit bearing an Account No. 41518465189 maintained with State Bank of India" 11. Aggrieved by the same, the Appellant has preferred the present appeal. 12. It is the case of the Appellant that the Adjudicating Authority failed to examine the different components of the claims filed by the Respondents and has treated everything as contribution, which is in violation of waterfall mechanism as stipulated under Section 53 of the Code. 13. It is further the case of the Appellant that the EPF Act is a welfare law for workers whereas the Code is for the resolution of the Corporate Debtor and maximisation of value of the assets of the Corporate Debtor. In this respect, the Appellant submitted that in terms of Section 7A of EPF Act, only amount accrued towards contribution is meant for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther the case of the Respondents that the interest under Section 7Q and damages under Section 14B are levied after following statutory procedures and are imposed due to delayed remittances of dues by the employers and are considered for overall welfare measures for the workers. 23. The Respondent submitted that the Corporate Debtor failed to remit all dues in time and therefore in terms of EPF Act, the Respondents correctly levied the charges. 24. The Respondent also submitted that in case the Appellant is aggrieved by any undue amount levied by the EPF Authority, the Appellant need to approach Central Government Industrial Tribunal or High Court and not before this Appellate Tribunal as the Adjudicating Authority or this Appellate Tribunal under the Code are not meant to decide quantum of the amount of dues under EPF Act for which appropriate alternatives remedies have been provided under other statutes in the law. 25. The Respondent pleaded that the EPF is purely to protect the rights of the workmen and employee and it is responsibility of the Corporate Debtor to maintain separate funds for the same. 26. The Respondents submitted that the specific powers have been provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay for Rs. 1,24,86,750/- on 26.02.2020 to protect the interest of the workers and employers of the Corporate Debtor. 34. Concluding their arguments, the Respondents requested this Appellate Tribunal to dismiss this appeal. Findings 35. From the above facts, the following issues need to be decided to decide the present appeal : - (i) Whether, provident fund dues are to be decided and distributed in accordance with Section 36(4)(iii) of the Code or in accordance with Section 53 of the Code. (ii) Treatment of the various components of claims of the EPFO (the Respondent herein) i.e., contribution under Section 7A, interest under Section 7Q and damages under Section 14 of the EPF Act and whether all these will constitute as PF dues in terms of EPF Act. (iii) What constitute the part of liquidation estate and what does not constitute part of liquidation estate in terms of the Section 36 of the Code especially, w.r.t. Provident Fund dues. All these points are interlinked and interdependent, hence these to be discussed in the conjoint manner in the following discussions. 36. At this stage, it would be desirable to look into the relevant definition of liquidation estate. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the applicability of this Act to an establishment, decide such dispute; and (b) determine the amount due from any employer under any provision of this Act, the Scheme or the Pension. Scheme or the Insurance Scheme, as the case may be, and for any of the aforesaid purposes may conduct such inquiry as he may deem necessary.*** 7Q. Interest payable by the employer.--The employer shall be liable to pay simple interest at the rate of twelve per cent. per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment: Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank.] Section 14B in The Employees' Provident Funds And Miscellaneous Provisions Act, 1952 14B. Power to recover damages.- Where an employer makes default in the payment of any contribution to the Fund , the [Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 or in the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay simple interest @ 12% p.a. or as specified on any amount due from the employer under EPF Act, from the date of which amount becomes due until date of its actual payment. 45. From section 14B of the EPF Act, we note that the EPFO Authorities hae been given powers to recover damages in case of employer's defaults in payment of any contribution to the fund. There is no pre-conceived formula regarding what damages should be fixed under Section 14B of the EPF Act and the same has been left to the discretion of the EPFO Authority to determine the damages in facts of each case. Thus it becomes clear that the EPFO Authorities have powers to levy damages. It is also significant to note that damages is in relation to non- payment or delayed payment of contribution under Section 7A of the EPF Act by the employer (the Corporate Debtor herein) therefore, the damages in a sense is to be treated as extended part of the contribution. 46. We note that the EPF Act itself provides the priority of payments of contributions or other debts under Section 11 which reads as under :- "Section 11 in Employees Provident Funds Miscellaneous Provisions Act, 1952 11. Priority of payment of contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in priority to all other debts.]" (Emphasis Supplied) 47. The liability accrued before the order of adjudication of insolvency or winding up are to be paid in priority over other claims. 48. In the present appeal, the claims pertains to the period prior to CIRP and subsequent liquidation and the claims were filed by the Respondents before the Resolution Professional after issue of by public notice inviting claims and the Respondents filed the claim of Rs. 1,24,86,750/-. 49. It is significant to note that an amendment was be made in the EPF Act vie amendment Act, 33 of 1988 w.r.f. 01.08.1988 which describes that without prejudice to the provision of sub-section 1 of Section 11 of the EPF Act, "if any amount is due from an employer" amount so due shall be due to be first charge on the assets of the establishment. 50. In this regard, we would like to refer to the judgement of the Hon'ble Supreme Court of India in case Maharashtra State Cooperative Bank (Supra) which gives clear ratio as laid down by the Hon'ble Supreme Court of India in Para 67 to 69. These paras reads as under :- "67. The expression "any amount due from an employer" appearing in sub-section (2) of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the appellant Bank that the amount of interest payable under Section 7-Q and damages leviable under Section 14-B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act." ( Emphasis Supplied ) 51. The Hon'ble Supreme Court laid down that there is no reason to give restrictive meaning of expression "any amount due from the employer" and confine to only amount determine under Section 7A of the EPF Act. The Hon'ble Supreme Court further held that interest payable by the employee under Section 7Q and the damages levied under Section 14B of the EPF Act will also be covered as dues from the employers for the purpose of Section 11(2) of the EPF Act. 52. We note that in the present appeal the amount which has been claimed by the employer are covered under Section 7A, 7Q and 14B of the EPF Act and therefore are fully governed by the judgement Maharashtra State Cooperative Bank (Supra). 53. In view of this clear judgement of the Hon'ble Supreme Court of India the contention of the Appellant are not tenable and stand rejected. 54. We also note that the Hon'ble Supreme Court of India in Sunil Kumar Jain v. Sundaresh Bhatt [(2022) 7 SCC ..... 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