The National Company Law Tribunal (NCLT), Mumbai Bench has held that if the corporate debtor (CD) failed to keep a separate account for the Provident Fund (PF), the Insolvency Resolution Professional (IRP)/RP /Liquidator cannot Provide for Income Tax except under section 53 of Insolvency Bankruptcy Code (IBC).
It has been submitted that under the provision of IBC 2016 and Employees Provident Funds and Miscellaneous Provisions Act (EPF and MP), 1952 the Provident Fund dues are one of the most important dues to be considered by the liquidator and have undoubtedly privilege and preference over the other payments due from the corporate debtor.
The Respondent has further submitted that the dues of workmen have to be given priority under Section 53 of the IB Code and EPF & MP Act. It has further submitted that the EPFO Authority submitted a claim before the IRP/Liquidator but the same has not been allowed by the IRP/Liquidator.
It has further been submitted that the Resolution Professional while rejecting the claims of the Respondent, has failed to secure the rights of labourers and also to honour the statutory provisions of the EPF Act. The Respondent has further submitted that it is well-settled and established law that there is no inconsistency between Section 238 and other provisions of IBC and Section 11(2) and other provisions of EPF & MP Act.
It was evident that the amount deducted for `Provident Fund’, purely belongs to an `Employees’ and is not to be treated as an `Asset’ of the ‘Corporate Debtor’ and cannot be touched by an `Interim Resolution Professional’/`Resolution Professional’/ `Liquidator’ as the case may be. However, it is important to note that such a `Provident Fund’, has to be an `Establishment Fund’, kept separately by the company and only then this proviso will be applicable.
If even wrongly and in violation of the laws of the land, the company fails to establish such `Provident Fund’, in that event `Interim Resolution Professional/Resolution Professional/Liquidator’ is not expected to provide for same, except under Section 53 of the I & B Code, 2016.
The two-member bench comprising of Shri. Kuldip Kumar Kareer (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member) viewed that since the Corporate Debtor had not opened a separate Bank Account for the `Provident Fund’, the aforesaid account has to be treated as per Section 53 of the I & B Code, 2016.
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