The National Company Law Appellate Tribunal ( NCLAT ) has held that PF dues are not the assets of the Corporate Debtor and directs to release the full provident fund to ex-employees.
The Appellant is an ex-employee of the Applied Electromagnetics Pvt. Ltd. (R3/CD), who worked as ‘Supervisor’ (R&D) and he has total outstanding dues of Rs. 12,49,702/-. Pursuant to the issue of demand notice issued to CD by one of the employees of the Company the Adjudicating Authority initiated the CIRP of the CD/Respondent No.3. The appeal has been filed by the Appellant under Section 61 of the ‘Insolvency and Bankruptcy Code, 2016’ against the impugned order passed by the National Company Law Tribunal.
The appellant submitted that the employee and workman are the backbone of the Applied Electromagnetics Pvt. Ltd. [Company/Corporate Debtor (CD)] in CIRP who stood by R3 by not resigning even when their rightful dues and salaries were not being paid / irregularly paid from the year 2012 which is much prior to CIRP. It is also their grievance that the ‘Resolution Plan’ has not considered the full Provident Fund (PF) dues ‘Provident Fund’ (PF) dues of the employees which R3/CD in CIRP was supposed to remit to the PF Authority under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 for the default period from 1st October, 2012 to 31st March, 2018 as accessed and communicated by the Assistant Provident Fund Commissioner regional officer Noida, Ministry of Labour and Employment, Govt. of India. Apart from the fact that the Resolution Plan is discriminatory insofar as it relates to the employees. It has also been submitted that the ‘Financial Creditors’ (21.6%) have been paid much more than the ‘Operational Creditors’ (12.67%).
It submitted by the appellant that PF dues are not the assets of the CD as amply made clear by the provisions of Section 36(4)(a)(iii) of the I& B Code, 2016
The division bench presided by Justice Ashok Bhushan, Chairperson, and Dr. Ashok Kumar Mishra, Member (Technical) has held that “in this context, the following judgments are also referred to the judgment of this Tribunal (3 Members Bench – comprising of Honorable Chairperson & two Members) Tourism Finance Corporation of India Ltd. Vs. Rainbow Papers Ltd. & Ors. 2019 SCC Online NCLAT 910 given below:
“However, as no provisions of the ‘Employees ProvidentFunds and Miscellaneous Provision Act, 1952’ is in conflict with any of the provisions of the ‘I&B Code’ and, on the other hand, in terms of Section 36 (4) (iii), the ‘provident fund’ and the ‘gratuity fund’ are not the assets of the ‘Corporate Debtor’, there being specific provisions, the application of Section 238 of the ‘I&B Code’ does not arise. Therefore, we direct the ‘Successful Resolution Applicant’- 2nd Respondent (‘Kushal Limited’) to release full provident fund and interest thereof in terms of the provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ immediately, as it does not include as an asset of the ‘Corporate Debtor’”.
Hence, we direct Respondent No.2/Successful Resolution Applicant to release full provident fund dues in terms of the provisions of the Employees Provident Funds and Miscellaneous Provident Fund Act, 1952 immediately by releasing the balance amount. The impugned order dated 02nd April, 2019 approving the ‘Resolution Plan’ stands modified to the extent above.
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