EPFO’s claim based on Inspection During CIRP is Not enforceable: NCLAT [Read Order]
After initiation of the CIRP, no assessment can be initiated or continued against the Corporate Debtor so as to pass any pecuniary liability on the Corporate Debtor
In a recent case, the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that the claims of the EPFO based on inspection conducted subsequent to initiation of the CorporateInsolvency Resolution Process (CIRP) are unenforceable and cannot be admitted.
The Resolution Professional- CA Pankaj Shah filed appeals against the NCLT order. The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor- M/s. Premshree Prime Properties Private Limited commenced vide order dated 17.02.2023, CA Pankaj Shah was appointed as Interim Resolution Professional who has subsequently confirmed as Resolution Professional.
On 11.05.2023, Employee’s Provident Fund Organisation (EPFO) initiated inquiry under Section 7A of the Employees’ Provident Fund and Miscellaneous Provision Act 1952 (“EPF & MP Act 1952”). On inspection report dated 10.05.2023 submitted by its Enforcement Officer, it was communicated that amount of Rs. 33,99,135/- was worked out as due amount from the Corporate Debtor for the period April, 2015 to March 2021.
A claim Form was also submitted by Employees’ Provident Fund Organisation to the Resolution Professional. A reply dated 25.05.2023 was sent by Resolution Professional to the EPFO requesting to submit proper claim Form as per Regulation 9 of the Insolvency and Bankruptcy (Insolvency Resolution for Corporate Persons) Regulations, 2016. EPFO did not submit claim Form and passed an order on 25.09.2023 under Section 7A of the EPF & MP Act
1952 determining amount of Rs.50,90,793/- and further an amount of Rs.50,66,686/- under Section 14B towards penal damages and Rs.35,60,358/- as interest for the belated remittances under Section 7 Q of the EPF & MP Act.
A claim form was filed by EPFO to the Resolution Professional on 26.09.2023 praying for revising their dues as earlier submitted. IA No.346 of 2023 was filed by the Resolution Professional challenging the order dated 25.09.2023 passed by EPFO under Section 7A, 14B & 7Q which application was dismissed as not maintainable.
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Counsel for the Resolution Professional challenging the order passed by the Adjudicating Authority submits that the CIRP against the Corporate Debtor having commenced on 17.02.2023, the EPFO could not have initiated any proceeding under Section 7A for determination of the amount payable by the Corporate Debtor. The order under Section 7A, 7F and 14B has been passed on 25.09.2023.
The EPFO has no jurisdiction to pass any order under Moratorium period to fasten any liability on the Corporate Debtor. On the basis of order passed during Moratorium period, no claim could have been admitted. First claim was submitted by EPFO on basis of an alleged inspection dated 10.05.2023 and thereafter a revised claim was filed on 26.09.2023 for Rs.1,37,17,837 which was impermissible.
Counsel for the Resolution Professional relied on the judgment of this Tribunal in Company Appeal (AT)
(Insolvency) No.1062 of 2024--“Employees’ Provident Fund Organisation Regional Office vs. Jaykumar Persumal Arlani, Resolution Professional of Ms/. Decent Laminates Pvt. Ltd.”. It is submitted that after declaration of the Moratorium, no assessment could have been passed nor on the basis of any assignment, any claim could have been filed. There is no occasion to admit any claim or mention the same in the Resolution Plan.
Counsel for the EPFO challenging the order passed by the Adjudicating Authority directing the EPFO to give the name of employees with details of computation, it is submitted that the Adjudicating Authority has no jurisdiction to enter into adjudication of claim under Section 7A, 14B and 7Q. It is submitted that under the EP & MP Act, 1952, it is statutory authorities who are entitled to adjudicate and pass order under Section 7A, 7Q & 14B. Direction of the Adjudicating Authority to the EPFO to give the name of employees and detail computation is uncalled for and beyond the jurisdiction.
It is further submitted that the EPFO had also jurisdiction to submit a claim on the basis of inspection report dated 10.05.2023. Inspection report dated 10.05.2023 can very well be basis for determining the employees’ contribution which does not violate the Moratorium. It is submitted that the application filed by the Resolution Professional challenging the order dated 25.09.2023 has also been disposed of by the Adjudicating Authority directing the Resolution Professional to challenge the same in appropriate forum, hence, the order dated 25.09.2023 could not have been questioned in the proceedings.
The demand made by the EPFO on the basis of inspection dated 10.05.2023 is clearly demand from the Corporate Debtor after commencement of the Moratorium. Similarly, revised claim submitted on 26.09.2023 on the basis of orders passed on 25.09.2023 where demand in pursuance of subsequent to Moratorium.
The bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member)observed that after initiation of the CIRP, no assessment can be initiated or continued against the Corporate Debtor so as to pass any pecuniary liability on the Corporate Debtor.
The EPFO has made demand on the basis of an alleged inspection report dated 10.05.2023 and assessment order dated 25.09.2023 which both were subsequent to initiation of CIRP on 17.02.2023. When no demand can be made on the basis of any inspection or assessment, we do not find any ground to allow the application IA No.409 of 2024 which was filed by EPFO where direction was sought to allow the entire claim of Rs.1,37,17,837/-.
In view of the law as laid down by this Tribunal, Resolution Professional has made out a case for issuing a direction that the said demand was unenforceable which arose on the basis of assessment made during the Moratorium. The tribunal allowed the appeal of the RP and the impugned order was set aside.
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