NCLAT: EPFO’s Delayed PF Claim Filed During IBC Moratorium Not Enforceable; Resolution Plan Cannot Be Modified
- REEDLAW
- Sep 21
- 4 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal, Principal Bench, held that a delayed provident fund claim initiated by the Employees’ Provident Fund Organisation (EPFO) during the IBC moratorium, without a valid Section 7A order, was unenforceable. The Tribunal further ruled that a resolution plan approved by the Committee of Creditors could not be modified to accommodate such claims, even when the successful resolution applicant had earlier given an undertaking to meet statutory dues.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a batch of two Company Appeals, held that the EPFO’s belated provident fund claim, based on an assessment initiated during the IBC moratorium and without a valid Section 7A order, was unenforceable. It further observed that a resolution plan once approved by the Committee of Creditors cannot be altered to admit such claims despite any prior undertakings given by the successful resolution applicant.
The Appellate Tribunal examined two cross-appeals challenging the order of the Adjudicating Authority, which had approved the resolution plan of the Corporate Debtor and directed payment of Employees’ Provident Fund Organisation (EPFO) dues by the Successful Resolution Applicant (SRA). The Corporate Debtor had entered the Corporate Insolvency Resolution Process (CIRP) on 2 December 2019, and the last date for filing creditor claims was 22 June 2022. No claim was submitted by the EPFO within this timeline. The EPFO lodged its claim only on 6 March 2023, after the statutory moratorium had commenced, and based on an Area Enforcement Officer’s Report prepared during the moratorium. The Resolution Professional rejected the claim, and although the Adjudicating Authority subsequently directed verification, the SRA undertook to pay certain amounts through affidavits while the resolution plan was pending approval.
The SRA argued that the assessment on which the EPFO claim was founded was void as it arose during the moratorium period and without any adjudication under Section 7A of the EPF Act. It contended that the Adjudicating Authority exceeded its jurisdiction by admitting belated claims and altering the resolution plan after the Committee of Creditors (CoC) had approved it. The SRA further maintained that its undertakings to pay were induced by misrepresentation that a valid Section 7A order existed and therefore could not bind it. Reliance was placed on a precedent holding that no assessment or recovery proceedings can continue against a corporate debtor once a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) commences.
The EPFO, in its own appeal, asserted entitlement to the full amount of Rs. 1.33 crore, including interest and damages, on the ground that its claim was filed before the CoC approved the plan and was subsequently admitted by the Resolution Professional. It argued that the SRA, having given repeated affidavits undertaking payment, was estopped from resiling. The EPFO further contended that provident fund dues must be given statutory priority and could not be treated as “tentative” or subject to reduction, and that the Adjudicating Authority erred in allowing only partial satisfaction of its claim.
Upon detailed consideration of the factual matrix and the legal position, the Appellate Tribunal held that the moratorium imposed under Section 14 of the IBC created a statutory freeze prohibiting continuation of assessment proceedings. It found that the EPFO’s claim, being founded on an assessment initiated and concluded during the moratorium period and not on a valid Section 7A adjudication, lacked enforceability within the CIRP. The Tribunal reaffirmed that once a resolution plan is approved by the CoC, the Adjudicating Authority cannot modify it or admit new claims contrary to the commercial wisdom of the CoC. Consequently, the belated and moratorium-barred claims could not be fastened on the SRA merely because of affidavits submitted under misapprehension, and the order of the Adjudicating Authority directing such payment was unsustainable.
Mr. Sanjay Ghose, Sr. Advocate, with Mr. Pratibhanu Kharola, Mr. Anindya Mazumdar, Mr. Girish Agarwal, Mr. Mohit Garg, Ms. Ankita, Advocates, represented the Appellant.
Mr. Gaurav Varma, Advocate, appeared for the Respondent.
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