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Provident fund dues are not the assets of the Corporate Debtor and they have to be paid in full


The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was hearing an Appeal on Wednesday and held that Provident Fund dues are not the assets of the Corporate Debtor and they have to be paid in full.


Facts:

The present Appeal has been filed challenging the Order passed by the National Company Law Tribunal, Kolkata Bench, Kolkata, wherein the Adjudicating Authority passed the order to

initiate the CIRP against the Corporate Debtor-HAIL Tea Limited.


The Appellant-Organization submitted its claim in Form-B for an amount of Rs. 2,10,13,797.92/-

on account of default on part of the Corporate Debtor to deposit its Provident Fund Contribution, Provident Fund Administrative Cost, Interest for the delay in deposit of the Provident Fund Dues, Interest for delay in deposit of Deposit Linked Insurance Dues and Provident Fund Contribution due and payment for the period commencing from 28th March 2019 till 26th September 2019.


The Resolution Professional admitted the entire claim of the Appellant- Organization of Rs. 2,10,13,797.92/-. Resolution Plan came to be submitted by Respondent No. 2. Resolution Plan came to be approved by National Company Law Tribunal, Kolkata Bench vide Order dated 3rd January 2022. In the Resolution Plan, the Appellant proposed an amount of only Rs. 1,07,21,592/-. The Resolution professional shared a copy of the Judgement dated 03rd January 2022 and made a part payment of Rs. 64,30,222/-. Being aggrieved by the

said Order, the Appellant-Organization has come up in this Appeal.


Appellant's Submission:

Learned Counsel for the Appellant challenging the Impugned Order submitted that Provident Fund Dues were entitled to be paid in full. The Resolution Professional having admitted the amount of Rs. 2,10,13,797.92/-, was required to be paid in full. He further submitted that non-payment of the full amount is a violation of the provision of Section 30(2)(e).


Learned Counsel for the Appellant has referred to Section 11(2) of EPF Act, 1952. It was submitted that Provident Fund Dues are not dues of any other Operational Creditor.


Respondent's Submission:

Learned Counsel for the Respondents opposed the Appeal. It was submitted that the Appeal was barred by the time it has been filed on 28th February 2022 challenging the Order dated 3rd January 2022, which ought to be rejected since the limitation for filing an Appeal was only for 30 days. It was further submitted that approval of the Resolution Plan was in the domain of the commercial wisdom of the Committee of Creditors. The haircut has been given to all the Financial creditors and Operational Creditors.


NCLAT Analysis:

The Appellate Authority observed that there was no dispute between the parties regarding the amount of claim admitted by the Resolution Professional as was submitted by the Learned Counsel for the Appellant-Organization. In the PF dues, the amount mentioned in paragraph 8 of the Judgement is Rs. 2,10,13,798/- whereas the total payment proposed in the plan was Rs.1,07,21,592.


The question which had arisen in the Appeal was fully covered by a recent Judgement of this Tribunal delivered on 21st October 2022 in Association of Aggrieved Workmen of Jet Airways (India) Limited v. Jet Airways India Limited & Ors. REED 2022 NCLAT Del 01580.


By another Judgement of the Appellate Tribunal in Company Appeal (AT) Ins. No. 987 of 2022 in the matter of Regional P.F. Commissioner v. Ashish Chhawchharia, Resolution Professional for Jet Airways (India) Ltd. & Anr., REED 2022 NCLAT Del 10550, had already been decided. The facts of the present case were fully covered by the Judgement in the Appeal filed by the Regional P.F. Commissioner v. Ashish Chhawchharia, Resolution Professional for Jet Airways (India) Ltd. & Anr., REED 2022 NCLAT Del 10550, i.e. Company Appeal (AT) Ins. No. 987 of 2022 dated 21.10.2022. The above Appeal had been allowed and direction has been issued to the Successful Resolution Applicant (SRA) to make the payment of Provident Funds dues in full.


The Appellate Tribunal did not accept the submission of the Learned Counsel for the Respondent that the Appellant was an Operational Creditor and both the Operational Creditor and Financial Creditor has taken a haircut. The Appellate Tribunal in the case of “Regional P.F. Commissioner, Provident Fund dues are not the assets of the Corporate Debtor and they have to be paid in full. Hence, the Appellant was clearly entitled to payment in full provident fund dues i.e. an amount of Rs. 2,10,13,798/-.


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