Case Law Details
Anuj Bajpai Vs Employee Provident Fund Organisation (NCLT Mumbai)
The National Company Law Tribunal (NCLT) Mumbai has provided a significant clarification regarding the priority of Provident Fund (PF) and Gratuity dues in the liquidation process. The court ruled that these dues are third-party assets belonging to workers and should be paid with priority in resolution or liquidation without following the distribution process under Section 53 of the Insolvency and Bankruptcy Code (IBC). This decision has implications for the treatment of workers’ dues during the liquidation process and has been welcomed by labor rights advocates.
The case involved a dispute between the Employees’ Provident Fund Organisation (EPFO) and the liquidator of a company undergoing insolvency proceedings. The EPFO claimed that its dues should be given priority over other claims, and it had initiated separate recovery proceedings against the assets of the company. The liquidator argued that since the company did not maintain separate funds for PF and Gratuity, the claims should be treated under the waterfall mechanism under Section 53 of the IBC.
The NCLT examined the relevant provisions and recent judgments, including those by the Hon’ble Supreme Court, and concluded that PF and Gratuity dues are not part of the corporate debtor’s assets. Instead, they are third-party assets belonging to the employees and should be excluded from the liquidation estate. The court upheld the priority of PF/Gratuity dues and directed the liquidator to use the funds already secured in a Fixed Deposit to repay the EPFO’s claims.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
Please become a Premium member. If you are already a Premium member, login here to access the full content.
