Central Board of Trustees Vs Deputy Registrar (Madras High Court)
Conclusion: Provident fund dues were protected by statute and same were excluded from the liquidation estate of a company under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016, thus, could not be denied to claimants on grounds of delay as it would defeat the object of protecting employees’ social security.
Held: The Corporate Debtor, K.N. Interior Designs and Engineering Pvt. Ltd., was ordered to be liquidated by the NCLT, Chennai. Pursuant thereto, the Liquidator issued a public notice inviting claims up to 19.10.2022. Assessee, Employees’ Provident Fund Organization (EPFO), filed its claim for ₹21,94,745, i.e., two days beyond the prescribed date. The Liquidator rejected the claim on the grounds that: the claim was not filed in Form C under Regulation 17 of the IBBI (Liquidation Process) Regulations, 2016; it was delayed by two days; and as per the Managing Director’s communication, no employees were enrolled after 2016 and hence no provident fund dues were payable. NCLT dismissed EPFO’s appeal, holding that liquidation was a time-bound process under the IBC and the delay could not be condoned since the process was nearing completion. EPFO contended that Provident Fund dues were statutorily protected under Section 36(4)(a)(iii) of the IBC and were excluded from the liquidation estate; EPFO was a secured creditor under Sections 3(30) and 3(31) of the IBC, relying on State Tax Officer v. Rainbow Papers Ltd. (2023) 9 SCC 545; the Liquidator, being a fiduciary, ought not to have taken an adversarial stance. Respondent contended that the claim was filed beyond the stipulated deadline; there was no adjudicated liability under Sections 7Q or 14B of the EPF Act, hence no provable debt existed; the liquidation process being time-bound, the NCLT rightly declined to entertain delayed claims. It was observed that provident fund contributions were protected by statute and could not be treated as part of the liquidation estate available for distribution among creditors. The Court noted that the delay in filing the claim was marginal and that rejection on technical grounds would defeat the object of protecting employees’ social security and held that the decision of the NCLT in refusing to entertain assessee’s claim was legally unsustainable. Accordingly, the Court set aside the impugned order and remitted the matter to the liquidator to consider the claim raised by EPFO on its merits. The High Court directed that if dues were found payable, steps must be taken to recover the funds from the stakeholders who had received distribution, and the process be completed within a period of six months, until when the dissolution of the company was also kept in abeyance.
