National Company Law Appellate Tribunal
Regional Provident Fund ... vs Vinod Balachandran on 17 October, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (Ins) No. 351/2024
(IA Nos. 960, 961 & 962/2024)
In the matter of:
Regional Provident Fund Commissioner-II (Legal),
Employee Provident Fund Organisation
Ministry of Labour and Employment,
Government of India,
Regional Office, Bhavishya Nidhi Bhawan,
Kaloor, Kochi - 682017 ...Appellant
V
Vinod Balachandran,
Resolution Professional of
M/s. Albanna Engineering (India) Pvt. Ltd.,
70/1909, Ashoka Road, Kaloor, Kochi ...Respondent
Present :
For Appellant : Mr. R. Vishnu, Advocate
For Respondent : Mr. Sivavarthanan, Advocate
ORDER
(Hybrid Mode) 17.10.2024:
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
1. The appellant in the instant appeal questions the propriety of the Impugned Judgment as detailed herein i.e. dated 21.03.2024.
2. This Company Appeal being Company Appeal (AT) (CH) (INS) No. 351 / 2024, is accompanied with a Condone Delay Application, being IA No. 960 / Comp. App (AT) (CH) (INS) No. 351/2024 Page 1 of 8 2024, where the appellant has sought a condonation of 11 days of delay which has chanced in preferring the appeal.
3. It is to be seen that the 11 days of delay, which has chanced in preferring the appeal falls to be well within the scope of proviso to Sub Section 2 of Section 61 of I & B Code, 2016. Apart from it, the reason which has been given by the appellant in Para 3, pertaining to the time taken in filing the Appeal, that he was engaged in procuring the certified copy of the Judgment which has contributed to the delay, seems to be reasonable, and we are satisfied with it.
4. Owing to the aforesaid reasons, the Condone Delay Application i.e. IA No. 960 / 2024, would stand disposed of and the delay of 11 days which has chanced in preferring the appeal, would hereby stand condoned.
5. As far as urgent listing application i.e. IA No. 961 / 2024 is concerned, no orders are required to be passed, because we are hearing the Company Appeal, with the consent of counsels, on merits of the matter. Accordingly, urgent listing application i.e. IA No. 961 / 2024, would too stand closed.
6. Since the learned counsels have agreed to have addressed the appeal on merits, there is no relevancy of IA No. 962 / 2024 for grant of any interim order.
Thus, the same would be treated to be stand closed.
7. The appellant i.e. The Regional Provident Fund Commissioner - II, Legal (hereinafter to be called as `EPFO'), states that he was an unsuccessful applicant before the learned Adjudicating Authority and being aggrieved by the Impugned Comp. App (AT) (CH) (INS) No. 351/2024 Page 2 of 8 Judgment of 21.03.2024, which has been passed by the NCLT, Kochi Bench, he has preferred this Company Appeal.
8. The appeal, being Company Appeal (IBC)/04/KOB/2023, as preferred in IBA/38/KOB/2019, filed before NCLT, Kochi Bench, by invoking the provisions contained under Section 42, of the I & B Code, 2016, was dismissed and as a consequence thereto, the claim of a sum of Rs.3,00,972/- has been denied to be paid to the Appellant, being the amount which was due to be payable under Section 7Q & 14B of Employees' Provident Funds & Miscellaneous Provisions Act, 1952 (hereinafter to be called as an `Act of 1952').
9. A short question which comes up for consideration, before this Tribunal in this Company Appeal is that, as to whether in a liquidation proceedings, the dues which are falling within the ambit of Section 7Q & 14B of the Act of 1952, are to be treated as dues to be payable to the Central Government / its Agencies to be paid under the waterfall mechanism as mandated in Section 53 of the I & B Code, 2016, or whether these dues, though payable to EPFO, a Central Government entity, being the amount meant for the benefit of the employees and due to the employees, would be covered under Section 36(4)(a)(iii) of the Code.
10. The learned counsel for the appellant has contended that, he has raised his contention before the learned NCLT from the aforesaid view point that, no detailed reference is required to be made with regards to the aforesaid ratio, for the reason being that, the same stands covered, by the Judgment as it has been Comp. App (AT) (CH) (INS) No. 351/2024 Page 3 of 8 rendered by the NCLAT in Company Appeal (AT) (CH) (INS) No. 268 / 2021 in the matters of Central Board of Trustees v. Shree Kumar Rajan, Resolution Professional & Anr., wherein in the Judgment which was rendered by this Tribunal, on 21.06.2023, the said issue has already been decided.
11. In the above case, the learned Tribunal was dealing with almost an identical issue, as to the amount which is liable to be paid under Section 7Q & 14B, whether they would be recovered under Section 53 of the Code or under Section 36(4)(a)(iii) of the Code.
12. The learned counsel for the appellant has submitted that, the issue is no more res-integra, for the reason being, that the issue has been laid to rest in two Judgments. The first one is Jet Aircraft Maintenance Engineers Welfare Association V. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors. as rendered on 21.10.2022 and as reported in 2022 SCC OnLine NCLAT 418, wherein an almost akin issue was being considered by the NCLAT and the relevant observations have been made in Para 117 & 118 and that too, was based upon the principles which was earlier settled by the Hon'ble Apex Court in Maharashtra State Co-operative Bank Limited v. The Assistant Provident Fund Commissioner & Ors., as reported in 2009 (10) SCC P 123. The relevant Paragraphs reiterating the aforesaid principles would be Para Nos. 67 & 119 of the Judgment in Jet Aircraft Maintenance Engineers Welfare Association (Supra), which are extracted hereunder:
Comp. App (AT) (CH) (INS) No. 351/2024 Page 4 of 8 ``67. Thus, from the above preposition it is clear that share of workmen dues have to be kept out of liquidation process and same shall have to be paid to the employees and workmen out of such provident fund, gratuity fund and pension fund, if any, available. Thus, it is clear that if any provident fund, gratuity fund and pension fund is available with the Corporate Debtor, the share of employees and workmen has to be paid from the said fund which has to be kept out of the liquidation process. Thus, if the claim of workmen/employees regarding payment of provident fund, gratuity fund and pension fund can be satisfied from the fund maintained by the Corporate Debtor that has to be kept out of the liquidation and cannot be utilized for distribution amongst other stakeholders.
119. The above judgment lays down that any amount due from employer appearing in sub-section (2) of Section 11 also covers the amount determined under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon'ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in "Tourism Finance Corporation of India Ltd. v. Rainbow Papers Ltd." (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in "Maharashtra State Cooperative Bank Limited v. Assistant Provident Fund Commissioner" (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.'' Comp. App (AT) (CH) (INS) No. 351/2024 Page 5 of 8
13. In the above said Judgment, where the said principle has been held that the provisions of Section 36(4)(a)(iii) of the Code, would prevail, it has been held that the funds which are due to be paid under the Employees Provident Fund Act, would be falling within the nomenclature of the expression given to ``any amount due from an employer'', and accordingly, 7Q & 14B amount due to be paid by the employer would not be coming under the distribution mechanism provided under Section 53 of the Code and rather, it would be well within the provisions of Section 36(4)(a)(iii) of the Code. Accordingly, this Tribunal (Para 119, last line) in the said matter has directed to issue the appropriate directions for the payment of the admitted claim of the appellant towards the Provident Fund dues under the aforesaid head from the plan. The relevant Paragraph Nos. 117 & 118 are extracted hereunder:
``117. In the appeal filed by the Regional Provident Fund Commissioner, it has been pleaded that the claim was filed by the Appellant for an amount of Rs. 24,40,65,594/- towards damages under Section 14B of Employees' Provident Funds & Miscellaneous Provisions Act, 1952, as per the order dated 17.10.2018. It is further mentioned that interest under Section 7Q was also levied of Rs. 12,85,92,763/-, which amount was paid by the establishment. The amount which was claimed by the Appellant was fully admitted by the Resolution Professional. List of Creditors mentions the admitted amount of the Appellant. The Appellant has filed his claim in Form B, which Form B is at page 102 to 104 of the Appeal. The Appellant's claim was not in the nature of workmen dues. The claim was also with regard to damages imposed under Section 14B of the 1952 Act. The Appellant was treated as Operational Creditor by the Resolution Professional, hence, the Appellant was allocated a fixed amount of Rs. 15,000/- which was allocated to all Operational Creditors except the workmen.
Comp. App (AT) (CH) (INS) No. 351/2024 Page 6 of 8
118. Challenge to the Resolution Plan by the Appellant is on the ground that Section 11 of the 1952 Act requires priority over all other dues and further Section 36(4)(a)(iii) excludes provident fund dues from the liquidation estate of the Corporate Debtor. We have already dealt with provisions of Section 36(4)(a)(iii) in foregoing paras of this judgment. Now, we, need to look into Section 11 of 1952 Act. The Section 11 of the 1952 Act provides for priority of payment of contributions over other debts. Learned counsel for the Appellant has relied on judgment of the Hon'ble Supreme Court in "Maharashtra State Cooperative Bank Limited v. Assistant Provident Fund Commissioner, (2009) 10 SCC 123". The Hon'ble Supreme Court dealing with Section 11 of 1952 Act laid down following in Para 67:
"67. The expression "any amount due from an employer"
appearing in sub-section (2) of Section 11 has to be interpreted keeping in view the object of the Act and other provisions contained therein including sub-section (1) of Section 11 and Sections 7A, 7Q, 14B and 15(2) which provide for determination of the dues payable by the employer, liability of the employer to pay interest in case the payment of the amount due is delayed and also pay damages, if there is default in making contribution to the Fund. If any amount payable by the employer becomes due and the same is not paid within the stipulated time, then the employer is required to pay interest in terms of the mandate of Section 7Q. Likewise, default on the employer's part to pay any contribution to the Fund can visit him with the consequence of levy of damages."
14. Based upon the aforesaid principles of the two Judgments, the NCLAT in the matters of Central Bureau of Trustees, (Supra) as referred to hereinabove, had dealt with an akin issue and based on the aforesaid principles of the Hon'ble Apex Court and making reference to the ratio laid down in Para 119 of the Judgment of Jet Aircraft Maintenance Engineers Welfare Association (Supra) had allowed the appeal, had set aside the Judgment of NCLT and thus, directed that the Workmen dues shall be kept outside the Liquidation Estate and process and the Comp. App (AT) (CH) (INS) No. 351/2024 Page 7 of 8 concerned workmen employee shall have to be paid the same, out of such Provident Fund, Gratuity, if any available.
15. The ultimate conclusion which has been drawn by this Tribunal in the aforesaid ratio while referring to the Jet Aircraft Maintenance Engineers Welfare Association case (supra) is that, since admittedly the amount paid under Section 7Q & 14B, will be falling within the ambit of Section 36(4)(a)(iii) and it would be outside the ambit of Section 53 of the Code, the instant Appeal too would stand allowed based upon the said ratio of the Judgment of 21.06.2023.
16. The Impugned Order dated 21.03.2024, would hereby stand quashed, subject to the principles which has been laid down by the NCLAT in the matters of Jet Aircraft Maintenance Engineers Welfare Association (Supra) as observed in Para 119 of the aforesaid Judgment, which has been extracted hereinabove.
Subject to the aforesaid, the Company Appeal (AT) (CH) (INS) No. 351 / 2024 stands allowed and the Impugned Order dated 21.03.2024, would stand quashed to that extent.
[Justice Sharad Kumar Sharma] Member (Judicial) [Jatindranath Swain] Member (Technical) SR/TM/MS Comp. App (AT) (CH) (INS) No. 351/2024 Page 8 of 8