Moratorium Bars Assessment of EPFO Dues Even for Pre-CIRP Period: NCLAT
Introduction
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that EPFO dues of the pre-CIRP period cannot be claimed based on assessments made during the imposition of the moratorium.
Factual Background
The corporate debtor was admitted into the Corporate Insolvency Resolution Process (CIRP), and Ms. Vineeta Maheshwari was appointed as the interim resolution professional, later confirmed as the resolution professional. The appellant, Regional Provident Fund Commissioner-II (RPFC-II), started proceedings under the EPF & MP Act, 1992, and issued a summons to the corporate debtor. The authority passed an order under sections 7Q and 14B for an amount of Rs. 53,338, which was for a period prior to the CIRP order.
Procedural Background
The appellant submitted its claim before the resolution professional, but it was rejected, leading the appellant to file an application before the NCLT. However, the application was dismissed, prompting the appellant to file an appeal before the NCLAT.
Issues
The main issue before the NCLAT was whether the assessment of interest and damages can take place post-admission of the CIRP, especially when a moratorium has been declared.
Contentions of the Parties
Appellant: The appellant contended that the assessment was for a period prior to the CIRP and relied on the decision of Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors. and Truvisory Insolvency Professionals Pvt. Ltd. (IPE) vs. Employees’ Provident Fund Organisation.
Respondent: The respondent argued that any post-moratorium assessment under sections 7Q and 14B is not permissible and relied on the decision of CA Pankaj Shah vs. Employee Provident Fund Organisation & Anr.
Reasoning and Analysis
The bench of Justice Rakesh Kumar Jain (Member-Judicial) and Mr. Naresh Salecha (Member-Technical) observed that the fact that the assessment happened post-admission of the CIRP is not disputed by the parties. The bench noted that though the assessment was for a period prior to the CIRP order, it happened only after the CIRP order. The tribunal relied on the judgment of CA Pankaj Shah (Supra), which ruled that no assessment can be done after the imposition of a moratorium under section 14.
Implications
The judgment highlights the importance of moratorium under section 14 of the IBC and its impact on assessments made during the CIRP period.
Relief Sought
The appellant sought to set aside the communication of the resolution professional and allow its claim. The NCLAT dismissed the appeal due to lack of merit.
In this case the appellant was represented by Mr. Sanket Gupta, Advocate. Meanwhile the respondent was represented by Mr. Himanshu Satija, Mr. Harsh Saxena and Mr. Anshul Rao, Advocates.