Mrs. Abirami Premkumar Vs. K. Sivalingam, The Liquidator Cauvery Power Generation Chennai Private Limited - We are of the view that rights of the Applicants arising under Section 4(1) of the Payment of Gratuity Act, 1972, in their capacity as an employee of the Corporate Debtor are independent of the rights of the Financial Creditors, if any, arising out of the personal guarantee contract. The personal liabilities of Applicants that may arise out of the personal guarantee extended by them in no way deter their rights to claim gratuity dues.

 NCLT Chennai-1 (2025.01.10) in Mrs. Abirami Premkumar Vs. K. Sivalingam, The Liquidator Cauvery Power Generation Chennai Private Limited [(2025) ibclaw.in 51 NCLT, IA/1167/(CHE)/2023 in IA/484/2022 in IBA/756/(CHE)/2019] held that;.

• Thus, it is settled position in law that the powers conferred on the Liquidator is “quasi-judicial” and the Liquidator is not bound by the decision of the SCC. Once the claim has been admitted by the Liquidator in exercise of it quasi-judicial powers, the Liquidator cannot escape from the settlement of such admitted claims on the grounds that the claimants are allegedly parties to avoidance transactions or related to such parties.

• We are of the view that rights of the Applicants arising under Section 4(1) of the Payment of Gratuity Act, 1972, in their capacity as an employee of the Corporate Debtor are independent of the rights of the Financial Creditors, if any, arising out of the personal guarantee contract. The personal liabilities of Applicants that may arise out of the personal guarantee extended by them in no way deter their rights to claim gratuity dues.

• As per Regulation 43 of the IBBI (Liquidation Process) Regulation, 2016, any monies received by stakeholders in distribution shall be returned, if he was not entitled to at the time of distribution, or subsequently became not entitled to receive such money.

• In our considered view, the Respondent cannot refuse payment of the already admitted claims on flimsy grounds that the same are not affirmed by law. We find that the Applicants herein are entitled to payment of admitted gratuity claims in view of the provisions of the Payment of Gratuity Act, 1972.

Excerpts of the Order

The Applicants, the erstwhile promoter directors/management of the Company, have filed the applications under Section 60(5)(b) read with Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) read with Rule 11 of the National Company Law Tribunal Rules, 2016 praying that the Respondent may be directed to effect payment of admitted gratuity dues payable to the Applicants herein under Section 36(4)(iii) of IBC, 2016, read with the provisions of the Payment of Gratuity Act, 1972 and grant such other incidental reliefs as deem fit and proper. 

SUBMISSIONS OF THE APPLICANTS 

2. It is stated that the Corporate Debtor was admitted into Liquidation vide order of this Tribunal dated 19.09.2022, passed in the proceedings numbered as IA (IBC) No. 484 of 2022 in IBA/756/2019. 

3. It is stated that the Applicants had filed their claims with the Respondent including gratuity amount payable to them under the Payment of Gratuity Act, 1972, and the claims were admitted by the Respondent. The details of the amounts claimed by the Applicants are as under, 

S.No Applicant/ Claimant Deignation of the Applicant with relation to the Corporate Debtor as per the Application Application Number Gratuity dues claimed by the Applicants 1. Abirami Premkumar Vice President - Business Development IA 1167/2023 Rs. 10,09,600 2. S.A. Prem Kumar Promoter and Driector IA 1168/2023 Rs. 20,00,000 3. Neeraj Elangovan Marketing Manager IA 1170/2023 Rs. 2,16,300 4. Praseeda Elangovan Vice President of Marketing IA 1171/2023 Rs. 10,09,600 5. S Elangovan Promoter and Driector IA 1172/2023 Rs. 20,00,000 

4. It is stated that the Hon’ble Supreme Court in the case of State Bank of India v. Moser Baer Karamchari Union and Anr (Civil Appeal No. 258 of 2020) vide order dated 07.02.2023, has held that Gratuity dues are not treated as part of the liquidation estate and would not be covered under the waterfall mechanism provided under Section 53 of the Code. It was further held that if there are any deficiency to the Gratuity Fund, then the Liquidator shall ensure that the fund is made available in the aforesaid accounts, even if the employer had not diverted the requisite amount. 

5. It is stated that the Respondent, vide e-mail dated 23.02.2023, sought advice from the Stakeholder Consultation Committee (SCC) of the Corporate Debtor regarding payment of gratuity to the employees of the Corporate Debtor. Thereafter, the Respondent vide e-mail dated 09.03.2023 informed the Applicants that the SCC has instructed the liquidator to effect payment of admitted gratuity dues, to the employees on the payroll of the Corporate Debtor, except for the promoters/directors and related parties of such promoters/directors of the Corporate Debtor. 

6. It is stated that the Applicants cannot be deprived of their statutory right to be paid gratuity under the Payment of Gratuity Act, 1972, for the reason that they are the Promoters/Directors of the Corporate Debtor. It is stated that there is no provision under IBC, 2016, wherein the Applicants can be discriminated and not be treated on par with the other employees, on the ground of them being a Promoter/Director. There is no disability imposed on such group to be treated equitably and fairly from a distribution perspective, especially in light of Section 36(4)(iii) of the IBC, 2016. 

7. It is stated that the Respondent being the Liquidator of the Corporate Debtor ought to have released the gratuity amount payments to the Applicants without having obtained the consent or permission from the SCC. The gratuity amounts payable to the Applicants is not part of the liquidation estate by virtue of Section 36(4)(ii) of the IBC, 2016, and the question of getting consent from the stakeholders to disburse the said amount does not arise. 8. It is stated that the action of the Respondent in not releasing the gratuity payments to the Applicant herein, despite being aware of the judgment of the Hon'ble Supreme Court in Moser Baer Karamchari Union (supra) and waiting for the approval/consent from the stakeholders, amounts to a failure in discharging his duties, violative of the provisions of the Code and the law as laid down by the Apex Court. 

COMMON SUBMISSIONS OF THE RESPONDENT 

9. The Respondent submitted the common counter vide SR No. 3615 dated 25.08.2023. 

10. It is stated the M/s Sherisha Technologies Private Limited emerged as the successful bidder in the 2nd auction for sale of the Corporate Debtor as a going concern with bid amount of Rs. 75,80,00,000. The sale consideration was duly remitted and thereafter, the possession of all the assets of the Corporate Debtor other than the designated Liquidation Account and Not-Readily Realisable Assets ("NRRA") under the control of the Liquidator were handed over to the Successful Bidder. 

11. It is stated that the Resolution Professional filed IA. Nos. 683/CHE/2021, IA 684/CHE/2021 and IA 757/CHE/2021 before this Tribunal, under sections 43, 45 and 66 of the IBC, 2016 respectively for reporting avoidance transactions. In the 6 th SCC meeting, it was decided that recoveries anticipated from the proceedings for PUFE transactions pending before this Tribunal shall be treated as NRRA. Thereafter, in the 7th SCC meeting, it was resolved to issue invitation for Expression of Interest along with sale notice for NRRA. It is stated that M/s Sherisha Technologies Private Limited, emerged as the successful bidder. A Certificate of Sale along with an Assignment Deed was executed on 10.06.2023 to complete the assignment of NRRA. 

12. It is stated that the amount realized from the sale of Corporate Debtor as a going concern was distributed by the Respondent to the stakeholders in accordance with Section 53 of the IBC, 2016, on 20.01.2023, 21.01.2023 and 20.04.2023, including distribution of unpaid gratuity, Provident Fund (PF) dues of unrelated employees and workmen, as approved by the SCC. Further, the amount realized from the auction for assignment / transfer of NRRA was also distributed to the stakeholders as per Section 53 of the of the IBC, 2016, on 30.06.2023, as per the advice of the SCC. 

13. It is stated that as on the date when the Corporate Debtor was sold as a going concern, the rule laid down by the Hon'ble National Company Law Appellate Tribunal (NCLAT) vide order dated 11.02.2020 in Savan Godiwala vs Apalla Siva Kumar [Company (Insolvency) No. 1229 of 2019; MANU/NL/0098/2020] is relevant. As per the order of the Hon’ble NCLAT in Savan Godiwala(Supra), the legal position with respect to payment of gratuity dues, provident fund dues and pension dues, is that in the absence of any 'fund', such dues were not payable by the liquidator to any employee/workmen. However, the Hon’ble NCLAT in State Bank of India vs Moser Baer Karamchari Union and Anr [Company Appeal (AT)(Insolvency) No. 396 of 2019] held that once the liquidation estate/assets of the Corporate Debtor under Section 36 of the Code do not include all sum due to any workman and employees from the provident fund, the pension fund and the gratuity fund, for the purpose of distribution of assets under Section 53, the provident fund, the pension fund and the gratuity fund cannot be included. The same was affirmed by the Hon’ble Supreme Court vide its order dated 07.02.2023 in Moser Baer Karamchari Union (supra). Further, the Hon’ble Supreme Court in its order in Appala Siva Kumar vs Savan Godiwala (Civil Appeal No. 2520/2020), quashed and set aside the order of the Hon’ble NCLAT in Savan Godiwala(Supra) dated 11.02.2020. 

14. It is stated that the Respondent intimated the SCC about the extant law and sought its instructions on the distribution of gratuity dues vide e-mail dated 23.02.2023. The SCC vide e-mails dated 27.02.2023 and 02.03.2023 advised the Respondent to pay the dues to all the employees on the roll except for the Promoters/Directors of the Corporate Debtor and their relatives/related parties. The reasoning for the decision of the SCC is that three avoidance applications in I.A. Nos. 683, 684 & 757 of 2021 are pending against the Applicants herein for preferential, undervalued and fraudulent transactions and any payout by whatever name called, may affect the realization of other stakeholders in view of the pending avoidance transaction IAs. Accordingly, the Respondent distributed the outstanding gratuity dues of the employees. 

15. It is stated that decision of the SCC was conveyed to Mr. S Elangovan i.e., the Applicant in IA. No. 1172/2023, vide letter dated 09.03.2023. Further, the decision of the SCC was also conveyed to the Applicants in IA. No. 1172/2023 and IA. No. 1168/2023, vide e-mail dated 24.03.2024. It is stated that Mr. Elangovan and Mr. SA Prem Kumar were sent notices for the four SCC meetings that were held post the communication dated 09.03.2024. It is stated that, Mr. Elangovan and Mr. SA Premkumar did not put forward any objection before the SCC in the subsequent meetings. 

16. It is stated that the SCC, under whose instruction the Respondent has acted, has not been made a necessary party in these IAs. 

17. The Applicant filed Citations and Case law paper book vide S.R. No. 4944 dated 29.11.2023 wherein it was reiterated that IBC, 2016 does not provide for non-payment of gratuity dues by the Liquidator on the ground that the employee is promoter/director. Further, it is stated that the Liquidator ought not to have sought the consent or permission of SCC to pay the admitted gratuity dues. 

18. The Respondent filed Synopsis of Arguments on behalf of the Respondent vide S.R. No. 4838 dated 30.09.2024 wherein it is stated that the commercial wisdom of the Stakeholders Consultation Committee (SCC) cannot be called in question and that the Respondent distributed the outstanding gratuity dues of the unrelated employees as per the directions of SCC. 

19. A Note on Behalf of the SCC was filed before this Tribunal vide S.R. No. 4811 dated 27.09.2024. It is stated that gratuity that is claimed by the directors and related persons who are subject to applications under Sections 43, 45 and 66 of the IBC, 2016 and thus do not have the bonafide locus to make such a claim. Gratuity has been withheld only for persons who constitute related parties as they form part of the suspended management or their immediate family members. It is stated that since the directors have extended personal guarantee for financial creditors, it has been the cause of withholding their gratuity on account of their irrefutable personal liability. It is stated that gratuity pertaining to all other bonafide employees has been released. 

FINDINGS OF THIS TRIBUNAL 

20. Heard the Ld. Counsels of the parties and perused the documents on record. 

21. Before proceeding with the merits of the case, it would be relevant to note the statutory provisions of IBC, 2016 and Regulations framed thereunder pertaining to the liquidation process. 

22. As per Regulation 19 of the IBBI (Liquidation Process) Regulations, 2016, a person claiming to be a workman or an employee of the Corporate Debtor shall submit his claim in the prescribed form along with the proof of claims to the Liquidator. Once, all claims are submitted, the Liquidator is bound by the provisions of Section 40 IBC, 2016, to verify the claims and thereafter, admit/reject the claim, in whole or in part. In case of rejection of claims, the Respondent shall record the reasons for such rejection in writing and communicate the same to the creditor and corporate debtor within seven days of such admission or rejection of claims. As per Section 41 of IBC, 2016, the Liquidator, shall make the best estimate of the amount of the claim based on the information available with him, in cases where the amount claimed by a creditor is not precise due to any contingency or other reason. The relevant provisions are reproduced below, 

• Regulation 19: Claims by workmen and employees. 

• (1) A person claiming to be a workman or an employee of the corporate debtor shall submit proof of claim to the liquidator in person, by post or by electronic means in Form E of Schedule II. 

• (2) Where there are dues to numerous workmen or employees of the corporate debtor, an authorized representative may submit one proof of claim for all such dues on their behalf in Form F of Schedule II. 

• (3) The existence of dues to workmen or employees may be proved by them, individually or collectively, on the basis of- 

• (a) records available in an information utility, if any; or 

• (b) other relevant documents which adequately establish the dues, including any or all of the following – (i) a proof of employment such as contract of employment for the period for which such workman or employee is claiming dues; (ii) evidence of notice demanding payment of unpaid amount and any documentary or other proof that payment has not been made; and (iii) an order of a court or tribunal that has adjudicated upon the non-payment of dues, if any. 

• (4) The liquidator may admit the claims of a workman or an employee on the basis of the books of account of the corporate debtor if such workman or employee has not made a claim. 

• Section 40: Admission or rejection of claims. 

• (1) The liquidator may, after verification of claims under section 39, either admit or reject the claim, in whole or in part, as the case may be: Provided that where the liquidator rejects a claim, he shall record in writing the reasons for such rejection. 

• (2) The liquidator shall communicate his decision of admission or rejection of claims to the creditor and corporate debtor within seven days of such admission or rejection of claims. 

• Section 41: Determination of valuation of claims. 

• The liquidator shall determine the value of claims admitted under section 40 in such manner as may be specified by the Board. 

23. In the instant case, the Corporate Debtor was admitted to Liquidation process vide order of this Tribunal dated 19.09.2022 in IA(IBC) No. 484 of 2022 and the Respondent herein was appointed as the Liquidator. The Applicants have filed claims in Form-E for claiming gratuity on the basis of eligibility under Section 4(1) of the payment of Gratuity Act, 1972 to the Respondent. The Applicants have submitted the last drawn salary slip and the gratuity report of the Corporate Debtor for the month of September 2019 as proof of claim. The claims of the Applicants were admitted by the Respondent as follows, 

24. The NCLT, Principal Bench in its decision in Alchemist Asset Reconstruction Co. Ltd v. Moser Baer India Limited (IB/378(PB)/2017) dated 19.03.2019, has held that gratuity dues payable to employees fall outside the purview of liquidation estate as per Section 36(4) of IBC, 2016 and is not subject to the provisions of Section 53 of the Code. Further, it was held that any deficiency in provident fund, pension fund, gratuity fund of the Corporate Debtor shall be made good by the Liquidator. The decision of NCLT, Principal Bench, was upheld by the Hon’ble NCLAT in State Bank of India vs Moser Baer Karamchari Union and Anr [Company Appeal (AT)(Insolvency) No. 396 of 2019] and Hon’ble Supreme Court of India vide its order dated 07.02.2023 in Moser Baer Karamchari Union (supra). The relevant portions of the judgement of NCLT, Principal Bench are reproduced below, 

• “ 4. A perusal of the aforesaid para shows that the provident fund dues, pension funds dues and gratuity fund dues are not treated as a part of the liquidation estate and would not, therefore, be recovered by Section 53 of the Code which provides for waterfall mechanism. The liquidator has taken a perverse view by unnecessarily referring to explanation II of Section 53 and Section 326 of the Companies Act, 2013. 

• 5. As a sequel to the above discussion, the application is allowed. Learned counsel for the liquidator states that the claim of the workmen dues shall be considered afresh as per law propounded in the present order as well as the order passed by Mumbai Bench of NCLT. It is made clear that if there is any deficiency to the provident fund, pension fund and gratuity fund, then the liquidator shall ensure that the fund is made available in the aforesaid accounts, even if their employer has not diverted the requisite amount. The prayer made with regard to the bonus and compensation shall also be decided in the light of the observations made in accordance with law.” 

25. However, on the basis of the recommendation of the SCC, the Respondent has disbursed the gratuity dues to all employees except to the Applicants who are the promoters/directors and related parties of such promoter/directors. It is pertinent to note here that as per Regulation 31A of IBBI (Liquidation Process) Regulations, 2016, the role of the SCC is advisory in nature and not binding on the Liquidator. In case of any disagreement between the liquidator and the SCC and the liquidator takes a decision different from the advice given by the consultation committee, the Liquidator shall record the reasons for the same in writing and submit the records relating to the said decision, to the Tribunal and to the Board within five days of the said decision and include it in the next progress report. The relevant portion of Regulation 31A of IBBI (Liquidation Process) Regulations, 2016 is reproduced hereunder, “Regulation 31A: Stakeholders’ consultation committee.  . . . . . . .” 

26. This Tribunal also takes note of the decision of the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. vs Union of India (AIR 2019 SUPREME COURT 739), wherein it was held in that the role of the Liquidator in verification of claims is quasi-judicial in nature. 

• “60. … It is clear from these Sections that when the liquidator ―determines the value of claims admitted under Section 40, such determination is a―decision, which is quasi-judicial in nature, and which can be appealed against to the Adjudicating Authority under Section 42 of the Code.” 

27. Thus, it is settled position in law that the powers conferred on the Liquidator is “quasi-judicial” and the Liquidator is not bound by the decision of the SCC. Once the claim has been admitted by the Liquidator in exercise of it quasi-judicial powers, the Liquidator cannot escape from the settlement of such admitted claims on the grounds that the claimants are allegedly parties to avoidance transactions or related to such parties. Such a view of denial of payment of admitted claims is not substantiated by the provisions of the Code or the relevant regulations. 

28. Further, it is observed that the Corporate Debtor has been sold as a going concern to M/s Sherisha Technologies Private Limited for Rs. 75,80,00,000. The Applications, IA. Nos. 683/CHE/2021, IA 684/CHE/2021 and IA 757/CHE/2021 filed under Sections 43, 45 and 66 of the IBC, 2016 that are pending before this Tribunal were treated as NRRA and sold to M/s Sherisha Technologies Private Limited for consideration of Rs. 10,00,000. That being the case, the Respondent and the SCC have failed to demonstrate how the outcome of the pending PUFE applications will affect the interest of the other stakeholders. 

29. With respect to the withholding payment of gratuity, on account of personal guarantee extended by the directors, we are of the view that rights of the Applicants arising under Section 4(1) of the Payment of Gratuity Act, 1972, in their capacity as an employee of the Corporate Debtor are independent of the rights of the Financial Creditors, if any, arising out of the personal guarantee contract. The personal liabilities of Applicants that may arise out of the personal guarantee extended by them in no way deter their rights to claim gratuity dues. Hence, the same cannot be a ground for non-payment of gratuity dues to the Applicants. The Financial Creditors are at liberty to enforce the personal guarantee contract through appropriate legal action. 

30. As per Regulation 43 of the IBBI (Liquidation Process) Regulation, 2016, any monies received by stakeholders in distribution shall be returned, if he was not entitled to at the time of distribution, or subsequently became not entitled to receive such money. Regulation 43 is reproduced hereunder, Regulation 43: Return of money. 43. A stakeholder shall forthwith return any monies received by him in distribution, which he was not entitled to at the time of distribution, or subsequently became not entitled to. 

31. In our considered view, the Respondent cannot refuse payment of the already admitted claims on flimsy grounds that the same are not affirmed by law. We find that the Applicants herein are entitled to payment of admitted gratuity claims in view of the provisions of the Payment of Gratuity Act, 1972. Hence, the Respondent is hereby directed to re-distribute the proceeds from the liquidation process to all the stakeholders, in terms of Section 36(4), Section 53 of IBC, 2016 and the order of the Hon’ble Supreme Court of India vide its order dated 07.02.2023 in Moser Baer Karamchari Union (supra). The stakeholders who have received money beyond their entitlement are directed to return the money as per the provisions of the aforementioned Regulation 43 of the IBBI (Liquidation Process) Regulation, 2016. 

32. Accordingly, IA/1167(CHE)/2023, IA/1168(CHE)/2023, IA/1170(CHE)/2023, IA/1171(CHE)/2023 and IA/1172(CHE)/2023 are allowed and disposed of. 

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Employees’ Provident Fund Vs. Jaykumar Pesumal Arlani (RP) - We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings.

 NCLAT (2025.01.03) in Employees’ Provident Fund Vs. Jaykumar Pesumal Arlani (RP) (2025) ibclaw.in 10 NCLAT, Company Appeal (AT) (Insolvency) No.1062 & 1065 of 2024 & I.A. No.3665 of 2024] held that;

• The Hon’ble Supreme Court in (2020) 13 SCC 208 – Rejendra K. Bhutta vs. Maharashtra Housing and Area Development and Anr. held that after the imposition of moratorium, a statutory freeze takes place.

• the Hon’ble Supreme Court in Rejendra K. Bhutta (supra), it is clear that no proceeding can continue after imposition of moratorium, which has effect of depleting the assets of the CD or creating new liabilities on the CD, since the object or purpose of IBC is to resolve the CD.

• Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.

• From the above discussion, we hold that the Respondent could only initiate assessment or re-assessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC.

• The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.

• We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings.

• No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.

Excerpts of the Order;

These two Appeal(s) raising common questions of facts and law, have been heard together and are being decided by this common judgment.

# 2. Company Appeal (AT) (Ins.) No.1062 of 2024 has been filed challenging order dated 19.10.2023 passed by National Company Law Tribunal, Ahmedabad, Division Bench, Court-1 in IA No.1111(AHM) 2023 filed by the Appellant in CP(IB) 387 of 2020. By the impugned order IA filed by the Applicant/ Appellant has been rejected. Aggrieved by which order this Appeal has been filed.

# 3. Company Appeal (AT) (Ins.) No.1065 of 2024 has been filed challenging order dated 22.08.2023 passed by National Company Law Tribunal, Mumbai Bench, Court-II in IA No.743/2023 in C.P.(IB)/3484(MB) 2019. By the impugned order, Application – IA No.743 of 2023 filed by the Applicant/ Appellant has been rejected. Aggrieved by which order this Appeal has been filed.

# 4. We need to notice brief background facts giving rise to these two Appeal(s):

Company Appeal (AT) (Ins.) No.1062 of 2024

(i) The Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor – Decent Laminate Pvt. Ltd. Commenced after an order dated 03.05.2021 passed by NCLT, Ahmedabad Bench. The Appellant vide email dated 11.06.2021 requested the Resolution Professional (“RP”) to forward the copy of NCLT order along with other details. On 16.06.2021, the RP replied forwarding the copy of NCLT order dated 03.05.2021.

(ii) The Appellant initiated proceedings under Section 7A of the Employees’ Provident Fund & Misc. Provisions Act, 1952 (for short “EPF & MP Act”). On 22.06.2022, summon was issued under Section 7A with copy to Interim Resolution Professional (“IRP”). The IRP appeared and informed that he does not have relevant records. On 09.05.2023, summons were again issued to the Establishment under Section 14B & 7Q of the EPF & MP Act to show cause as to why damages under Section 14B and interest under Section 7Q of the Act may not be levied and recovered.

(iii) On 11.05.2023, the claim of Rs.76,09,494/- was submitted before the IRP. On 16.08.2023, order was passed under Section 14B and 7Q. On 31.08.2023, a revised claim of Rs.1,58,90,685/- was submitted. On 05.09.2023, RP replied that claim cannot be considered as the Plan has been approved by the Committee of Creditors (“CoC”)

(iv) An IA No.1111 of 2023 was filed by the Appellant praying for direction to the IRP to admit the total claim of Rs.2,35,00,179/-. The Adjudicating Authority heard the Applicant/ Appellant as well as the RP and by the impugned order rejected the Application. The Adjudicating Authority noticed in the order that order under Section 7A, 14B and 7Q was passed only on 11.08.2023 and the Resolution Plan has been approved by the CoC long back. It was held that IBC (Insolvency and Bankruptcy Code, 2016) is a time bound process and the claim, which was submitted by the Applicant at a belated stage, after the approval of Resolution Plan was rightly rejected by the RP. With the above observation the Adjudicating Authority rejected IA No.1111 of 2023. Aggrieved by which order this Appeal has been filed.

Company Appeal (AT) (Ins.) No.1065 of 2024

(i) CIRP against the Corporate Debtor – Apollo Soyuz Electricals P. Ltd. commenced on 12.07.2021. On 18.10.2021, IRP wrote to the Appellant to submit their PF claim and other related information with proof.

(ii) Inquiry under Section 7A was initiated against the Establishment in the year 2019. An order dated 29.8.2022 was passed by the Appellant under Section 7A for an amount of Rs.10,89,938/-. IRP sent a letter dated 12.07.2022 to the Appellant informing that Resolution Plan of the CD has been approved by the CoC on 23.06.2022 and RP is prohibited to accept any claim from any creditor, including the Appellant.

(iii) The Appellant filed IA No.743 of 2023 on 30.01.2023 seeking a direction to the RP to accept and pay the claim of Rs.10,89,938/- towards PF dues. During pendency of IA No.743 of 2023, the NCLT Mumbai Bench passed order dated 13.04.2023 in IA No.1785 of 2022 approving the Resolution Plan in the CIRP. The Appellant has also filed an Appeal, challenging the order dated 13.04.2023 in this Tribunal. IA No.743 of 2023 was heard and rejected by order dated 22.08.2023 passed by the Adjudicating Authority. The Adjudicating Authority took the view that order under which amount of Rs.10,89,938/- is claimed was passed by EPFO on 29.08.2022, i.e., during moratorium period. It was also noticed that Resolution Plan has been approved by the CoC on 01.06.2022 and prior to approval of Resolution Plan, no claim by the EPFO was lodged with the RP. It was held that order dated 29.8.2022 was hit by Section 14 of the IBC. The Adjudicating Authority held that at this stage, no direction can be issued to the RP to entertain or pay the claim of Rs.10,89,938/-. Consequently, IA No.743 of 2023 was rejected.

# 5. We have heard learned Counsel for the parties. The submissions, which have been advanced by learned Counsel for the Appellant challenging the impugned order being common submissions, we notice the submissions, as submission of the Appellant.

# 6. Learned Counsel for the Appellant submitted that despite imposition of moratorium under Section 14 of the IBC, proceeding under Section 7A of the EPF & MP Act can still continue. It is submitted that moratorium under Section 14 of the IBC, does not prevent proceedings under Section 7A of the EPF & MP Act. Learned Counsel for the Appellant has relied on judgments of the Hon’ble Supreme Court of India in S.V. Kindaskar v. V.M. Deshpande – AIR (1972) SC 878 and Sundresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, (2023) 1 SCC 472 to support his submission that moratorium under Section 14 and 33(5) of the IBC, do not bar for determination of quantum of dues or taxes or other levies and the embargo is only against its enforcement. It is submitted that in the proceedings under Section 7A, the Establishment delayed to give its reply and it was the CD, who is to blame for delay in passing order under Section 7A. The CD at no point of time in proceedings under Section 7A has raised objection to inquiry proceedings and always took time to produce the relevant records. The assessment under Section 7A related to period prior to CIRP initiation. By rejection of the Application filed by the Appellant, prejudice has been caused to the Appellant, since its claim has not been accepted. PF dues, inclusive of damages and interest, are excluded from the liquidation estate in light of Section 36(4)(a)(iii) of the IBC. The order rejecting the claim is in contravention of the law laid down by NCLAT and Hon’ble Supreme Court of India in Tourism Finance Corporation of India & Ors. vs. Rainbow Papers Ltd. & Ors., where it was held that no provisions of the EPF & MP Act is not in conflict of IBC. The priority of PF dues operates against all other debts including secured and unsecured creditors.

# 7. Learned Counsel appearing for the Respondent refuting the submissions of learned Counsel for the Appellant(s) submits that no claim was filed by the Appellant before the Plan was approved by the CoC and the assessment proceedings were carried out and final order under Section 7A of the EPF & MP Act was passed during the CIRP is in violation of the moratorium. When assessment order has been passed post moratorium, it is bad in law and on the basis of said assessment, no claim can be admitted in the CIRP. Learned Counsel for the Respondent has also placed reliance on the judgment of the Hon’ble Supreme Court of India in Sundresh Bhatt, Liquidator of ABG Shipyard (supra). It is submitted that post approval of Resolution Plan by the CoC, no claim can be considered by the RP. In both the Appeal(s), the claims were filed by the Appellant(s) subsequent to the approval of Plan by the CoC and further assessment orders were made subsequent to imposition of moratorium. Hence, the said claims cannot be accepted.

# 8. We have considered the submissions of learned Counsel for the parties and have perused the records.

# 9. From the submissions of learned Counsel for the parties, following issues arise for consideration:

• (1) Whether after imposition of moratorium under Section 14 of the IBC, assessment proceedings can be carried on by the EPFO under Section 7A, 14B and 7Q of the EPF & MP Act, 1952.

• (2) Whether any claim on the basis of assessment, subsequent to imposition of moratorium, can be admitted in the CIRP.

• (3) Whether claims, which were filed by the Appellant(s), subsequent to the approval of Resolution Plan by the CoC, could have been admitted in the CIRP.

Question Nos.(1) & (2)

Question Nos.(1) & (2) being interrelated, are being taken together.

# 10. In Company Appeal (AT) (Ins.) No.1062 of 2024, CIRP was initiated vide order dated 03.05.2021 and the assessment order under Section 7A was passed on 11.08.2023 and order under Section 14B and 7Q was issued on 16.08.2023. In Company Appeal (AT) (Ins.) No.1065 of 2024, the CIRP against the CD commenced on 12.07.2021 and assessment order under Section 7A was passed on 29.08.2022. It is an admitted position that in both the cases, assessment orders under Section 7A, 14B and 7Q were passed subsequent to initiation of CIRP against the CD. Moratorium under Section 14 was imposed by the Adjudicating Authority, initiation CIRP. Section 14(1) of the IBC provides as follows:\

• “14. Moratorium. –

• (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:-

• (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

• (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

• (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

• (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

• Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period.”

# 11. The Hon’ble Supreme Court had occasion to consider effect and consequence of imposition of moratorium. The Hon’ble Supreme Court in (2020) 13 SCC 208 – Rejendra K. Bhutta vs. Maharashtra Housing and Area Development and Anr. held that after the imposition of moratorium, a statutory freeze takes place. In paragraph 25 of the judgment, following was held:

• “25. There is no doubt whatsoever that important functions relating to repairs and reconstruction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, hand over execution of any housing scheme under its own supervision. However, when it comes to any clash between MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management.”

# 12. In (2021) 6 SCC 258 – P. Mohanraj and Ors. Vs. Shah Brothers ISPAT Pvt. Ltd., the Hon’ble Supreme Court had occasion to interpret the expression “proceeding” in Section 14. The object and purpose of moratorium has been captured in paragraph 30 of the judgment, which is as follows:

• “30. It can be seen that Para 8.11 refers to the very judgment under appeal before us, and cannot therefore be said to throw any light on the correct position in law which has only to be finally settled by this Court. However, Para 8.2 is important in that the object of a moratorium provision such as Section 14 is to see that there is no depletion of a corporate debtor’s assets during the insolvency resolution process so that it can be kept running as a going concern during this time, thus maximising value for all stakeholders. The idea is that it facilitates the continued operation of the business of the corporate debtor to allow it breathing space to organise its affairs so that a new management may ultimately take over and bring the corporate debtor out of financial sickness, thus benefitting all stakeholders, which would include workmen of the corporate debtor. Also, the judgment of this Court in Swiss Ribbons (P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] states the raison d’être for Section 14 in para 28 as follows : (SCC p. 55)

• “28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protect the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.”

# 13. The plain reading of Section 14, sub-section (1) indicates that expression ‘suits or proceedings against the corporate debtor’ has been used. The word ‘proceeding’ is not qualified, so as to confine it to proceedings before the Civil Court. The proceedings, which have the effect on the assets of the CD are all covered in the expression ‘proceeding’. The question to be answered is as to whether after moratorium has been imposed, it was open for EPFO to proceed with the assessment proceeding. Learned Counsel for the parties state that during moratorium proceeding, no recovery proceeding can be initiated against the CD. However, submissions of the learned Counsel for the Appellant is that assessment proceedings against the CD may continue. Hence, the orders of assessment passed during moratorium period, were fully permissible and the claim on the basis of the said proceedings had to be admitted in CIRP.

# 14. Learned Counsel for the Appellant placed reliance on the judgment of the Hon’ble Supreme Court in S.V. Kindaskar v. V.M. Deshpande – AIR (1972) SC 878. In the above case, the Hon’ble Supreme Court had occasion to consider provisions of Section 446 of the Companies Act, 1956 in context of re-assessment proceedings under Section 148 of the Income Tax Act, 1961. Section 446, which came for consideration before the Hon’ble Supreme Court has been extracted in paragraph 4 of the judgment, which is as follows:

• “4. Section 446 of the Act reads:

• “(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

• (2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of —

• (a) any suit or proceeding by or against the company;

• (b) any claim made before against the company (including claims by or against any of its branches in India);

• (c) any application made under Section 391 by or in respect of the Company; (sic)

• (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company;

• whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.

• (3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

• (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or High Court.”

# 15. The words used in Section 446, sub-section (1) is “no suit or other legal proceeding shall be commenced …, except by leave of the Court”. The Hon’ble Supreme Court dwell upon the expression “legal proceeding” in sub-section (1). The Hon’ble Supreme Court in the above case was considering the assessment proceeding qua winding up proceeding under the Companies Act. In paragraph 9 of the judgment, the Hon’ble Supreme Court made following observations:

• “9. In this case the observations already reproduced from the judgment of the Federal Court in Shakuntla case were approved. It may also be pointed out that in this decision this Court observed that the winding up Court assures pro rata distribution of the assets of the company in the same way in which the Court under the Presidency Towns Insolvency Act or the Provincial Insolvency Act ensures such distribution of assets. Section 232(1) of the Act of 1913 which was held supplemental to Section 171 was also stated to have reference to legal proceedings in the same way as such proceedings were envisaged by Section 171. These two decisions in our opinion do not lay down the assessment proceedings under the Income Tax Act should be held to be within the contemplation of Section 171 of the Indian Companies Act, 1913. The next decision to which reference has been made by Shri Desai is Union of India v. India Fisheries (P) Ltd. [AIR 1966 SC 35 : (1965) 3 SCR 679] In that case the respondents, Fisheries (P) Ltd., had been directed to be wound up by the winding up court and an Official Liquidator had been appointed by an order of the High Court in October 1950. The headnote in that cases gives a clear idea of the facts and the decision. It reads:

• “The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October 1950. In December 1950, the respondent was assessed to tax amounting to Rs 8737 for the year 1948-49. A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April 1952. The Liquidator declared a dividend of 9½ annas in the Rupee in August 1954, and paid a sum of Rs 5188 to the Department, leaving a balance of Rs 3549.

• In June 1954, the Department made a demand from the respondent and was paid Rs 2565 as advance tax for the year 1955-56. On a regular assessment being made for that year, only Rs 1126 was assessed as payable so that a sum of Rs 1460, inclusive of interest, became refundable to the respondent. However, the Income Tax Officer, purporting to exercise the power available to him under Section 49-E of the Income Tax Act, 1922, set off this amount against the balance of Rs 3549 due for the year 1948-49. A revision petition filed by respondent in respect of this set off was rejected by the Commissioner of Income Tax.

• Thereafter, petition under Article 226 filed by the respondent to set aside the orders of the Income Tax Officer and Commissioner was allowed by the High Court, mainly on the ground that the demand for Rs 8737 in respect of 1948-49, being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department; it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor.

• In the appeal to this Court it was contended on behalf of the appellant that Section 49-E gave statutory power to Income Tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law.

• Held :

• The Income Tax Officer was in error in applying Section 49-E and setting off the refund due to the respondent.

• The effect of Sections 228 and 229 of the Companies Act, 1913, is inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid pari passu. Once the claim of the Department has to be proved and is proved in liquidation proceedings, it cannot, by exercising the right under Section 49-E get priority over other unsecured creditors and thus defeat the very object of Sections 228 and 229 of the Companies Act. Furthermore, if there is an apparent conflict between two independent provisions of law, the special provision must prevail. Section 49-E is a general provision applicable to all assessees in all circumstances; Sections 228 and 229 deal with proof of debts and their payment in liquidation. Section 49-E can be reconciled with Sections 228 and 229 by holding that Section 49-E applies when insolvency rules do not apply.””

# 16. The Hon’ble Supreme Court held that the Company Court, cannot be invested with the powers of an Income Tax Officer conferred on him. The Company Court, which is winding the Company cannot carry on assessment under the Companies Act. Hence, it was held that assessment proceedings are not covered by Section 446 and under both sub-section (1) and (2), winding up Court cannot deal with the Income Tax proceedings. There can be no two opinions about the law laid down by the Hon’ble Supreme Court in the above case in context of Section 446 of the Companies Act. Section 446, sub-section (1) uses the expression “suit or other legal proceeding”. There is marked difference in the expression used in Section 14, sub-section (1) of the IBC. Section 446, sub-section (1) uses expression “other legal proceeding”, while Section 14, sub-section (1) uses the expression “proceedings”. In view of the law laid down by the Hon’ble Supreme Court in Rejendra K. Bhutta (supra), it is clear that no proceeding can continue after imposition of moratorium, which has effect of depleting the assets of the CD or creating new liabilities on the CD, since the object or purpose of IBC is to resolve the CD.

# 17. Now we come to the judgment of the Hon’ble Supreme Court relied by learned Counsel for the Appellant in Sundresh Bhatt, Liquidator of ABG Shipyard (supra). In the above case, the Hon’ble Supreme Court had occasion to consider Section 14, 25 and 33(5) of the IBC in reference to the provisions of Customs Act. In the above case, CIRP against the CD commenced on 01.08.2017. Notice for payment of custom dues was issued by the Customs Authorities on 29.03.2019 and thereafter on 02.04.2019 and 07.04.2019. Five different notices were issued. Order of liquidation was passed on 25.04.2019. The claim was filed by the Custom Authorities before the Liquidator. The question, which essentially came for consideration before the Hon’ble Supreme Court is as to whether any demand notice can be issued demanding customs’ due from the Corporate Debtor, after initiation of CIRP. Sections 14 and 33(5) was considered by the Hon’ble Supreme Court and in paragraphs 36, 37, 38, 39, 40 and 41, following was observed:

• “36. Section 14 of the IBC prescribes a moratorium on the initiation of CIRP proceedings and its effects. One of the purposes of the moratorium is to keep the assets of the corporate debtor together during the insolvency resolution process and to facilitate orderly completion of the processes envisaged under the statute. Such measures ensure the curtailing of parallel proceedings and reduce the possibility of conflicting outcomes in the process. In this context, it is relevant to quote the February 2020 Report of the Insolvency Law Committee, which notes as under:

• “8.2. The moratorium under Section 14 is intended to keep ‘the corporate debtor’s assets together during the insolvency resolution process and facilitating orderly completion of the processes envisaged during the insolvency resolution process and ensuring that the company may continue as a going concern while the creditors take a view on resolution of default’. Keeping the corporate debtor running as a going concern during the CIRP helps in achieving resolution as a going concern as well, which is likely to maximise value for all stakeholders. In other jurisdictions too, a moratorium may be put in place on the advent of formal insolvency proceedings, including liquidation and reorganisation proceedings. Uncitral Guide notes that a moratorium is critical during reorganisation proceedings since it ‘facilitates the continued operation of the business and allows the debtor a breathing space to organise its affairs, time for preparation and approval of a reorganisation plan and for other steps such as shedding unprofitable activities and onerous contracts, where appropriate’.”

• From the above, it can be seen that one of the motivations of imposing a moratorium is for Sections 14(1)(a), (b) and (c) of the IBC to form a shield that protects pecuniary attacks against the corporate debtor. This is done in order to provide the corporate debtor with breathing space, to allow it to continue as a going concern and rehabilitate itself. Any contrary interpretation would crack this shield and would have adverse consequences on the objective sought to be achieved.

• 37. Even if a company goes into liquidation, a moratorium continues in terms of Section 33(5) of the IBC which reads as under:

• “33. (5) — Subject to Section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:

• Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the adjudicating authority.”

• 38. We may note that the IBC, being the more recent statute, clearly overrides the Customs Act. This is clearly made out by a reading of Section 142-A of the Customs Act. The aforesaid provision notes that the Customs Authorities would have first charge on the assets of an assessee under the Customs Act, except with respect to cases under Section 529-A of the Companies Act, 1956; Recovery of Debts and Bankruptcy Act, 1993; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the IBC, 2016. Accordingly, such an exception created under the Customs Act is duly acknowledged under Section 238 of the IBC as well. Additionally, we may note that Section 238 of the IBC clearly overrides any provision of law which is inconsistent with the IBC. Section 238 of the IBC provides as under:

• “238. Provisions of this Code to override other laws.—

• The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

• 39. The NCLAT, while playing down the effect of Section 142A of the Customs Act and Section 238 of the IBC, has held that the Customs Act is a complete code in itself and no person can seek removal of goods from the warehouse without paying customs duty. The NCLAT relies on the judgment in Collector of Customs v. Dytron (India) Ltd., MANU/WB/0334/1998 : 1999 ELT 342 Cal., by the High Court of Calcutta, which laid down that customs duty carry first charge even during the insolvency process Under Section 529 and 530 of Companies Act, 1956. However, reliance on the said precedent is not appropriate as the NCLAT has failed to notice that such interpretation has been legislatively overruled by the inclusion of Section 142A under the Customs Act, through Section 51 of the Finance Act of 2011.

• 40. From the above, it is to be noted that the Customs Act and the IBC act in their own spheres. In case of any conflict, the IBC overrides the Customs Act. In present context, this Court has to ascertain as to whether there is a conflict in the operation of two different statutes in the given circumstances. As the first effort, this Court is mandated to harmoniously read the two legislations, unless this Court finds a clear conflict in its operation.

• 41. At the cost of repetition, we may note that the demand notices issued by the Respondent are plainly in the teeth of Section 14 of the IBC as they were issued after the initiation of the CIRP proceedings. Moratorium Under Section 14 of the IBC was imposed when insolvency proceedings were initiated on 01.08.2017. The first notice sent by the Respondent authority was on 29.03.2019. Further, when insolvency resolution failed and the liquidation process began, the NCLT passed an order on 25.04.2019 imposing moratorium Under Section 33(5) of the IBC. It is only after this order that the Respondent issued a notice Under Section 72 of the Customs Act against the Corporate Debtor. The various demand notices have therefore clearly been issued by the Respondent after the initiation of the insolvency proceedings, with some notices issued even after the liquidation moratorium was imposed.”

# 18. The Hon’ble Supreme Court in paragraph 42 held that demand notice to seek enforcement of the customs dues during the moratorium period, clearly violate the provisions of Section 14 or 33(5) of the IBC. In paragraph 42, following was held:

• “42. We are of the clear opinion that the demand notices to seek enforcement of custom dues during the moratorium period would clearly violate the provisions of Sections 14 or 33(5) of the IBC, as the case may be. This is because the demand notices are an initiation of legal proceedings against the Corporate Debtor. However, the above analysis would not be complete unless this Court examines the extent of powers which the Respondent authority can exercise during the moratorium period under the IBC.”

# 19. Ultimately the Hon’ble Supreme Court relied on the its judgment in S.V. Kandoakar v. V.M. Deshpande (supra) and held following in paragraphs 44 and 45:

• “44. Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.

• 45. From the above discussion, we hold that the Respondent could only initiate assessment or re-assessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.”

# 20. In paragraph 46, the Hon’ble Supreme Court noticed that demand notice dated 11.07.2019 was issued under Section 72 of the Customs Act, which was in clear breach of the moratorium imposed under Section 33(5) of the IBC. In paragraph 46, following was held:

• “46. There is another aspect of this case that needs to be highlighted to portray the inconsistency of the Customs Act vis-à- vis the IBC during the moratorium period. In the present case, the demand notice dated 11.07.2019 was issued by the Respondent Under Section 72 of the Customs Act, in clear breach of the moratorium imposed Under Section 33(5) of the IBC. Issuing a notice Under Section 72 of the Customs Act for nonpayment of customs duty falls squarely within the ambit of initiating legal proceedings against a Corporate Debtor. Even under the liquidation process, the liquidator is given the responsibility to secure assets and goods of the Corporate Debtor Under Section 35(1)(b) of IBC.”

# 21. Ultimately, the Hon’ble Supreme Court answered the question in paragraphs 53 and 54 in following manner:

• “53. For the sake of clarity following questions, may be answered as under:

• a) Whether the provisions of the IBC would prevail over the Customs Act, and if so, to what extent?

• The IBC would prevail over The Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the Respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The Respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

• b) Whether the Respondent could claim title over the goods and issue notice to sell the goods in terms of the Customs Act when the liquidation process has been initiated? answered in negative.

• 54. On the basis of the above discussions, following are our conclusions:

• i) Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the Respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The Respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

• ii) After such assessment, the Respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority.

• iii) In any case, the IRP/RP/liquidator can immediately secure goods from the Respondent authority to be dealt with appropriately, in terms of the IBC.

# 22. In the case before the Hon’ble Supreme Court in Sundresh Bhatt, Liquidator of ABG Shipyard, demand notice was issued subsequent to initiation of CIRP and that was not the case of any assessment carried out by Customs Authorities and the liquidation order was passed on 25.04.1999 and notice under Section 72 was issued on 11.07.2019, i.e. after the liquidation. Hence, applicability under Section 33, sub-section (5) found to be there as held in paragraph 46 of the judgment as noted above. It is well settled law that a judgment of the Court has to be read in the context of the facts and ratio of judgment has to be read in reference to the facts, which have come for consideration before the Court. It is well settled that ratio of a judgment cannot be read as statute and above judgment of the Hon’ble Supreme Court, does not support the submission of the Appellant that after imposition of moratorium under Section 14, sub-section (1), it was open for the EPFO Authority to proceed with the assessment and conclude the assessment.

# 23. In the present case, admittedly assessment has been completed after initiation of the moratorium. We, thus, are of the view that once order of liquidation is passed, moratorium under Section 14 comes to an end and moratorium under Section 33(5), which is differently worded, comes into play. Under Section 33(5), the expression used are “suit or other legal proceeding”, which occurs in Section 446 of sub-section (1) noticed above. Thus, bar is only against suit or legal proceeding and there is no bar against assessment proceeding to be conducted by statutory Authorities, including the EPFO. Thus, after the liquidation, it is open for EPFO to carry on the assessment. Section 33(5), cannot be held to apply on assessment proceedings. However, while looking to the expression used in Section 14(1), assessment proceedings before the EPFO, cannot be continued after initiation of CIRP.

# 24. In view of the aforesaid, we answer Question Nos.(1) and (2) in following manner:

• (1) We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings.

• (2) No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.

Question No.(3)

# 25. It is an admitted fact that claims were filed by the Appellant subsequent to approval of Resolution Plan by the CoC. The Adjudicating Authority has relied on the judgment of the Hon’ble Supreme Court in RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr. – Civil Appeal No.5590 of 2021 decided on 11.09.2023, which judgment squarely applies to the facts of the present case. More so, when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP.

Question No.(3) is answered accordingly.

# 26. In view of the foregoing discussions, we do not find any error in the order impugned in the present Appeal(s) passed by Adjudicating Authority. In the result, both the Appeal(s) are dismissed. Pending IAs, if any, are also disposed of. There shall be no order as to costs.

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