Imp. Rulings - Claims of Provident Fund & Gratuity Etc.
Index;
SCI (2026.07.28) in Employees Provident Fund Organisation Vs. Rachna Jhunjhunwala & Anr. [Civil Appeal No(s). 9768/2026 @ Diary No. 18254/2026 ]
HC Nagpur (2026.01.29) in M/s. Altaf Ahamad Vs. The Assistant Provident Fund Commissioner & Anr. [2026:BHC-NAG:1660, Writ Petition No.1335 Of 2011]
HC Bombay (2025.04.29) in Dalmia Cement (Bharat) Limited & Ors. Vs. The Central Board of Trustees, EPFO, [2025:BHC-NAG:4461-DB, Writ Petition No. 693 /2022]
NCLAT (2024.09.23) in Gujarat Urja Vikas Nigam Ltd.. Vs. Mr. Udayraj Patwardhan (RP) [(2024) ibclaw.in 615 NCLAT, Comp. App. (AT) (Ins) No. 1183 of 2024 & & I.A. No. 4232 & 4954 of 2024]
NCLAT (2024.09.18) in SBS Holdings Inc. Vs. Mohan Lal Jain [(2024) ibclaw.in 587 NCLAT, Company Appeal (AT) (Insolvency) No. 624 of 2024]
NCLAT (2024.07.09) in Jitender Kumar Jain Vs. Employee Provident Fund Organisation [Company Appeal (AT) (Insolvency) No. 1227 of 2024]
NCLAT (2022.10.21) in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia RP of Jet Airways (India) Ltd. & Ors. [Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801 915 of 2021, 361, 771 & 987 of 2022]
NCLAT (2022.09.30) in Mr. B. Parameshwara Udpa RP of M/s. Easun Reyrolle Ltd. Vs. Assistant PF Commissioner EPFO [Company Appeal (AT) (CH) (Ins) No. 231 of 2021]
NCLAT (2020.02.11) in Mr Savan Godiwala Vs. Mr. Apalla Siva Kumar [Company Appeal (AT) (Insolvency) No. 1229 of 2019 ]
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Blogger’s Comments;
A. There is a conflict between section 30(2)(e) & section 238. The Section 11 of the EPF & MP Act 1952, which provides for priority of payment of contributions over all other debts, is in conflict with the arrangements proposed for distribution of funds during Resolution & Liquidation of the Company in the Code. Resolution of the CD can not be equated with recovery of dues of various stakeholders.
(ii). Section 11(2) EPF & MP Act, 1952 reads as under;
# Section 11(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer whether in respect of the employee’s contribution deducted from the wages of the employee or the employer’s contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts.
(iii) In view of the provisions of Section 11(2) EPF & MP Act, 1952, the amount payable/assessed under Section 7A of EPF & MP Act, 1952, can be paid in priority under the resolution plan. Any other amount payable/assessed under Section 7Q & Section 14B of EPF & MP Act, 1952, are required to be treated as Govt./Statutory Dues.
[ Link - Imp. Provisions of PF & Gratuity Act. ]
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1). SCI (2026.07.28) in Employees Provident Fund Organisation Vs. Rachna Jhunjhunwala & Anr. [Civil Appeal No(s). 9768/2026 @ Diary No. 18254/2026 ] held that;
This court is further of the view that no resolution plan can succeed if uncertain or unquantified claims are permitted to linger and resurface against the successful resolution applicant years after approval. Such a situation would be akin to a hydra headed recurrence and is antithetical to the ‘clean slate’ principle.
In our view, though PF dues are excluded from the liquidation estate under Section 36(4)(iii) of IBC, liability of CD towards interest and damages payable under Section 7Q and 14B of the 1952 Act, if not determined and finalized before CIRP commencement, would fall in the category of a contingent liability. To assuage the concern of all stakeholders, the COC, in its commercial wisdom, may provide for a lump sum amount to meet contingent liabilities arising from uncrystallized claims. However, if the COC, in its commercial wisdom, has not provided for such contingent liabilities in the resolution plan, its decision cannot be faulted because the underlying object of CIRP is to adhere to fixed timelines.
Besides, approval of a resolution plan duly approved by the COC can be declined by the Adjudicating Authority on limited grounds, inter alia, that it does not fulfill the mandate of sub-section (2) of Section 30 of IBC.
Here the resolution plan provides for payment of PF dues even though it does not provide for uncrystallized claims of interest and damages regarding which proceedings were not initiated by the CIRP commencement date. Therefore, in our view, there is no blatant violation of the statutory mandate of IBC.
[ Link Synopsis ]
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2). HC Nagpur (2026.01.29) in M/s. Altaf Ahamad Vs. The Assistant Provident Fund Commissioner & Anr. [2026:BHC-NAG:1660, Writ Petition No.1335 Of 2011] held that;
Expenditure shown as wages in balance sheet has been acted upon without verifying the actual part thereof appropriated towards payment of wages by Employer. The quantification of amount without identifying beneficiaries or any attempt to recover it is therefore unsustainable
Although I am in agreement with the learned Advocate for the respondents that the petitioner will be employer for the employees engaged through the contractor under the EPF Act, 1952, in the absence of identification of the employees, it will not be permissible for the respondent No.1 to recover provident fund dues for such unidentified employees for the petitioner.
In fairness, the learned advocate for the respondents states that he is instructed to inform that the records in the office of respondents also do not throw any light on the identification of the employees for whose benefit the order impugned is passed.
In view of the aforesaid, the petitioner deserves to be allowed and is accordingly allowed by quashing and setting aside the order dated 04.08.2009 passed by Assistant Provident Fund, Commissioner, Nagpur (respondent No.1) and order dated 18.02.2011 in Appeal (ATA) No.595(9) of 2009 passed by the Employments Provident Fund Tribunal, New Delhi (respondent No.2).
[ Link Synopsis ]
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3). HC Bombay (2025.04.29) in Dalmia Cement (Bharat) Limited & Ors. Vs. The Central Board of Trustees, EPFO, [2025:BHC-NAG:4461-DB, Writ Petition No. 693 /2022] held that.
It would thus be apparent that the Provident Fund is in sum and substance the property of an employee, part of which is contributed by such employee and part by the employer. Though part of the provident fund is contributed by the employer, however in terms of sec.6 of the EPF Act, it is on account of a Statutory obligation and though at times, if for any reason, such contribution is not paid by the employer, that however, cannot mean that the employers contribution to the provident fund, would become the property or asset of the employer, over which he would have control or dominion of disposition, for in such a case it would be held by the employer in trust for the employee as the employers contribution to the provident fund.
The protection against attachment to the provident fund as envisaged by section 10 of the EPF Act, as indicate, hereinafter, not only supports, but emphasizes the primacy of workers dues over everything else.
As discussed above the Provident Fund of an employee, which includes both the components (a) employee contribution and (b) employers contribution, cannot be held to be ‘assets’, over which the corporate debtor can be held to have any rights of ownership or dominion and would, even in case it is not deposited in the Provident Fund account, by the employer would continue to be property owned by the employee, held in trust by the employer, on behalf of the employee for being deposited in the provident fund account and thus would be outside the scope and ambit of the duties of the IRP as specified in sec.18 of the IB Code.
Not only this, sec.10, even directs that neither the Official assignee appointed under the Presidency Towns Insolvency Act, nor any received appointed under the Provincial Insolvency Act, shall be entitled to or have any claim on such provident fund amount of an employee, thereby indicating that it is to be preserved sacrosanct, by granting it immunity even in respect of insolvency proceedings, which may be initiated, even against such employee.
It would thus be apparent that since the employers provident fund contribution, cannot be included in the definition of ‘assets’, in view of Explanation (a) to Sec.18(1) of the IB Code, there would be no obligation upon the provident fund department to lodge a claim for the dues, in that regard with the IRP and get such claim verified so as to be included in the Resolution Plan.
In view of the above discussion, we are of the considered opinion, that the claim of the respondents, cannot be said, to have been wiped out, on account of the resolution plan having been approved by the Committee of Creditors and consequently by the adjudicating authority and would be a claim, which is beyond the scope and ambit of Chapter II of the IB Code, and thus is a claim, which is payable by the petitioners. Since the claim is for a period earlier than the insolvency commencement date, there is no call for issuance of any directions in that regard.
[ Link Synopsis ]
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4). NCLAT (2024.09.23) in Gujarat Urja Vikas Nigam Ltd.. Vs. Mr. Udayraj Patwardhan (RP) [(2024) ibclaw.in 615 NCLAT, Comp. App. (AT) (Ins) No. 1183 of 2024 & & I.A. No. 4232 & 4954 of 2024] held that;
Explanation of Section 14 clearly stipulate that notwithstanding anything contained in any other law for the time being inforce, no license, permit, concessions or rights, etc., given by any other authority can not be suspended or terminated on ground of insolvency, subject to condition that there is no default in payment of current dues arising or use of continuation of license, permit, concessions or rights, etc.
We hold that if the Appellant has any recovery towards the Corporate Debtor, he is entitled to initiate suitable recovery proceedings, if allowed by the law and in accordance with the law, which is a different legal right then arising out of filing claims under present petition, but cannot file claims arising after CIRP date.
We hold that there is a clear law that Resolution Professional can only entertain claims due and filed w.r.t. CIRP commencement date and not due to subsequent event, for which claimant might have other legal remedy.
It is settled law that the Resolution Professional can collate and verify claims w.r.t. CIRP date and therefore any claims arising subsequent to CIRP date can’t be entertained by Resolution Professional.
[ Link Synopsis ]
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5). NCLAT (2024.09.18) in SBS Holdings Inc. Vs. Mohan Lal Jain [(2024) ibclaw.in 587 NCLAT, Company Appeal (AT) (Insolvency) No. 624 of 2024] held that;
The statutory scheme delineated by the above provisions, makes it clear that the claims to be filed by the claimants as on the liquidation commencement date. The Liquidation Regulations, does not contemplate consideration of any claim, which arises subsequent to liquidation commencement date.
Regulation 28 being the only Regulation, which deals with a payment not due on the liquidation commencement date and the distribution has been provided in a manner as contained in sub-regulation (2) of Regulation 28, it is clear that no other claim is contemplated to be considered, which is not available on the liquidation commencement date.
The statutory scheme delineated by Regulation 12 and Regulation 16, clearly contemplate that a claim has to be filed on the liquidation commencement date. When a claim has not arisen on the liquidation commencement date, the Regulation do not contemplate admission of such claim.
Regulation 13, as noted above, which provides for sending a Preliminary Report of the assets and liabilities as on the liquidation commencement date, clearly indicate that all liabilities have to be frozen on the liquidation commencement date and the statutory regulation does not contemplate admission of any claim arisen subsequent to liquidation commencement date.
We are also of the view that claim could not have been entertained by the Liquidator, which arose subsequent to the liquidation commencement date, no error has been committed by the Liquidator in rejecting the claim on the ground that it was filed much beyond the last date for admission of the claim, which was 15.01.2021 and claim was filed by the Appellant, after more than two years.
[ Link Synopsis ]
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6). NCLAT (2024.07.09) in Jitender Kumar Jain Vs. Employee Provident Fund Organisation [Company Appeal (AT) (Insolvency) No. 1227 of 2024] upheld the orders of NCLT as under;
# 3. The Learned Adjudicating Authority in paragraphs 3.2 & 3.3 has made following observations:
“3.2. The appellant has claimed dues on account of principal contribution, damages and interest on these two components. In so far as principal contribution is concerned the same no longer forms part of Liquidation estate, hence the Liquidator is directed to exclude this amount from the Liquidation estate and deal with the same in priority over all other claims. In so far as damage and interest are concerned, these dues are not payable to the employees, but the same are contributions to the general fund of Provident Fund Organisation and have statutory force.
3.3. Accordingly, we direct the Liquidator to admit the dues on account of contribution to Provident fund (both employer and employee) and exclude the corresponding amount from the Liquidation estate to be dealt with in priority of all other claims. We further direct the Liquidator to admit the dues on account of damages and interest as Operational Debt payable to Statutory Authorities and deal with the same accordingly in terms of section 53 of the Code.”
# 7. We thus do not find any error in the order of the Adjudicating Authority directing the amount to be kept separate from the liquidation estate. There is no merit in the appeal. The appeal is dismissed.
[ Link Synopsis ]
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7). NCLAT (2022.10.21) in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia RP of Jet Airways (India) Ltd. & Ors. [Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801 915 of 2021, 361, 771 & 987 of 2022] held that;
# 72. Our answer to Question II and III is as follows:
(i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii).
(ii) The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 30(2)(b) read with Section 53(1).
# 80. As observed above, in admitted claim of workmen provident fund, gratuity and leave encashment was included, and payment proposed in plan partly satisfy above dues also. The workmen are entitled to full payment of provident fund and gratuity, hence, the balance of above dues are to be paid by the Successful Resolution Applicant, to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e), hence, to save the plan the above payments have to be made.
[ Link Synopsis ]
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8). NCLAT (2022.09.30) in Mr. B. Parameshwara Udpa RP of M/s. Easun Reyrolle Ltd. Vs. Assistant PF Commissioner EPFO [Company Appeal (AT) (CH) (Ins) No. 231 of 2021] held that;
The `Provident Fund’ referred to Section 36(4)(a)(iii) of the I & B Code, 2016 applies to `Provident Fund Accounts’, maintained as per Section 16-A of the `Employees Provident Fund’ & `Miscellaneous Provisions Act, 1952’.
If we read Section 14(1)(a), it can be inferred that there shall be complete embargo to continue any proceeding against the ‘Corporate Debtor’ by any `Authority’ till the ‘Corporate Insolvency Resolution Process’ is completed and `Moratorium’ is lifted by the ‘Adjudicating Authority’ or it result into `Liquidation’ on failure of the ‘Corporate Insolvency Resolution Process’.
Thus, it can be presumed that `Attachment of Bank Account’ of the `Corporate Debtor’ by `EPFO’ cannot be continued when `Moratorium’ is declared under I & B Code, 2016 and proceedings are required to be kept in abeyance till lifting of moratorium.
It is therefore evident that amount deducted for `Provident Fund’, purely belongs to an `Employee’ and not to be treated as an `Asset’ of the ‘Corporate Debtor’ and cannot be touched by an `Interim Resolution Professional’/`Resolution Professional’/ `Liquidator’ as the case may be.
Therefore, it can be concluded that `Resolution Professional’ is right in seeking lifting of `Attachment Orders’ on `Bank Account’ of ‘Corporate Debtor’ and the ‘Adjudicating Authority’ should have done accordingly.
The Provident Fund referred to Section 36(4)(a)(iii) I & B Code, 2016 applies to Provident Fund Accounts maintained as per Section 16-A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952.
The Exclusion from the Liquidation Estate Assets as well as from Recovery in Liquidation, as stipulated in Section 36(4)(a)(iii) of I&B Code, 2016, applies in respect of sums due to any workman or employee from the Provident Fund, when the Corporate Debtor has maintained an Establishment fund in terms of Section 16-A of the Employees Provident Fund, Miscellaneous Provisions Act,1952.
This `Tribunal’ gave clear verdict that where no fund is created by a Company, the `Liquidator’ should not have been directed to make provision for payment of Gratuity to the Workmen.
Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund cannot be utilised, attached or distributed by the liquidator, to satisfy the claim of other creditors.
Section 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate.
In a case, where no fund is created by a company, in violation of the Statutory provision the Section 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not part of the liquidation estate.
Therefore, the `Resolution Professional’ is not duty bound to make adequate provisions for ‘Provident Fund’ when the `Corporate Debtor’ did not have separate `Provident Fund Account’.
Further, in terms of Regulation 13, the ‘Resolution Professional’ is mandated to verify the `Claim’ and subsequently determine the amount of `Claim’ as per Regulation. 14. It is therefore, necessary that any person having `Claim’ over the ‘Corporate Debtor’ has to prefer `Claim’ as stipulated in such regulations.
[ Link Synopsis ]
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9). NCLAT (2020.02.11) in Mr Savan Godiwala Vs. Mr. Apalla Siva Kumar [Company Appeal (AT) (Insolvency) No. 1229 of 2019 ] held that;
Sec 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate.
In a case, where no fund is created by a company, in violation of the Statutory provision of the Sec 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not part of the liquidation estate.
In this case, we are not concerned with determination about the entitlement of Gratuity by the employees of the ‘Corporate Debtor‘. Payment of Gratuity to employees depends on their entitlement of Gratuity, subject to the fulfilment of the conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard.
The annual cash flow statement for the ending 31st March, 2017 show that Gratuity Fund was proposed. However, it is noticed that no such fund was created. In the circumstances, the Liquidator should not have been directed to make provision for the payment of gratuity to the workmen as per their entitlement.
[ Link Synopsis ]
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