Employees’ Provident Fund Organization (EPFO) Vs. Southern Batteries Pvt. Ltd. - By contrast, interest under Section 7Q and damages under Section 14B of the EPF Act are of a different character. Section 7Q casts a liability on the employer to pay interest for delayed remittances, while Section 14B empowers the authority to levy and recover damages as a penal consequence of default. The statutory design treats these sums as recoveries made by the Provident Fund Organization in its capacity as a statutory authority. They are not automatically earmarked to individual member accounts, and in fact the Act permits the authority to exercise discretion in levying or waiving damages. Thus, their nature is more akin to a statutory impost rather than a crystallized employee entitlement.

 NCLT Bangaluru (2022.09.30) in Employees’ Provident Fund Organization (EPFO) Vs. Southern Batteries Pvt. Ltd. [(2025) ibclaw.in 2196 NCLT, I.A. No. 680 of 2024 in C.P. (IB) No. 357/BB/2019] held that;

• The legislative intent behind this exclusion is to ensure that amounts already earmarked for employees under statutory social security legislations do not get diluted in the insolvency process and remain sacrosanct for their welfare.

• By contrast, interest under Section 7Q and damages under Section 14B of the EPF Act are of a different character. Section 7Q casts a liability on the employer to pay interest for delayed remittances, while Section 14B empowers the authority to levy and recover damages as a penal consequence of default. The statutory design treats these sums as recoveries made by the Provident Fund Organization in its capacity as a statutory authority. They are not automatically earmarked to individual member accounts, and in fact the Act permits the authority to exercise discretion in levying or waiving damages. Thus, their nature is more akin to a statutory impost rather than a crystallized employee entitlement.

• Accordingly, it is held that while the Sec. 7A contributions are rightly excluded from the liquidation estate as “sums due to employees”, the 7Q interest and 14B damages are of distinct character, and therefore correctly treated by the Liquidator as statutory dues ranking under Section 53(1)(e)(i) of the Code.

Excerpts of the Order;

# 1. This Application has been filed by Employees’ Provident Fund Organization, (hereinafter called the Appellant), under Section 42 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code”), seeking to set aside the Liquidator’s decision treating Section 7Q & 14B of the EPF & MP Act as Government dues and a direction to release the balance amount of Rs. 2,06,02,288/- to the Appellant immediately.

# 2. Brief relevant facts of the Application are as follows: –

i. The CIRP was initiated against the Corporate Debtor on a petition filed by Allahabad Bank under Section 7 of the Code. The same was admitted vide order dated 19.02.2020 in CP(IB) No. 357/BB/2019 and Mr. Ramanahalli Shivanna Dodda Byregowda was appointed as the Interim Resolution Professional. Subsequently, vide order dated 09.04.2021 in IA No. 110/2021, the present Respondent was appointed as the Resolution Professional in place of the earlier IRP.

ii. The Corporate Debtor had been a chronic defaulter in remitting statutory dues to the Employees’ Provident Fund (EPF). After granting opportunity of hearing, the Regional PF Commissioner, Bengaluru, passed an order dated 26.06.2019 under Section 7A of the EPF & MP Act, 1952, assessing the liability of the Corporate Debtor at Rs.1,25,33,751/- for the period – August 2018 to March 2019, excluding statutory interest under Section 7Q and damages under Section 14B.

iii. Upon initiation of CIRP, the Appellant filed its claim in Form-F dated 12.08.2020 (submitted on 18.08.2020) for Rs. 1,27,13,927/- towards PF dues, enclosing supporting documents. The Resolution Professional neither admitted nor expressly rejected the said claim and did not communicate any decision. Despite repeated follow-ups, the dues remained unpaid.

iv. After lapse of nearly two years, the Appellant filed a revised claim on 27.07.2022, enhancing the claim to Rs. 2,93,24,169/-, comprising:

• Assessed dues under Section 7A: Rs.1,25,33,751/-

• Assessed damages under Section 14B: Rs. 82,341/-

• Calculated interest under Section 7Q: Rs. 97,835/-

• Anticipated damages under Section 14B: Rs. 1,12,23,138/-

• Anticipated interest under Section 7Q: Rs. 53,87,104/-

v. Out of the above, only the principal assessed dues of Rs.1,25,33,751/- were eventually paid by the Liquidator on 02.04.2024 pursuant to a decision of the Stakeholders’ Consultation Committee. The balance claim of Rs.2,06,02,288/- under Sections 7Q and 14B was not admitted.

vi. The Appellant submits that despite numerous reminder letters, including one dated 12.12.2023, the Respondent did not provide any update or formal order regarding acceptance/rejection of the claim. For the first time, vide email dated 11.03.2024, the Respondent sought breakup of dues, to which the Appellant replied with a detailed explanation of law and supporting documents, reiterating its claim of Rs. 2,93,24,169/-.

vii. However, by letter dated 25.03.2024, the Respondent stated that the claim had already been admitted only for Rs.1,25,33,751/- by his letter dated 11.08.2022 (a communication which the Appellant denies ever receiving) and that payment had been made accordingly.

viii. Thereafter, by letter dated 08.04.2024, the Respondent took the stand that dues under Section 7Q (interest) and Section 14B (damages) of the EPF Act do not fall within the exclusion under Section 36(4)(a)(iii) of the IBC and must instead be treated as “government dues” under Section 53(1)(e)(i) of the IBC. Consequently, these dues were not admitted in full. Aggrieved, the Appellant filed the present application.

ix. The appeal is accompanied by a prayer to condone delay in filing beyond the 14-day limitation prescribed under Section 42 of the IBC, on grounds that the Liquidator failed to issue a speaking order, failed to share certified copies of relevant orders, and to properly inform the Appellant in time.

# 3. The Respondent filed written submissions, on 19.07.2025 stating as follows:

i. The Respondent demonstrates the chronology of events where the Appellant had initially filed its claim during the CIRP for a sum of Rs.1,27,13,927/-, of which the Resolution Professional duly admitted an amount of Rs.1,25,33,751/- towards statutory PF dues under Section 7A. The said claim was incorporated in the Resolution Plan approved by this Authority, and subsequently, upon liquidation of the Corporate Debtor, the admitted dues were paid to the Appellant on 25.03.2024.

ii. The Appellant neither filed any revised claim during CIRP nor preferred any claim during liquidation within the timelines prescribed under Regulation 12 and 16 of the IBBI (Liquidation Process) Regulations, 2016, despite repeated public announcements and specific intimations. Instead, the Appellant, much belatedly, issued a corrigendum in July 2022 seeking to introduce “anticipatory dues” and thereafter initiated fresh proceedings under Sections 7Q and 14B of the EPF Act on 30.04.2024, i.e. after commencement of liquidation and even after distribution of liquidation proceeds.

iii. It is submitted that the corrigendum dated 28.07.2022 and the assessment orders dated 30.04.2024 are legally unsustainable. The corrigendum was issued during CIRP and is hit by Section 14 moratorium, while the fresh assessments were made after commencement of liquidation and are barred by Section 33(5). Judicial pronouncements such as Chandra Prakash Jain (Company Appeal (AT) (Insolvency) No. 1856 of 2024) and Manish Kumar Bhagat (Company Appeal (AT) (Insolvency) No. 808 of 2022) hold that no fresh assessment for interest or damages can be made after initiation of CIRP or liquidation.

iv. Also, it is pertinent to note that the amounts now claimed are largely under Sections 7Q and 14B of the EPF Act (interest and penalties). Only principal PF contributions under Section 7A are exempt under Section 36(4)(a)(iii) of the Code. Interest and damages are in the nature of government dues and fall within the waterfall under Section 53, ranking below employees, workmen, and secured creditors. This distinction has been recognized in Shri Addanki Haresh v. EPFO (NCLT Bengaluru, 2022) and EPFO v. Rajat Mukherjee (NCLAT, 2024).

v. The last date for filing claims in liquidation was 08.04.2023. Despite public announcements and direct intimation, no claim was filed by the Appellant. The present demand, raised only through the 30.04.2024 orders, is hopelessly barred by Regulation 16 of the Liquidation Regulations and Section 42 of the Code, since the Application itself has been filed more than six months beyond the 14-day limitation.

vi. Further, regarding the realization of assets, it is submitted that Liquidation assets have already been realized and distributed in accordance with Section 53. The admitted claim of Rs.1,25,33,751 has already been paid. The Corporate Debtor is at the cusp of dissolution. Hence, entertaining belated claims at this stage will upset settled distributions, prejudice other stakeholders, and defeat the objective of speedy resolution under the Code.

# 4. Heard Learned Counsels for the parties and carefully perused the material on record.

# 5. Before adverting to the merits, it is necessary to examine the maintainability of the present Application under Section 42 of the IBC. The said provision explicitly provides that:

• “A creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting or rejecting the claims within fourteen days of the receipt of such decision.”

The time limit of fourteen days is not an empty formality but a conscious legislative choice. The object of the Code is to ensure certainty, speed and finality in insolvency resolution and liquidation. Strict adherence to statutory timelines is the backbone of the scheme.

# 6. The Hon’ble Supreme Court in V. Nagarajan v. SKS Ispat and Power Ltd. (2021) 4 SCC 171 (paras 25–27) has categorically held that the time periods prescribed under the Code are mandatory in nature, and condonation of delay cannot be granted mechanically, particularly when no sufficient cause is shown. The Hon’ble NCLAT has, in several cases reiterated that the 14-day window under Section 42 is sacrosanct and that a belated appeal cannot be entertained unless compelling and exceptional circumstances are established. In the present case, the Appellant has approached this Tribunal well beyond the statutory period of fourteen days where no cogent explanation has been tendered for the delay. The Application merely prays for a waiver of the limitation without demonstrating any exceptional cause such as non-receipt of the decision, illness, or circumstances beyond control. Allowing such belated claims would defeat the very object of the Code, as liquidation cannot be kept in suspended animation at the instance of one stakeholder. Therefore, the Appellant, having failed to approach the Adjudicating Authority within the stipulated period and having shown no sufficient cause for condonation, cannot now seek to reopen the decision of the Liquidator.

# 7. Before proceeding further, it would be in the interest of justice to recall Section 36 and Section 53 of the IBC in order to appreciate the submissions advanced by the Learned Counsels for the parties: . . . . 

# 8. This Tribunal takes note of the fact that IBC is a special code governing Insolvency and Liquidation with an integrated waterfall where the legislature deliberately ranked different classes of creditors – and government dues have a fixed place in that ladder. Where a statutory levy falls within “any amount due to Central/State Government” the Code provides for payment under Section 53. It consciously carved out only “sums due to employees” from the liquidation estate. To extend that to statutory penalties and interest and permitting litigants to ignore that distribution based on broad policy claims would enlarge the exclusion beyond the text and disrupt the priority structure of Section 53.

# 9. Section 36(4)(a)(iii) of the Code vehemently provides that the liquidation estate shall not include “all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund.” A plain reading of the provision reveals that the exclusion is specifically targeted at monies that are directly payable to the employees, such as their accumulated contributions or entitlements under these welfare schemes. The legislative intent behind this exclusion is to ensure that amounts already earmarked for employees under statutory social security legislations do not get diluted in the insolvency process and remain sacrosanct for their welfare. By contrast, interest under Section 7Q and damages under Section 14B of the EPF Act are of a different character. Section 7Q casts a liability on the employer to pay interest for delayed remittances, while Section 14B empowers the authority to levy and recover damages as a penal consequence of default. The statutory design treats these sums as recoveries made by the Provident Fund Organization in its capacity as a statutory authority. They are not automatically earmarked to individual member accounts, and in fact the Act permits the authority to exercise discretion in levying or waiving damages. Thus, their nature is more akin to a statutory impost rather than a crystallized employee entitlement.

# 10. This interpretation finds support in decisions of coordinate Benches. In Enviro Bulk Shipping & Services Pvt. Ltd. v. EPFO (NCLT Chennai, 2020), the Tribunal distinguished between contributions payable to employees and penal damages recoverable by the authority, holding that Section 14B dues fall within the ambit of statutory dues payable under Section 53(1)(e)(i). A similar view was expressed in Regional PF Commissioner v. Sholingur Textiles Ltd. (NCLT Chennai, 2020), where damages and interest were treated as government dues under the waterfall. If the argument of the Appellant were accepted, it would result in every statutory levy raised by the Provident Fund authority, regardless of its penal or compensatory nature, being lifted out of the liquidation estate and placed above the waterfall. Such an interpretation would impermissibly enlarge the scope of Section 36(4)(a)(iii) and disturb the carefully balanced distribution scheme of Section 53.

# 11. This Tribunal further derives guidance from the recent judgment of the Hon’ble Supreme Court in Committee of Creditors of Bhushan Power & Steel Ltd. v. JSW Steel Ltd. (Civil Appeal No. 1808 of 2020, decided on September 26th 2025), wherein the Court has reaffirmed the principle that once a Resolution Plan is duly approved under Section 31 of the Code, it attains finality and binds all stakeholders, including statutory authorities. The Hon’ble Court observed that reopening claims or permitting fresh challenges after approval and implementation would “strike at the very root of the IBC framework,” which is predicated upon certainty, finality, and commercial wisdom of the Committee of Creditors. In that case, the Supreme Court emphatically held that claims not forming part of the approved Resolution Plan, or not raised during the CIRP, cannot be entertained at a later stage, whether by way of fresh petitions or collateral challenges. The Court emphasized that judicial fora cannot sit in appeal over the commercial wisdom of the CoC except on the limited grounds expressly enumerated in the Code. Once the plan is partly implemented, any attempt to revert to liquidation or reopen distribution would erode the sanctity of the process.

# 12. Applying this ratio to the present case, the contributions under Section 7A were already accounted for and admitted during the CIRP/liquidation process, and the present claim is a belated attempt to secure additional priority for penal and interest dues. Entertaining such a challenge at this stage would be contrary to the principle of finality laid down by the Supreme Court in Bhushan Power & Steel, and would undermine the binding effect of the resolution/liquidation framework under Sections 31 and 53 of the Code.

# 13. On the other hand, the EPF Act contains separate machinery for assessment, recovery, waiver, and adjustment where that machinery contemplates the EPFO recovering sums in its statutory capacity — this reinforces the view that 14B/7Q are recoveries by a statutory body, not immediate employee entitlements. Allowing every such recovery to leap out of the liquidation estate would effectively nullify that separate statutory mechanism.

# 14. Multiple NCLT judgements, as stated by the Respondent, have held that damages under Section 14B (and in certain cases interest under 7Q) are not sums “due to employees” for the purposes of Section 36(4)(a)(iii) and therefore fall in the Section 53 waterfall as government/statutory dues — particularly where EPFO has not shown the sums are directly attributable to employee accounts or produced clear evidence of vesting.

# 15. Accordingly, it is held that while the Sec. 7A contributions are rightly excluded from the liquidation estate as “sums due to employees”, the 7Q interest and 14B damages are of distinct character, and therefore correctly treated by the Liquidator as statutory dues ranking under Section 53(1)(e)(i) of the Code. This construction harmonizes the social-welfare objective of protecting employees’ actual entitlements with the legislative design of the IBC, which envisages that all other statutory claims must take their place in the waterfall in order to ensure equitable distribution among creditors.

# 16. For the reasons aforesaid, not only the claim in the appeal is grossly time barred but also not sustainable even on merits as interest under Section 7Q and damages under Section 14B of the EPF&MP Act are statutory/government dues, not “sums due to employees” under Section 36(4)(a)(iii) and having been accordingly bracketed, we do not find the Liquidator to have faulted on that count.

# 17. Accordingly, the I.A. No. 680 of 2024 filed by the Appellant is dismissed.

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Samith R. Arasa Vs. Bijendra Kumar Agarwal - As rightly contended by the learned Liquidator this Tribunal has no jurisdiction or power to grant liquidated damages to the Respondent as a Civil Court and the appropriate remedy available to the Petitioner is to approach a competent legal forum.

  NCLT Mumbai-III (2022.10.04) in Samith R. Arasa Vs. Bijendra Kumar Agarwal [(2022) ibclaw.in 838 NCLT, “I.A. No. 1573 of 2021 In C.P. No. 1118 of 2019”] held that;

• As rightly contended by the learned Liquidator this Tribunal has no jurisdiction or power to grant liquidated damages to the Respondent as a Civil Court and the appropriate remedy available to the Petitioner is to approach a competent legal forum.

•  All the above issues have to be raised by the Petitioner before a competent Civil Court by letting proper oral and documentary evidence and this Tribunal being not a Civil Court is not empowered to decide all the above contentions of the Petitioner in an Application of this nature.

Excerpts of the Order;

# 1. This Interlocutory Application is filed by Samith R. Arasa, Applicant against Resolution Professional Mr. Birendra Kumar Agrawal of Suwarnsparsh Gems & Jewellery Ltd. Are praying the following reliefs:

• a. The interlocutory Application for mentioning the company Petition may be allowed;

• b. The Hon’ble Tribunal be pleased to direct the Liquidator to forthwith accept the claim of the Applicant to the extent of Rs. 3,13,58,500/-(Rs Three Crores Thirteen Lakhs Fifty Eight Thousand Five Hundred only).

• c. The Hon’ble Tribunal be pleased to direct the Liquidator to forthwith accept the claim of the Applicant to the extent of Rs. 87,25,000/- (Rupees Eighty Seven Lakhs Twenty Five Thousand only) i.e. the rent due and payable to the Applicant from the date of the moratorium till 05.11.2020 may be included in the insolvency Resolution Process Cost;

• d. The Hon’ble Tribunal be pleased to direct the Liquidator to make the payments of the amounts as mentioned in (b) and /or (c) due to the Applicant; at the earliest;

• e. Pending the hearing and final disposal of this application, the Liquidator may be directed to pay the admitted claim of Rs. 23,73,500/- to the Applicant;

• f. Pending the hearing and final disposal of this application, the Liquidator may be directed not to proceed with the liquidation process;

• g. To pass any such Order or Orders as this Hon’ble Tribunal may deem fit and expedient;

# 2. Brief submissions of the Applicant are as follows:

i. The Applicant submitted that, The Applicant and CD had entered into Leave and License Agreement on 16th December 2015 to use and occupy the Shop Nos. 11 and 11A situated at Rajhans Hotel Bldg, 15/16, N.G. Acharya Marg, Chembur, Mumbai – 400 071 for the period from 01.04.2015 to 04.04.2017 for a compensation of Rs. 75,000/- per month. Further, Clause 17 of the said Leave and Licence Agreement also stipulates a compensation of Rs. 25,000/- per day to be paid to the Applicant by the CD on the failure to vacate the premises on 04.04.2017.

ii. The Applicant states that Company Petition was admitted on 22.10.2019 and thus CIRP was initiated against the CD.

iii. The Applicant further submits that his claim was filed before the IRP of Rs. 2,26,33,500/-. The IRP was pleased to accept the claim of the Applicant to the extent of Rs. 16,73,500/- vide letter dated 04.02.2020.

iv. The Applicant states that despite the expiry of the term of the leave and licence on 04.04.2017, the CD continued to be in unlawful and illegal occupation of the Shop No. 11 till the Applicant moved this bench vide IA No. 856 of 2020 in the present company Petition subsequent to which the said Shop No. 11 was vacated by the RP on 05.11.2020. As a result of this the Applicant has faced huge losses and irreparable harm.

v. The Applicant also mentions that on the Application filed by the RP, this bench was pleased to initiate the Liquidation Process vide Order dated 15.02.2021.

vi. The Applicant further contented that on requesting the Liquidator to accept full claim of the Applicant including the amount of Rs. 25,000/- per day from 05.04.2017 till 05.11.2020, however the said claim has not been accepted by the Liquidator. The Liquidator has only accepted the claim to the extent of Rs. 23,73,500/- being the rent amount of Rs. 75,000/- per month not paid to the Applicant.

# 3. The Liquidator has filed a detailed reply as well as written submissions, strongly opposing the above Application.

# 4. Heard the arguments on both sides and examined the relevant record.

# 5. After hearing the submissions and upon examining the relevant record this Bench observes that the Petitioner and the Corporate Debtor have entered into a registered Lease Agreement dated 16.12.2015 for a period of two years commencing from 01.04.2015 to 04.04.2017 on a monthly rent of Rs. 75,000/- per month in respect of two shops bearing no. 11 and 11A situated in Rajhans Hotel Building, 15/16, M.G. Acharya Marg, Chembur, Mumbai. Belonging to the Petitioner and there is no dispute between the parties with regard to the ownership, duration of lease and the amount of rent.

# 6. It is also observed that the Corporate Debtor himself vacated shop bearing no. 11A much prior to the expiry of the license period under the agreement and was using only shop bearing no. 11 till it was vacated by the Resolution Professional on 05.11.2020.

# 7. This Bench also observes that the Resolution Professional has admitted the claim to an extent of Rs. 16,73,500/- against the net claim of Rs. 2,26,33,500/- put forth by the Petitioner during the course of CIRP period.

# 8. It has been also observed that the Petitioner has subsequently submitted a claim of Rs. 3,13,58,500/- claiming compensation to damages at the rate of Rs. 25,000/- per day after passing Liquidation Order of the Corporate Debtor out of which an amount of Rs. 23,73,500/- was accepted by the Liquidator.

# 9. Since the Petitioner is claiming liquidated damages at the rate of Rs. 25,000/- per day, the only question that needs to be decided is

• 1. Whether the Petitioner is entitled to claim liquidated damages at the rate of Rs. 25,000/- per day before this tribunal through the above Interlocutory Application?

# 10. It has been observed that the Respondent did not take any legal action before the commencement of CIRP against the Corporate Debtor before any appropriate Court even though the license period was expired on 04.04.2017 by efflux of time.

# 11. As rightly contended by the learned Liquidator this Tribunal has no jurisdiction or power to grant liquidated damages to the Respondent as a Civil Court and the appropriate remedy available to the Petitioner is to approach a competent legal forum. It is also appropriate to observe here that the Corporate Debtor has taken two shops on lease and had vacated shop bearing no. 11A much prior to the completion of license period and therefore the Corporate Debtor is entitled for proportionate reduction of rent for the unexpired license period in respect of the shop vacated by the Corporate Debtor. However, the Liquidator has allowed the entire amount of admitted rent till the date of vacation as per the agreement without deducting proportionate rent for shop no. 11A.

# 12. The Petitioner is claiming the above amount of Rs. 3,13,58,500/- on the ground that the similar size shops in the same premises are usually let out and earned approximately Rs. 1,00,000/- per month and due to illegal possession of the Corporate Debtor well beyond the expiry of period of leave and license the Applicant has incurred heavy opportunity cost and financial losses without any fault on his part. All the above issues have to be raised by the Petitioner before a competent Civil Court by letting proper oral and documentary evidence and this Tribunal being not a Civil Court is not empowered to decide all the above contentions of the Petitioner in an Application of this nature.

# 13. Therefore, for the aforesaid reasons, this Bench is of the considered view that there is no illegality or irregularity committed by the Liquidator in rejecting the claim of the Petitioner beyond the admitted rent and the above Application is nothing but an afterthought and is liable to be rejected.

# 14. Accordingly, the above Interlocutory Application is dismissed by confirming the action of the Liquidator.

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Regional Director, ESI Corporation Vs. Manish Kumar Bhagat Liquidator, - the amount of ESI, contributed both by the employer and employee, lying with the CD/Company in liquidation, is in trust in view of Section 40(4) of the ESI Act, 1948 to which the provisions of Section 36 (4) (a) (i) shall squarely apply.

  NCLAT (2025.09.24) in Regional Director, ESI Corporation Vs. Manish Kumar Bhagat Liquidator, [Comp. App. (AT) (Ins) No. 301 of 2024 & I.A. No. 1013, 4529 of 2024 ] held that;

• the amount of ESI, contributed both by the employer and employee, lying with the CD/Company in liquidation, is in trust in view of Section 40(4) of the ESI Act, 1948 to which the provisions of Section 36 (4) (a) (i) shall squarely apply.

Excerpts of the Orders,

24.09.2025: This appeal is filed by the Regional Director of ESI Corporation, being aggrieved against the order dated 28.11.2023 by which IA No. 184/NCLT/AHM/2022, filed by the appellant in CP (IB) No. 537/NCLT/AHM/2018 under Rule 11 of NCLT Rules, 2016 against the liquidator of M/s Gupta Dyeing & Printing Mills Pvt. Ltd., Navrangpura, Ahmedabad Corporate Debtor for the purposes of keeping the ESI dues out of the liquidation estate by the corporate debtor has been dismissed.

# 2. Shorn off unnecessary details, the aforesaid application was dismissed by the Ld. Tribunal while making the following observations:

• “20. The liquidator had considered the claim of the applicant in terms of provisions of IBC 2016 and also included the applicant as an operational (unsecured) creditor. Applicant also attended various CoC meetings during the CIRP. The claim was settled in terms of the IBC provisions treating the applicant as an operational unsecured creditor and proportionately allotted the amount to be disbursed. Therefore, the Appellant for the purpose of determining the workmen’s dues as mentioned in Section 53 (1) (b) cannot derive any advantage of explanation (iv) Section 326 of the Companies Act 2013.

• 21. The consequences of non-payment of employees contribution from wages deducted in terms of Section 40(4) of the EST Act, 1948 and when not paid would be the responsibility of the principal employer which amounts to “breach of trust” and is punishable under IPC 406, 409 and also an offence u/s 85 of ESI Act. The liquidator has admitted the claims as per provision of the IBC 2016. The applicant has not proceeded in any manner against the corporate debtor, individually for which a provision is available in the ESI Act.

• 22. Role of Liquidator and powers are defined in Section 35 of the IBC, Liquidation Estate in Section 36 and determination of value of claims in Section 41 of IBC. Section 36 (4) (iii) of the IBC does not define the ESIC dues as workmen dues except for PF, Pension Fund and the Gratuity Fund. Secured Creditor is defined in Section 52 of liquidation proceedings in which the ESIC cannot make a claim or status to be included.

• 23. Insurance is a coverage on the premium paid whether run by private or government institution and offers a service when there is an even which is triggered and cannot be equated with other benefits which are protected under IBC. This applies for both state run and private institution, but there are imbibed provisions in the state insurance which gives it a statutory status for compliance and is on par with the other authorities who are treated as operational creditors. There is no provision in the statute of ESIC for any charge or special status other than those provided in Section 45 A of the ESIC whereby the applicant could have proceeded individually against the defaulter.

• 24. While treating the claim filed by the applicant the liquidator has arrived at the admissible amount and priority as per the provisions of IBC, 2016”.

# 3. Counsel for the appellant has submitted that the Ld. Tribunal has committed an error in not appreciating the provision of Section 36(4) (a) (i) as per which the assets in trust of any third party with the CD does not become the liquidation estate as such.

# 4. In this regard, he has relied upon a decision of a coordinate Bench of this court rendered in the case of Nurani Subramanian Suryanarayanan, Liquidator of M/s Care IT Solutions Pvt. Ltd. vs. Employees State Insurance Corporation, Rep. by its Regional Director & 2 Ors., TA (AT) No. 212/2021 CA (AT) (Ins) No. 116/2020 decided on 18.07.2024 in which the similar controversy was involved and the Appellate Tribunal had categorically held that the amount of ESI, contributed both by the employer and employee, lying with the CD/Company in liquidation, is in trust in view of Section 40(4) of the ESI Act, 1948 to which the provisions of Section 36 (4) (a) (i) shall squarely apply.

# 5. Counsel for the appellant has also submitted that the amount of claim of Rs. 1,20,80,940/- submitted by the appellant was admitted by the liquidator under the category of operational creditor.

# 6. Ld. Sr. Counsel appearing on behalf of the Respondent has submitted that the decision in the case of Nurani Subramanian (Supra) will not apply to the facts of the case and has rather relied on three decisions of the Hon’ble Supreme Court in the case of Moser Baer Karamchari Union vs. Union of India & Ors., (2023) 9 SCC 499, Sunil Kumar Jain & Ors. vs. Sundaresh Bhatt & Ors. (2022) 7 SCC 540 and K. Kishan vs. Vijay Nirman Company Pvt. Ltd. (2018) 17 SCC 662.

# 7. We have heard Counsel for the parties and after examining the record, are of the considered opinion that the controversy at hand is squarely covered by the decision of this court in the case of Nurani Subramanian (Supra) and the Judgments relied upon by the Respondents are not applicable as the said judgments are not on the issue of ESI.

# 8. In view of the aforesaid discussion, the present appeal is hereby allowed and the impugned order is set aside.

# 9. The parties shall bear their own costs.

# 10. Pending IA’s if any are hereby closed.

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