NCLT Bengaluru Rejects EPFO Claim For PF Dues In Dunlop Polymers Insolvency

The National Company Law Tribunal (NCLT) at Bengaluru has dismissed an application filed by the Regional Provident Fund Commissioner (Legal) in the insolvency proceedings of Dunlop Polymers Private Limited. The tribunal held that EPFO cannot seek remittance of provident fund dues during the moratorium when its claim has not been admitted in the Corporate Insolvency Resolution Process.

A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada held that the relief sought would amount to enforcement of statutory dues during the subsistence of the moratorium under Section 14 of the Insolvency and Bankruptcy Code. Such enforcement is impermissible.

The EPFO alleged that the company had defaulted in remitting provident fund contributions. It initiated proceedings under Sections 7A, 14B and 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. These proceedings resulted in determinations of dues along with damages and interest.

Corporate Insolvency Resolution Process against the company commenced on June 25, 2019. EPFO stated that it had submitted its claim in Form B before the Interim Resolution Professional on January 29, 2020. It also relied on subsequent communications. However, it contended that the IRP failed to recognise the statutory dues.

Asserting that provident fund dues are excluded from the liquidation estate under Section 36(4) of the IBC, EPFO sought recognition of its claim. It also sought payment of Rs. 27,783,833/- towards provident fund dues, damages, and interest.

Opposing the plea, the IRP contended that no valid claim in Form B, supported by documents and acknowledgment, had been filed within the prescribed timeline pursuant to the public announcement dated June 29, 2019. It was further submitted that the resolution plan had already been approved by the Committee of Creditors. The plan is pending consideration before the Tribunal.

The bench observed that EPFO failed to produce any acknowledgment or contemporaneous material to demonstrate that a valid claim had been lodged within the prescribed timeline under the CIRP Regulations.

“Mere assertion of having sent letters or emails cannot substitute compliance with the statutory procedure for filing claims,” the tribunal held.

Rejecting EPFO's reliance on Section 36(4), the bench observed:

“The Applicant's reliance on Section 36(4) of the IBC, which excludes provident fund dues from the liquidation estate, does not ipso facto entitle the Applicant to seek immediate remittance or enforcement during CIRP, particularly in the absence of an admitted claim. The exclusion under Section 36(4) operates in the context of liquidation and does not override the procedural discipline mandated during CIRP.”

The tribunal clarified that if any portion of the claimed amount represents employees' contributions already deducted from wages but not remitted, such amounts would not partake of the character of assets of the corporate debtor. They must ordinarily remain segregated in law.

“The RP needs to take care that such deducted but not paid PF contribution of Employees and Employer are kept apart for remittance before disbursal of proceeds of CD under Section 53 of IBC,” it added.

Holding that the directions sought would amount to enforcement of statutory dues during the moratorium, the tribunal dismissed the application. It clarified that the order would not preclude EPFO from availing any other remedy available in law under the EPF Act or otherwise, subject to the limitations imposed by the IBC.

For Applicant: Advocate B V Vidyulatha

For IRP: Advocate Hemanth Rao