No Conflict Between Section 17B Of The PF Act And IBC, NCLAT Directs Full Payment Of PF

An appeal was filed u/s 61 of the IBC by the Appellant, who worked as a 'Supervisor' with the Corporate Debtor in CIRP, seeking to set aside the resolution plan under which did not consider payment of full Provident Fund dues, due to him under the Employees Provident Fund and Miscellaneous Provisions Act, 1952.

The Tribunal analysed the provisions u/s of Section 31(1), Section 30(2), Section 36(4)(a)(iii) and Section 238 of the IBC and held that the resolution plan does not contravene any provisions of the existing law and the Resolution Professional/ Adjudicating Authority(AA) is required to look at the compliance of law for the time being force.

When read with Section 17-B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, it is made amply clear that the Resolution Applicant is required to pay the contribution and other sums due from the employer as per the provisions of the PF Act. It is the duty of the Resolution Professional/AA to see that the law is being complied with, and it is not a question of the commercial wisdom of the CoC.

The Tribunal held that since there is no conflict between the provisions of the PF Act and the IBC, the question of applicability of Section 238 does not arise. Tribunal relied on the judgment of the NCLAT in Tourism Finance Corporation of India Ltd. Vs. Rainbow Papers Ltd. & Ors. in this regard. It was also held that provident fund dues are not considered to be assets of the Corporate Debtor, as has been clarified by the provisions of Section 36(4)(a)(iii) of the IBC.

For reaching at the decision, the Tribunal relied on the decision of the Supreme Court in State of Jharkhand and Ors. Vs. Jiterdra Kumar Srivastava and Anr. While discussing the nature of gratuity and pension, Supreme Court has held that-

"It is thus hard earned benefit which accrues to an employee and is in the nature of "property". This right to property cannot be taken away without the due process of law as per the provisions of Article 300 A of the Constitution of India."

The NCLAT allowed the appeal, directing the successful Resolution Applicant to release the amount due to employees under the provisions of the Employees Provident Funds and Miscellaneous Provisions Fund Act, 1952.

Counsel for the Appellant: Mr. Shantanu Awasthi, Mr. Shikhar Mittal, Advocates.

Counsel for the Respondents: Mr. Abhishek Anand, Mr. Sahil Bhatia, Advocates for RP Mr. ManishKaushik, Mr. Anubhav Gupta, Mr. Ajit Singh Joher, Advocates for R2 & 3

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