Claims Submitted After Resolution Plan Approval Including Related Moratorium Period Not Allowed Under IBC: NCLT Bengaluru

The bench held that permitting such belated claims at a later stage would interfere with the Corporate Insolvency Resolution Process.

Brief Facts:

The matter pertained to an application filed by the Employee's Provident Fund Organisation (EPFO) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The EPFO sought to condone a delay of 370 days in filing claims for Provident Fund dues of the Corporate Debtor (CD) before the Resolution Professional (RP). The delay was attributed to the CD's failure to produce necessary records which impeded the timely formulation of dues. The EPFO also requested an appropriate direction for the RP to consider its claim under Section 36(4)(a)(iii) and to prioritize the payment of statutory PF dues in accordance with Section 11 of the EPF & MP Act, 1952.

The petition was admitted by NCLT and the erstwhile RP made a public announcement inviting claims. The deadline for submission of claims was set for May 6, 2022. The RP was appointed on August 3, 2022. The establishment defaulted in paying PF contributions and related dues for eligible employees which caused evasion of statutory payments. On July 10, 2023, the EPFO demanded payment of statutory dues amounting to Rs. 3,84,08,033/-. However, the RP rejected this claim via email stating non-compliance with the 90-day filing requirement.

The delay was reportedly due to the RP not directly informing the EPFO about the initiation of CIRP and the new RP's appointment was only communicated after the deadline. The EPFO attempted to obtain records from the RP and the establishment but faced delays. Following a report, which noted discrepancies in employee wages and PF contributions, the EPFO recalculated dues including interest and penalties. The EPFO's claim was again submitted on July 10, 2023. The RP requested additional time to collate information but later informed that the dues were finalized by the Committee of Creditors (CoC).

The EPFO contended that the establishment evaded PF contributions by not generating Universal Account Numbers (UAN) for numerous employees.

Observations by the NCLT:

The NCLT noted that the Applicant's claim was submitted on July 10, 2023 which was significantly delayed by 370 days from the extended deadline of July 6, 2022. This deadline was set as 90 days from the commencement of the CIRP. The public notice in newspapers specified that claims should be filed by May 6, 2022. The CoC approved the Resolution Plan during their 11th meeting on June 7, 2023 and an application for adjudication was filed with the Tribunal on June 9, 2023. Moreover, the Applicant was aware of the CIRP proceedings as indicated by its communication with the RP regarding the required documents.

The NCLT noted that the RP's letter highlighted that some employees did not have Unique Identification Numbers (UIN) due to missing Know Your Customer (KYC) documents, and some employees left the company which made the claim erroneous. The Applicant argued that the penalties and interest levied by the EPGO were government dues. The NCLT noted that while dues payable to employees are protected under Section 36(4)(a)(iii) of the IBC, this protection does not extend to penalties and interest under Sections 7Q and 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Applicant's claim included Rs. 1,65,779/- for penalties and interest, which was deemed payable to the government and Rs. 2,18,30,133/- for dues which included the moratorium period from April 7, 2022 to the commencement of CIRP.

The NCLT held that belated claims made after the approval of the Resolution Plan, including those pertaining to the moratorium period, are not permissible under the IBC. The bench held that the inspection conducted by the Area Enforcement Officer for the period April 2019 to November 2022, including the moratorium period, supported this view. The NCLT held that allowing such claims at latter stage would disrupt the CIRP process.

The NCLT referred to the decision of the Supreme Court in RPS Infrastructure Ltd. Vs. Mukul Kumar where it was held that the CIRP must proceed without unnecessary delays. The Supreme Court held that once the Resolution Plan is approved, reopening claims could prolong the process and disrupt its purpose.

The NCLT also referred to the NCLAT's order in The Regional Provident Fund Commissioner vs. M/s. Adept Technology Private Limited and the NCLT Ahmedabad's decision in The Assistant Provident Fund Commissioner vs. Jaykumar Pesumal Arlani, both of which supported the rejection of belated claims post-Resolution Plan approval.

Consequently, the NCLT held that the application was not maintainable.

Case Title: Employee's provident Fund Organisation vs CA Shirley Mathew

Case Number: I.A. No.4 & 87 of 2024 U/s 60(5) of the IBC, 2016 in C.P.(IB)No.36/BB/2022

For the RP : Shri C.K.Nandakumar (Sr.Adv.) With Ms.Maitreyi Bhat

RP : Ms.Shirley Mathew

For the Applicant in I.A 87/24 : Shri Sandeep H

For the Applicant in I.A 4/24 : Shri Saravana P

Date of Judgment: 09.07.2024

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