Teena Saraswat Pandey vs Regional Provident Fund Commissioner
I.A. 962 OF 2022 IN C.P.(IB) No. 3703/MB/2019
Facts:
1.Company Petition No. 3703 of 2019 was admitted vide order dated 24.01.2020 under Section 7 of the Code and the Corporate Insolvency Resolution Process was commenced against the Corporate Debtor. Mr. Navin Khandelwal as the IRP who was subsequently replaced by the Applicant herein as the RP.
2.Application is filed by the Applicant, namely under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with rule 11 of the National Company Law tribunal Rules, 2016 (“NCLT Rules”) seeking directions to the Regional Provident Fund Commissioner (hereinafter referred to as “Respondent”) to remove the lien and release the amount which is held in its custody during the Corporate Insolvency Resolution Process.
Issue: Whether an Attachment on Corporate Debtor’s bank account that was imposed before the initiation of CIRP, can continue during Moratorium under Section 14 of IBC?
Arguments:
For Applicant:
1.Applicant has submitted that the Respondent had filed its claim vide email dated 01.12.2020 for an amount of Rs.2,98,11,102/- which the erstwhile IRP had accepted vide email dated 01.12.2020. In respect of the said claim, the Respondent had passed multiple orders calling upon the Corporate Debtor to pay the outstanding dues.
2.Applicant has submitted that the erstwhile IRP had communicated to the Respondent via email dated 16.04.2021 about the Initiation of CIRP and informed the Respondent that in order to meet the CIRP expenses, the HDFC bank Account needs to be maintained by the erstwhile IRP only and all the other signatories had to be suspended. Further, the erstwhile IRP had also requested the Respondent to instruct the HDFC Bank to remove the lien on the Corporate Debtors Account.
3.Applicant has submitted that vide emails dated 21.08.2021 and 09.09.2021, she has communicated with the authorized representative of the Respondent and requested the Respondent to release the lien on the bank account in which an amount of Rs.3,81,676.32 was received from the prospective Resolution Applicants during the CIRP.
For Respondent:
1.Respondent submitted that the Code only provides for moratorium against commercial claims whereas EPF dues are social dues for the welfare of the workers and such statutory dues need to be assessed and recovered in the interest of the workmen so that their financial interests can be secured.
2.Respondent has further placed its reliance upon Section 529 of Companies Act 1956 and has submitted that the official liquidator is entitled to represent the workmen and enforce such charge. This section specifically empowers the official liquidator to represent the workmen and to enforce pari passu charge in favour of workmen in realization. Therefore, the official liquidator is duty bound to represent workmen even though no claim has been filed with respect to the provident fund dues.
3.Respondent has further submitted that the dues of workmen have to be given priority under Section of 53 of the IB Code and EPF & MP Act. It has further submitted that the EPFO Authority submitted a claim before the IRP/Liquidator but the same has not been allowed by the IRP/Liquidator.
Decision: An Attachment on Corporate Debtor’s bank account that was imposed before the initiation of CIRP, cannot continue during Moratorium under Section 14 of IBC.
Rationale:
1.NCLT relying on 14(1)(a), it is clear that continuation of pending suits or proceedings against the ‘Corporate Debtor’ including Execution of any Judgment, decree or order in any Court of Law’,Tribunal’, Arbitration Panel’ or otherAuthority’ will temporarily cease to operate during Moratorium’. The purpose of the Section 14 is to ensure that no depletion ofAssets’ of the ‘Corporate Debtor’ takes place during the ‘Corporate Insolvency Resolution Process’ and the ‘Corporate Debtor’ is allowed to continue as a going concern in order to maximise the value for all the `Stakeholders’.
2.It also noted that from the circumstances and intent of legislation that in the present cases, the lien created prior to the initiation of the ‘Corporate Insolvency Resolution Process cannot sustain as it will hinder the entire resolution process.
3.It noted that the amount deducted for Provident Fund’, purely belongs to an Employees’ and is 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. However, it is important to note that such Provident Fund’, has to be an Establishment Fund’, kept separately by the company and only then this proviso will be applicable.
Order Copy:
