Section 14 Of IBC Does Not Differentiate Between Assessment, Quasi-Judicial Or Judicial Proceedings: NCLT Mumbai

Update: 2022-08-18 06:24 GMT

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), while adjudicating an application filed in M/S Ravi Infrastructure & Projects v KSS Petron Private Limited, has held that Section 14 of the Insolvency and Bankruptcy Code, 2016 ("IBC") does not differentiate between assessment, quasi-judicial or judicial proceedings and moratorium is imposed on all proceedings irrespective of the nature. The Bench has set aside the assessment proceedings initiated by the Provident Fund Commissioner during the moratorium period.


M/S Ravi Infrastructure & Projects had filed a petition under Section 9 of the IBC seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against KSS Petron Pvt. Ltd. ("Corporate Debtor"). The Adjudicating Authority had admitted the petition and CIRP was initiated on 01.08.2017. Consequently, moratorium was imposed under Section 14 of the IBC. The Provident Fund Commissioner ("Respondent") had submitted its claim before the then Resolution Professional on 22.06.2018 for an amount Rs. 47,25,682/- for the period of March 2012 to October 2015 and June 2015 to March 2017; the claim was duly admitted by the then Resolution Professional under the List of Creditors of Corporate Debtor.

Subsequently, the Respondents initiated inquiry under Section 7A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("EPF & MP Act, 1952") based on a report prepared by Enforcement Officer. The inquiry was initiated vide notice dated 30.01.2019 for the period of April 2015 to December 2018. Despite being informed by the Resolution Professional regarding CIRP commencement and imposition of moratorium, the Respondent continued its proceedings and issued summons on 04.06.2019 and 02.07.2019 under Section 7A and 14B of the EPF & MP Act, 1952. In the meanwhile, Adjudicating Authority had passed an order for liquidation of the Corporate Debtor on 28.06.2019.

Thereafter, the Respondent had issued Orders dated 05.07.2019 to the Corporate Debtor, passed under Section 7A, 7Q and 14B of EPF &MP Act, 1952, demanding Rs. 14,40,58,888/-, alongwith Rs. 6,43,84,526/- towards interest component and Rs. 13,02,25,964/- towards damages and penalty. Subsequently, the Respondent had issued notices dated 28.06.2020 and 07.07.2020 seeking recovery of the amounts in respect to those Orders.

The Liquidator ("Applicant") had challenged the notices seeking recovery of amounts from Corporate Debtor on the premise that these orders were passed in violation of the moratorium period and the inquiry under Section 7A had no basis, as there is no outstanding liability of the Provident Fund dues.


The Respondent argued that determination of the amounts of Provident Fund dues are assessment proceedings and are not barred under Section 14 of IBC. Only after completion of the assessment proceedings a claim could be filed under the IBC. It was further submitted that the dues of the Respondent were required to be paid in priority over all dues provided under Section 11 of the EPF & MP Act, as the said dues are excluded from the Liquidation Estate under Section 36 of IBC.


The Applicant submitted that till date no claims were submitted by the EPF authorities claiming any dues under the EPF & MP Act, 1952 and in case, any such claims are made, the Applicant would deal with such claims in accordance with IBC and the law laid down by the Courts. Further, the Respondent failed to provide details of the employees and their provident fund numbers in respect of whom the alleged dues were being claimed. In absence of these details, no dues could exist.


The Bench observed that Section 14 of IBC imposes complete prohibition on the institution of suits or continuation of proceedings against the Corporate Debtor, including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel or other authority. Section 14 does not differentiate between any proceedings, whether they are assessment, quasi-judicial or judicial in nature. In fact, a moratorium is imposed on all proceedings irrespective of the nature. The object is to shield the Corporate Debtor from all pecuniary attacks.

The Bench opined that the proceedings initiated by the Respondent were not merely assessment proceedings, rather judicial proceedings which encompassed evidence to be led by parties to reach to a conclusion whether any amount is due or payable under the EPF & MP Act. Further, in case any amount is due or payable, the Respondent, in terms of provisions of the EPF & MP Act can also impose penalty and damages. The initiation of proceedings by the Respondent would therefore entail imposition of a pecuniary liability on the Corporate Debtor. This is exactly what is prohibited by the IBC.

It was further observed that a claim which is not alive on the insolvency Commencement Date, cannot indirectly be permitted to be ascertained, as it would lead to numerous proceedings the Corporate Debtor which will frustrate the object of the IBC and the completion of the CIRP in time.

The Bench granted liberty to the employees or workmen to file their respective claims, if any, with the Applicant under the provisions of the IBC in respect of dues toward provident fund, pension fund and gratuity fund and the Liquidator would be duty bound to ascertain and prioritise the payments of the social welfare dues.

The Bench set aside the recovery notices issued by the Respondents.

Case Title: M/S Ravi Infrastructure & Projects v KSS Petron Private Limited, CP (IB) 1202/MB/C-II/2017

Counsel for the Applicant/Liquidator: Adv. Mr. Sandeep Bajaj

Click Here To Read/Download Order


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