Appeal Under Section 42 Of IBC Would Only Lie Against An 'Adjudicating' Order Of The Liquidator: NCLT Mumbai

The Bench has rejected an appeal filed under Section 42 of IBC, whereby Employees Provident Fund Organization challenged a letter sent by the Liquidator at a time when he stood discharged from his duties due to dissolution of the Corporate Debtor.

Background Facts

On 29.08.2019, the NCLT admitted M/s. Kalpyog Chemicals Private Limited (“Corporate Debtor”) into Corporate Insolvency Resolution Process (“CIRP”). Thereafter, on 21.09.2020 NCLT ordered liquidation of Corporate Debtor.

The Employees Provident Fund Organization (“EPFO/Appellant”) passed orders under Section 7A, 7Q and 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (“EPF & MP Act”) against the Corporate Debtor, during the liquidation period. The Liquidator admitted the claim.

The Liquidator paid part dues under section 7A and 7Q of EPF & MP Act on 06.07.2022. Thereafter, on 14.12.2022 the NCLT ordered dissolution of Corporate Debtor.

On 19.04.2023, EPFO addressed a letter to the Liquidator stating that EPFO dues are to be paid in priority of all other debts.

On 26.04.2023, the Liquidator replied to the letter dated 19.04.2023, and informed EPFO that balance claim under Section 14B of the EPF & MP Act are part of the liquidation estate and required to be liquidated as per waterfall mechanism provided under Section 53 of IBC.

The EPFO filed an appeal under Section 42 of IBC, seeking setting aside of order dated 26.04.2023 passed by the Liquidator in respect of remaining provident fund dues.

NCLT VERDICT

The Bench noted that the dissolution order has been passed upon an application filed by Liquidator after completion of liquidation process i.e. distribution of all assets to the creditors as per waterfall mechanism under Section 53 of the IBC.

It was observed after dissolution all liabilities of Corporate Debtor are automatically extinguished. The company ceases to exist as the liquidation process is completed under the supervision of NCLT. Post dissolution, the liquidator has been discharged from his duties as Liquidator.

The Bench accepted the Liquidator's contention that the reply dated 26.04.2023 in response to the EPFO's letter dated 19.04.2023, cannot be treated as an adjudicating order by Liquidator, who stood discharged from his duties upon order of dissolution of Corporate Debtor on 14.12.2022.

“On bare perusal of the abovementioned provision, it is clear that the appeal under section 42 of IBC, 2016 can only be filed against the decision of a Liquidator. Since letter dated 26.04.2023 is not order of Liquidator, hence there is no question of setting aside the same. As far as issue whether amount under 14B of the EPF & MP Act, 1952 is outside liquidation estate of the Corporate Debtor may be decided in an appropriate case.”

The Bench observed that since the Corporate Debtor has been dissolved, there is no question of priority in payment or recovery of EPFO dues.

The appeal has been dismissed.

Case Title: Sai Projects & Engineers Private Limited v Kalpyog Chemicals Private Limited

Case No.: C.P.(IB)/1619(MB)/C-III/2019

Counsel for Appellant: Adv. Uinaq Kafe

Counsel for Respondent: Adv. Laukik Palekar

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