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Provident Fund Dues Are Not Assets Of Corporate Debtor, They Have To Be Paid In Full: NCLAT Delhi

Pallavi Mishra
11 Nov 2022 1:15 PM GMT
Provident Fund Dues Are Not Assets Of Corporate Debtor, They Have To Be Paid In Full: NCLAT Delhi
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The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Assam Tea Employees Provident Fund Organization v Mr. Madhur Agarwal & Anr., has held that provident fund dues are not the assets of the Corporate Debtor and they have to be paid in full.

Background Facts

HAIL Tea Limited ("Corporate Debtor") was admitted into Corporate Insolvency Resolution Process ("CIRP") vide an order dated 21.01.2020 passed by the Adjudicating Authority.

Assam Tea Employees Provident Fund Organization ("Appellant") submitted its claim in Form-B for an amount of Rs. 2,10,13,797.92/-. The claim was on account of Corporate Debtor's default in depositing Provident Fund Contribution, Provident Fund Administrative Cost, Interest for delay etc.

The Resolution Professional admitted the entire claim of the Appellant worth Rs. 2,10,13,797.92/-. On 03.01.2022, the Resolution Plan submitted by the Successful Resolution Applicant for the Corporate Debtor was approved by the Adjudicating Authority. The approved Resolution Plan had earmarked only Rs. 1,07,21,592/- against the Appellant's claim. The Resolution professional made part payment of Rs. 64,30,222/- to the Appellant. The Appellant filed an appeal before the NCLAT challenging the judgment dated 03.01.2022.

Contentions Of Appellant

The Appellant argued that its claim was liable to be paid in full since the Resolution Professional had admitted the full amount of Rs. 2,10,13,797.92/-. Non-payment of the full amount was violative of Section 30(2)(e) of IBC. Further, Provident Fund Dues are not dues of any other Operational Creditor.

Contentions Of Respondent

The Resolution Professional submitted that approval of Resolution Plan is within commercial wisdom of the Committee of Creditors. Moreover, the Appellant was an Operational Creditor and haircut was given to all the Financial Creditors and Operational Creditors.

Decision Of NCLAT

The Bench placed reliance on its recent judgment in Regional P.F. Commissioner v Ashish Chhawchharia, Resolution Professional for Jet Airways (India) Ltd. & Anr., Company Appeal (AT) Ins. No. 987 of 2022, wherein it has been held that provident fund dues have to be paid in full. It was observed that the Resolution Professional's contention that Appellant is an Operational Creditor and both Operational Creditor and Financial Creditor have taken haircut is not acceptable. The Bench held that provident fund dues are not the assets of the Corporate Debtor and they have to be paid in full. The Appellant was clearly entitled for payment of full provident fund dues i.e. an amount of Rs. 2,10,13,798/-.

The Successful Resolution Applicant was directed to make the payment of balance amount of Provident Fund to the Appellant to save the Resolution Plan from invalidity.

Case Title: Assam Tea Employees Provident Fund Organization v Mr. Madhur Agarwal & Anr.

Case No.: Company Appeal (AT) (Insolvency) No. 262 of 2022

Counsel For Appellant: Mr. Karan Mehra, Advocate.

Counsel For Respondent: Mr. Dhruv Surana, Mr. Madhav Bhatia, Mr. Aditya Pandey, Advocate for R-1 Mr. Mohit Yadav, Mr. R.Pratap Singh, Advocates for R-2

Click Here To Read/Download Order

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