PF Dues: No Assessment Proceedings During Moratorium

In a judgment dated January 3, 2025, the National Company Law Appellate Tribunal (NCLAT) upheld the decision of the Adjudicating Authority, ruling that assessment proceedings cannot be continued by the Employees’ Provident Fund Organisation (the appellant herein) after initiation of the moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016.[1]

In the present case, the appellant passed assessment orders under Section 7A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, subsequent to the commencement of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtors, M/s. Decent Laminates Pvt. Ltd. and Apollo Soyuz Electricals P. Ltd. As the assessment was carried out during the moratorium imposed under Section 14 of the Code, the Adjudicating Authority rejected applications seeking admission of claims towards PF dues. This led the appellant to file appeals before the NCLAT challenging orders of the Adjudicating Authority.

The NCLAT emphasised that the term used in Section 14(1) of the Code, was ‘proceedings’ and the one used in Section 33(5) of the Code was ‘legal proceeding’, implying that the bar under Section 14(1) extended to assessment proceedings conducted by statutory authorities. It was reasoned that the intent behind the provision was to ensure that there was no depletion of the corporate debtor’s assets. On the other hand, Section 33(5) did not cover assessment proceedings, thus allowing the initiation and continuation of assessment proceedings once an order of liquidation was passed.  

It was also held that the claims made based on assessments carried out during the moratorium period could not be admitted in the CIRP.

[1] Employees’ Provident Fund Organization v. Jaykumar Pesumal Arlani, RP and Employees’ Provident Fund Organization v. Sanjay Kumar Lalit, RP [Company Appeal (AT) (Ins.) Nos. 1062 & 1065 of 2024]