In an appeal preferred by the Appellant in the case Regional Provident Commissioner Employees Provident Fund Organisation v Vandana Garg & Ors., the Corporate Debtor (CD), “GVR Infra Projects Limited” defaulted in payment of dues/damages/interest, including the employees share of contribution, since 2014, which were deducted from employees’ wages. The issue before the Tribunal was whether any claims raised after the approval of the Resolution Plan can be accepted.
The Adjudicating Authority initiated CIRP against the CD for defaulting in payments of dues/damages/interest, including employees share of contributions, since April 2014, which were deducted from their wages. The appellant submitted its claims to the Resolution Professional (RP). The RP asked the Appellant to submit the claims again in a different form. As per the documents submitted by the Appellant, a claim of Rs. 1,95,01,301 was admitted by the RP that included the PF dues of the CD from May 2017 to April 2019.
The Appellant contended that the Adjudicating Authority upheld a Resolution Plan which waves off the major portion of the Provident Fund dues owed by the Corporate Debtor. The Appellant contended a claim of Rs. 2,84,69,797 exists which is much greater than the claim that was admitted by the RP. It was argued that waving off the Provident Fund dues is not only the violation of Section 11 of the Employees Provident Fund Act (EPF Act), which lays down the priority of charge of Provident Fund dues but also a violation of Section 36 (4) (a) (iii) and Section 30 (2) (e) of The Insolvency and Bankruptcy Code 2016 (IBC) which lays down that the Provident Fund dues are outside Liquidation Estate. The Adjudicating Authority has failed to consider that Provident Fund dues ought to be given priority over all other dues owed by the CD.
The Respondent (R1) contended that the Appellant’s claim amounting to ₹1,95,01,301/- has been dealt with in the Resolution Plan in conformity with Section 30 (2) of the IBC 2016. The resolution plan was approved by the CoC. The Appellant has not provided any reason or justification for raising the enhanced claim of ₹ 2,84,69,797/-, which is much higher than the amount claimed.
As per the R1, the Resolution Plan subsumed all the Financial Creditors, Operational Creditors, and any pending statutory dues per the payout plan under the Resolution Plan. The Resolution Plan also subsumes all the dues of the Appellant as well, and the total claim amount of ₹ 1,95,01,301/, as filed. Despite this, the Appellant raised an additional claim. As per the IBC, the debts of the Corporate Debtor stood crystallized as on the date of initiation of CIRP. Hence, no changes can be
Furthermore, sec. 36(4)(a)(ii) of the IBC applies only upon the formation of Liquidation Estate and in this case the CD has not gone into liquidation.
Moreover, no separate corpus was maintained for the Provident Fund by the Corporate Debtor in the present case. Therefore, in the absence of any such funds of any recurring cash flows with the CD, R1 is not in a position to now make provision for the payment of Provident Fund dues. Therefore, no fund could be excluded from the Liquidation Estate in terms of Section 36 (4) (a) (iii) of the IBC.
R2 contended that as per sec 31 of IBC, once a resolution plan is approved, it is binding on the CD, Stakeholders, including the statutory authorities, to whom the CD owes any debt. No preferential treatment can be given to the creditor who has submitted a claim with the Resolution Professional.
It was established by the Hon’ble Supreme Court in the case Committee of Creditors of Essar Steel India Ltd versus Satish Kumar Gupta that all claims which have not been submitted to or dealt with by the Resolution Professional stood extinguished. An RP cannot suddenly be faced with ‘undecided’ claims after the resolution plan submitted by him has been accepted.
FINDINGS OF THE BENCH
After analyzing the contention of both the parties, and analyzing the previous judgements, the Court held that, if under Sec 31, the Resolution Plan is approved, the claims in the Resolution Plan stand frozen and are binding on the Corporate Debtor and its employees, members, creditors including the Central Government, any State Government or any Local Authority, Guarantors and other Stakeholders. All the other claims that are not part of the Resolution Plan are extinguished and no person will be entitled to initiate continuing any proceedings regarding a claim that is not part of the Resolution Plan.
In regards to the applicability of Section 36 (4) (a) (iii) of the IBC in this case, the Tribunal was of the opinion that the question of applicability arises at the stage of the formation of Liquidation Estate by the Liquidator. Since the Corporate Debtor has not gone into Liquidation and is currently under Insolvency Resolution, Section 36 of the IBC cannot be applied. Moreover, no fund could be excluded from the Liquidation Estate in terms of Section 36 (4) (a)(iii) of the IBC 2016. Furthermore, as per the case Mr. Savan Godiwala, Liquidator of Lanco Infratech Ltd v Apalla Siva Kumar it is the settled position of law that the provident fund, the pension fund and the gratuity fund, do not come within the purview of ‘liquidation estate ‘for the purpose of distribution of assets under Section 53 of the Code.
Finally, it was held that in a case, where no fund is created by a company, in violation of the Statutory provision of the Sec 4 of the Payment of Gratuity Act, 1972, then in that situation also, the Liquidator cannot be directed to make the payment of gratuity to the employees because the Liquidator has no domain to deal with the properties of the Corporate Debtor, which are not part of the liquidation estate.
Therefore, the claim of Appellant that the about the provident Fund dues amounting to Rs. 2,84,69,797/-, which is much higher than the amount claimed is not justified and the claim of Rs. 1,95,01,301 which was earlier raised at the time of initiation of CIRP and was later admitted, stood frozen and will be binding on all the Stakeholders, including the Central Government.
Author: Rohan Bhargava, a fifth year student of Law from Dr. Ram Manohar Lohiya National Law University
 Regional Provident Commissioner Employees Provident Fund Organisation v Vandana Garg & Ors., Company Appeal (AT) (CH) (Ins.) No. 50 of 2021.
 Committee of Creditors of Essar Steel India Limited (through authorized signatory) v. Satish Kumar Gupta and Others, (2020) 8 SCC 531.
 Mr. Savan Godiwala, Liquidator of Lanco Infratech Ltd v Apalla Siva Kumar, Company Appeal (AT) (insolvency) No 1229 of 2019.