NCLAT held that while statutory assessments are permissible, they are unenforceable during the moratorium, and claims filed after the approval of the Resolution Plan are inadmissible.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed two appeals and held that while statutory authorities may assess liabilities under the EPF & MP Act, such assessments cannot be enforced against the Corporate Debtor during the moratorium period under Section 14 of the IBC. Furthermore, any claims submitted after the approval of the Resolution Plan are inadmissible, as they do not override the finality of the insolvency resolution process.
The National Company Law Appellate Tribunal (NCLAT) adjudicated two appeals, Company Appeal (AT) (Ins.) No. 1062 of 2024 and Company Appeal (AT) (Ins.) No. 1065 of 2024, arising from the rejection of claims under the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 ("EPF & MP Act") during the Corporate Insolvency Resolution Process ("CIRP"). In Company Appeal (AT) (Ins.) No. 1062 of 2024, the CIRP of Decent Laminate Pvt. Ltd. commenced on 03.05.2021, and the Appellant initiated proceedings under Section 7A of the EPF & MP Act, issuing summons on 22.06.2022 and 09.05.2023. The claim, initially filed for ₹76,09,494 on 11.05.2023 and later revised to ₹1,58,90,685, was rejected by the Resolution Professional ("RP"), citing the prior approval of the Resolution Plan by the Committee of Creditors ("CoC"). The Adjudicating Authority upheld the RP’s decision, dismissing IA No. 1111 of 2023 on the ground that belated claims post-approval of the Resolution Plan were not maintainable.
In Company Appeal (AT) (Ins.) No. 1065 of 2024, the CIRP of Apollo Soyuz Electricals Pvt. Ltd. commenced on 12.07.2021, and an assessment order under Section 7A was passed on 29.08.2022 for ₹10,89,938. The RP refused to entertain the claim on the premise that the CoC had already approved the Resolution Plan. The Adjudicating Authority, in its order dated 22.08.2023, held that the assessment order was issued during the moratorium period and was, therefore, barred under Section 14 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), leading to the rejection of IA No. 743 of 2023.
The NCLAT deliberated on whether assessment proceedings under the EPF & MP Act could continue post-moratorium and whether claims submitted after the approval of the Resolution Plan could be entertained. Referring to the Supreme Court’s ruling in Sundresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, REEDLAW 2022 SC 08611, the Tribunal reaffirmed that while statutory dues could be assessed, their enforcement against the Corporate Debtor during the moratorium period was barred. Since the claims in question were filed after the conclusion of the moratorium and approval of the Resolution Plan, the Tribunal deemed them inadmissible and dismissed the appeals.
The Hon’ble Supreme Court has previously examined the interpretation of “legal proceeding” under Section 446(1) of the Companies Act, 1956, concluding that tax assessment proceedings under the Income Tax Act were not covered within its ambit. It held that a Company Court overseeing the winding-up process could not assume the powers of an Income Tax Officer for assessment purposes and that unsecured creditors, including tax authorities, could not claim priority over other creditors in liquidation proceedings. Furthermore, the Court distinguished between Section 446(1) of the Companies Act and Section 14(1) of the IBC, clarifying that proceedings leading to depletion of assets or creation of liabilities were impermissible post-moratorium.
In Sundresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, REEDLAW 2022 SC 08611, the Supreme Court examined the interplay between the IBC and the Customs Act, ruling that demand notices for customs dues issued post-CIRP initiation contravened the moratorium under Section 14 or 33(5) of the IBC. The Court underscored that, while tax authorities could assess liabilities, they could not enforce recovery proceedings against the Corporate Debtor during the moratorium. It reiterated that the IBC, as a later and overriding statute, prevailed over the Customs Act, and conflicting provisions of the latter must yield to the overriding effect of Section 238 of the IBC. Consequently, the NCLAT, in line with settled jurisprudence, rejected the claims under the EPF & MP Act and dismissed the appeals.
Mr. Sandeep Vishnu, Advocate, represented the Appellant, but his appearance was not marked.
Mr. Vashisht, Advocate, appeared for Respondent No. 1.
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