The National Company Law Appellate Tribunal has clarified that claims for damages and interest under the Employees Provident and Miscellaneous Provisions Act, 1952, arising during the moratorium period under the Insolvency and Bankruptcy Code, 2016, are inadmissible in the Corporate Insolvency Resolution Process. This ruling reinforces the statutory prohibition on enforcement actions during CIRP and aligns with the principle of pari passu distribution among creditors.
Background & Facts
The Dispute
The Employees Provident Fund Organisation (EPFO), Amritsar, sought to recover Rs. 1,42,16,709/- from the corporate debtor, Shiva Shakti Grains (India) Pvt. Ltd., comprising unpaid provident fund contributions, damages, and interest under Sections 7A, 14B, and 7Q of the EPF Act. The claim was filed during the Corporate Insolvency Resolution Process (CIRP) initiated against the corporate debtor.
Key Facts
The corporate debtor defaulted on statutory EPF contributions for the period 2018 - 2023
The EPFO initiated assessment proceedings under Section 7A of the EPF Act on 15.04.2024
The assessment order was passed on 20.08.2024, determining dues of Rs. 1,42,16,709/- including Rs. 89,25,000/- as damages and interest
The Corporate Insolvency Resolution Process was initiated on 10.06.2025 under Section 7 of the IBC
The moratorium under Section 14 of the IBC came into effect on 10.06.2025
The Resolution Professional (RP) rejected EPFO’s claim as inadmissible under the moratorium
EPFO filed I.A. No. 526 of 2025 before the NCLT, Chandigarh, seeking admission of its claim
Procedural History
10.06.2025: Corporate Insolvency Resolution Process initiated against Shiva Shakti Grains (India) Pvt. Ltd.
15.04.2024: EPFO initiated assessment proceedings under Section 7A of the EPF Act
20.08.2024: EPFO issued assessment order for Rs. 1,42,16,709/- including damages and interest
12.11.2025: NCLT, Chandigarh, dismissed I.A. No. 526/2025 filed by EPFO
03.09.2025: NCLAT delivered judgment in Pankaj Shah v. EPFO, holding EPF claims for damages and interest inadmissible during moratorium
09.10.2025: NCLT, Chandigarh, heard arguments in the present matter; RP relied on Pankaj Shah precedent
09.04.2026: NCLAT heard appeal and condoned 13-day delay in filing
Relief Sought
EPFO sought reversal of the NCLT order dated 12.11.2025 and direction to admit its claim of Rs. 1,42,16,709/- as a financial debt under Section 5(8) of the IBC, including damages and interest.
The Legal Issue
The central question was whether claims for damages and interest under Sections 7A, 14B, and 7Q of the Employees Provident and Miscellaneous Provisions Act, 1952, arising during the moratorium period under Section 14 of the IBC, are admissible in the Corporate Insolvency Resolution Process.
Arguments Presented
For the Appellant
EPFO contended that its claim was not merely a penalty but a statutory entitlement under the EPF Act, and that the moratorium under Section 14 of the IBC does not bar recovery of statutory dues. It argued that the Pankaj Shah judgment was distinguishable as it involved a different factual matrix and that EPF contributions are akin to wages under Section 53(1)(b) of the IBC. EPFO further submitted that the NCLT erred in not considering the legislative intent behind Section 7A, which imposes damages to deter non-compliance.
For the Respondent
The Resolution Professional relied on the binding precedent of Pankaj Shah v. EPFO (03.09.2025), wherein the NCLAT held that assessment proceedings under the EPF Act are prohibited during moratorium and any claim based on such proceedings is inadmissible. The RP argued that damages and interest under Sections 7A and 14B are not part of the principal contribution and are punitive in nature, falling squarely within the scope of Section 14(1)(a) and (c) of the IBC, which prohibit enforcement of any security interest or institution of suits.
The Court's Analysis
The NCLAT examined the scope of Section 14 of the IBC, which imposes a moratorium prohibiting the institution or continuation of any suit or legal proceeding against the corporate debtor. The Tribunal noted that the EPFO’s claim was not for the principal contribution but for damages and interest assessed during the moratorium period.
"No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1), can be pressed in the CIRP."
The Tribunal held that the Pankaj Shah precedent was directly applicable. It emphasized that the EPF Act’s assessment mechanism, even if statutory, constitutes a legal proceeding under Section 14(1)(a). The Tribunal rejected EPFO’s argument that such claims should be treated as operational debts, noting that damages and interest are not part of the statutory contribution but are penal in nature and arise from non-compliance.
The Court further clarified that while principal contributions under the EPF Act may be treated as operational debt under Section 5(21) of the IBC, claims for damages and interest are not. The Tribunal observed that allowing such claims would undermine the purpose of the moratorium, which is to preserve the corporate debtor’s assets for equitable distribution among all creditors.
The Verdict
The appeal was dismissed. The NCLAT upheld the NCLT’s order dated 12.11.2025, holding that the EPFO’s claim for damages and interest of Rs. 1,42,16,709/- under Sections 7A, 14B, and 7Q of the EPF Act is inadmissible in the Corporate Insolvency Resolution Process. The Tribunal confirmed that any claim based on assessment proceedings initiated or continued during the moratorium period under Section 14 of the IBC cannot be enforced.
What This Means For Similar Cases
EPF Damages Are Not Operational Debt
Practitioners must distinguish between principal EPF contributions (potentially operational debt) and damages/interest (inadmissible during CIRP)
Claims for penalties under labor or social security statutes must be evaluated for punitive nature, not statutory origin
Moratorium Overrides Statutory Assessment Powers
Even statutory authorities like EPFO, ESIC, or Income Tax cannot initiate or continue assessments during moratorium
Any assessment order passed during moratorium is void for the purposes of CIRP
Precedent Binding Across Tribunals
Pankaj Shah v. EPFO is now binding precedent for all NCLT benches and NCLAT
Counsel must cite this judgment to oppose claims for interest, penalties, or damages under any statute during CIRP
