Saturday, 4 November 2023

Imp. Rulings - Section 36(4)(a)(iii); Provident fund, the Pension fund and the Gratuity fund.

Imp. Rulings - Section 36(4)(a)(iii); Provident fund, the Pension fund and the Gratuity fund.


Index; In Resolution Process (CIRP)

  1. NCLAT (2024.03.13) in Regional Provident Fund Commissioner. Vs. Ms. Mamta Binani, RP and Ors [Company Appeal (AT) (Insolvency) No. 245 of 2022]

  2. NCLAT (2022.10.21) in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia RP of Jet Airways (India) Ltd. & Ors.  [Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801 915 of 2021, 361, 771 & 987 of 2022]

  3. NCLAT (2019.12.19) in Regional Provident Fund Commissioner-I, Ahmedabad  Vs. Ramchandra D. Choudhary [Company Appeal (AT) (Insolvency) Nos. 354, 364, 404 & 1001 of 2019]

  4. NCLAT (2019.12.19) in Tourism Finance Corporation of India Ltd. & Ors vs Rainbow Papers Ltd. & Ors. [Company Appeal (AT) (Insolvency) No. 354, 364, 404 & 1001  of 2019]

  5. Supreme Court (2009.10.08) In Maharashtra State Co-operative Bank Ltd. vs The Assistant Provident Fund Commissioner and others (CIVIL APPEAL NO.6893 OF 2009)


Index; In Liquidation process

  1. NCLAT (2024.07.09) in Jitender Kumar Jain Vs. Employee Provident Fund Organisation  [Company Appeal (AT) (Insolvency) No. 1227 of 2024]

  2. NCLAT (2022.09.22) in Mr. B. Parameshwara Udpa RP of M/s. Easun Reyrolle Ltd. Vs. Assistant PF Commissioner EPFO [Company Appeal (AT) (CH) (Ins) No. 231 of 2021]

  3. Supreme Court (2022.04.19) in Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others.  [Civil Appeal  No. 5910 Of 2019 ]

  4. NCLAT (2022.03.11) in Sikander Singh Jamuwal Vs. Vinay Talwar Resolution Professional. (Company Appeal(AT) (Ins)No. 483 of 2019)

  5. NCLAT (2021.04.05) in Technology Development Board Vs.Anil Goel, Liquidator of Gujarat Oleo Chem Limited (GOCL) & Ors.  [Company Appeal (AT) (Insolvency) No.731 of 2020] [Priority of Charge]

  6. NCLAT (2020.02.11) in Mr Savan Godiwala Vs. Mr. Apalla Siva Kumar [Company Appeal (AT) (Insolvency) No. 1229 of 2019 ]

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Blogger’s Comments

A. There is a conflict between section 30(2)(e) & section 238. The Section 11 of the EPF & MP Act 1952, which provides for priority of payment of contributions over all other debts, is in conflict with the arrangements proposed for distribution of funds during Resolution & Liquidation of the Company in the Code. Resolution of the CD can not be equated with recovery of dues of various stakeholders. 


(ii). Section 11(2) EPF & MP Act, 1952 reads as under;

  • # Section 11(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer whether in respect of the employee’s contribution deducted from the wages of the employee or the employer’s contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be id in priority to all other debts.


(iii) In view of the provisions of Section 11(2) EPF & MP Act, 1952, the amount payable/assessed under Section 7A of EPF & MP Act, 1952, can be paid in priority under the resolution plan. Any other amount payable/assessed under Section 7Q & Section 14B of EPF & MP Act, 1952, are required to be treated as Govt./Statutory Dues. 


(iv) .Hon’ble NCLAT (2024.07.09) in Jitender Kumar Jain Vs. Employee Provident Fund Organisation  [Company Appeal (AT) (Insolvency) No. 1227 of 2024] held that; 

  • Accordingly, we direct the Liquidator to admit the dues on account of contribution to Provident fund (both employer and employee) and exclude the corresponding amount from the Liquidation estate to be dealt with in priority of all other claims. 

  • We further direct the Liquidator to admit the dues on account of damages and interest as Operational Debt payable to Statutory Authorities and deal with the same accordingly in terms of section 53 of the Code.

  • That provident fund claims are not part of the liquidation estate and Section 36 has been considered and interpreted which Judgment has also been affirmed by the Hon’ble Supreme Court.

  • That provident fund dues cannot be part of the liquidation estate under Section 36.


B. Relevant  provisions of  Section 36(4)(a)(iii) of the Code, reads as under;

  • # Section 36. Liquidation estate. -, 

  • XXXXX

  • (4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation: -

  • (a) assets owned by a third party which are in possession of the corporate debtor, including -

  • (i) assets held in trust for any third party

  • (ii) bailment contracts;

  • (iii) all sums due to any workmen or employee from the provident fund, the pension fund and the gratuity fund;


(ii). Provident fund, the Pension fund and the Gratuity fund mentioned under Section 36(4)(a)(iii) are funds created/established under the provisions of Section 16A of EPF & MP Act, 1952 & Section 4A(2) of Payment of Gratuity Act, 1972. 


(iii). However, the important question here is whether the amount of employees contribution (PF deducted from the salaries of the workmen & employees) & employer’s (CD’s) contribution towards PF, not deposited with  EPFO can/are to be treated as trust funds in the hands of employer (CD), under the provisions of Section 36(4)(a)(i) of the Code.


(iv). Hon’ble Supreme Court in Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others.  [Civil Appeal  No. 5910 Of 2019 ] held that;

  • # 14(ii) considering Section 36(4) of the IB code and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds.


(v). Hon'ble NCLAT in Mr. B. Parameshwara Udpa RP of M/s. Easun Reyrolle Ltd. Vs. Assistant PF Commissioner EPFO [Company Appeal (AT) (CH) (Ins) No. 231 of 2021] held that;

  • It is therefore evident that amount deducted for `Provident Fund’, purely belongs to an `Employee’ and not to be treated as an `Asset’ of the ‘Corporate Debtor’ and cannot be touched by an `Interim Resolution Professional’/`Resolution Professional’/ `Liquidator’ as the case may be.

  • The Exclusion from the Liquidation Estate Assets as well as from Recovery in Liquidation, as stipulated in Section 36(4)(a)(iii) of I&B Code, 2016, applies in respect of sums due to any workman or employee from the Provident Fund, when the Corporate Debtor has maintained an Establishment fund in terms of Section 16-A of the Employees Provident Fund, Miscellaneous Provisions Act,1952.

  • In a case, where no fund is created by a company, in violation of the Statutory provision the Section 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 `Resolution Professional’ is not duty bound to make adequate provisions for ‘Provident Fund’ when the `Corporate Debtor’ did not have separate `Provident Fund Account’. 


[ Link - Imp. Provisions of PF & Gratuity Act. ]

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1). NCLAT (2024.03.13) in Regional Provident Fund Commissioner. Vs. Ms. Mamta Binani, RP and Ors [Company Appeal (AT) (Insolvency) No. 245 of 2022]

  • Claim of the Appellant submitted under Sections 7A, 7Q and 14B having been admitted, we are of the view that the Appellant’s entire claim require consideration and payments in the Resolution Plan.

  • This Tribunal taking note of the claim under Section 14B took the view that the Central Board is empowered to waive the damages under Section 14B as per the scheme under the 1952 Act.

  • The power of recommendation as contemplated in paragraph 32B scheme can very well be exercised by the NCLT. We while hearing the Appeal against order of NCLT in an appropriate case can make a recommendation to the Central Board to waive the damages.

  • Now coming to another part of the claim which was admitted in the CIRP i.e. amount under Section 7Q amounting to Rs.75,62,576/-. We are of the view that the said amount is required to be paid by SRA to the Appellant.

[ Link Synopsis ]

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2). NCLAT (2022.10.21) in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia RP of Jet Airways (India) Ltd. & Ors.  [Company Appeal (AT) (Insolvency) Nos. 752, 643, 792, 801 915 of 2021, 361, 771 & 987 of 2022] held that;

  • # 72. Our answer to Question II and III is as follows:

(i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii).

(ii) The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 30(2)(b) read with Section 53(1).

  • # 80. As observed above, in admitted claim of workmen provident fund, gratuity and leave encashment was included, and payment proposed in plan partly satisfy above dues also. The workmen are entitled to full payment of provident fund and gratuity, hence, the balance of above dues are to be paid by the Successful Resolution Applicant, to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e), hence, to save the plan the above payments have to be made.

  • # 119. The above judgment lays down that any amount due from employer appearing in sub-section (2) of Section 11 also covers the amount determined under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon’ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in “Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors.” (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in “Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others” (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.

[ Link Synopsis ]

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3). NCLAT (2019.12.19) in Regional Provident Fund Commissioner-I, Ahmedabad  Vs. Ramchandra D. Choudhary [Company Appeal (AT) (Insolvency) Nos. 354, 364, 404 & 1001 of 2019] held that; - 

  • However, as no provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ is in conflict with any of the provisions of the ‘I&B Code’ and, on the other hand, in terms of Section  36 (4) (iii), the ‘provident fund’ and the ‘gratuity fund’ are not the assets of the ‘Corporate Debtor’, there being specific provisions, the application of Section 238 of the ‘I&B Code’ does not arise.

  • Therefore, we direct the ‘Successful Resolution Applicant’- 2nd Respondent (‘Kushal Limited’) to release full provident fund and interest thereof in terms of the provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ immediately, as it does not include as an asset of the ‘Corporate Debtor’. The impugned order dated 27th February, 2019 approving the ‘Resolution Plan’ stands modified to the extent above. The appeal preferred by ‘Regional Provident Fund Commissioner’ is allowed with aforesaid observations and directions. No costs.

[ Link Synopsis ]

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4). NCLAT (2019.12.19) in Tourism Finance Corporation of India Ltd. & Ors vs Rainbow Papers Ltd. & Ors. [Company Appeal (AT) (Insolvency) No. 354, 364, 404 & 1001  of 2019] held that;.

  • # 44. However, as no provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ is in conflict with any of the provisions of the ‘I&B Code’ and, on the other hand, in terms of Section 36 (4) (iii), the ‘provident fund’ and the ‘gratuity fund’ are not the assets of the ‘Corporate Debtor’, there being specific provisions, the application of Section 238 of the ‘I&B Code’ does not arise. 

  • # 45. Therefore, we direct the ‘Successful Resolution Applicant’- 2nd Respondent (‘Kushal Limited’) to release full provident fund and interest thereof in terms of the provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ immediately, as it does not include as an asset of the ‘Corporate Debtor’. The impugned order dated 27th February, 2019 approving the ‘Resolution Plan’ stands modified to the extent above. The appeal preferred by ‘Regional Provident Fund Commissioner’ is allowed with aforesaid observations and directions.

[ Link Synopsis ]

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5). Supreme Court (2009.10.08) In Maharashtra State Co-operative Bank Ltd. vs The Assistant Provident Fund Commissioner and others (CIVIL APPEAL NO.6893 OF 2009) held that;

  • Sub-section (2) of Section 11 of the EPF and MP Act has two facets. First, it declares that the amount due from the employer towards contribution under the EPF and MP Act shall be deemed to be the first charge on the assets of the establishment. Second, it also declares that notwithstanding anything contained in any other law for the time being in force, such debt shall be paid in priority to all other debts. 

  • Taking into consideration that the EPF and MP Act is a social benefit legislation, and the evil consequences of provident fund dues being defeated by prior claims of secured or unsecured creditors, the legislature took care to declare that irrespective of when a debt is created, the dues under the EPF and MP Act would always remain first charge and shall be paid first out of the assets of the establishment. 

  • A Pawnee has no right of foreclosure since he never had absolute ownership at law and his equitable title cannot exceed what is specifically granted by law. In a pledge the pledge is in possession of and has a special property in the goods which he is entitled to detain to secure repayment."

  • We, therefore, hold that the deeds of pledge executed by the management of the Sugar Mills as security for repayment of loan etc. did not have the effect of transferring of the ownership of the sugar bags to the appellant-bank and the Recovery Officer did not commit any illegality by attaching the same and the High Court was fully justified in directing payment of a portion of the sale price to the Assistant Commissioner for being appropriated towards the provident fund dues of the workers.

  • it is not disputed that the pawnbroker has special property rights in the goods pledged, a right higher than a mere right of detention of goods but a right lesser than general property right in the goods.

  • In other words, the sugar bags pledged with the appellant-bank continued to be movable property i.e. assets of the establishment, which could be attached and sold by the Recovery Officer in terms of Section 8B or by adoptingalternative modes of recovery enumerated in Section 8F.

  • Section 11 is declaratory in nature. Sub- section (2) thereof declares that any amount due from an employer shall be deemed to be first charge on the assets of the establishment and shall be paid in priority to all other debts. For recovery of the amount due from an employer which is treated as arrear of land revenue, the Recovery Officer or any other authorized officer has to take recourse to the provisions contained in Section 8 read with Sections 8B and 8F.

  • Therefore, it is not possible to agree with the learned senior counsel for the appellant- bank that the amount of interest payable under Section 7Q and damages leviable under Section 14B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act.

[ Link Synopsis ]

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6).  NCLAT (2024.07.09) in Jitender Kumar Jain Vs. Employee Provident Fund Organisation  [Company Appeal (AT) (Insolvency) No. 1227 of 2024] held that; 

  • Accordingly, we direct the Liquidator to admit the dues on account of contribution to Provident fund (both employer and employee) and exclude the corresponding amount from the Liquidation estate to be dealt with in priority of all other claims. 

  • We further direct the Liquidator to admit the dues on account of damages and interest as Operational Debt payable to Statutory Authorities and deal with the same accordingly in terms of section 53 of the Code.

  • That provident fund claims are not part of the liquidation estate and Section 36 has been considered and interpreted which Judgment has also been affirmed by the Hon’ble Supreme Court.

  • That provident fund dues cannot be part of the liquidation estate under Section 36.

[ Link Synopsis

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7). NCLAT (2022.09.30) in Mr. B. Parameshwara Udpa RP of M/s. Easun Reyrolle Ltd. Vs. Assistant PF Commissioner EPFO [Company Appeal (AT) (CH) (Ins) No. 231 of 2021] held that;

  • The `Provident Fund’ referred to Section 36(4)(a)(iii) of the I & B Code, 2016 applies to `Provident Fund Accounts’, maintained as per Section 16-A of the `Employees Provident Fund’ & `Miscellaneous Provisions Act, 1952’.

  • If we read Section 14(1)(a), it can be inferred that there shall be complete embargo to continue any proceeding against the ‘Corporate Debtor’ by any `Authority’ till the ‘Corporate Insolvency Resolution Process’ is completed and `Moratorium’ is lifted by the ‘Adjudicating Authority’ or it result into `Liquidation’ on failure of the ‘Corporate Insolvency Resolution Process’.

  • Thus, it can be presumed that `Attachment of Bank Account’ of the `Corporate Debtor’ by `EPFO’ cannot be continued when `Moratorium’ is declared under I & B Code, 2016 and proceedings are required to be kept in abeyance till lifting of moratorium.

  • It is therefore evident that amount deducted for `Provident Fund’, purely belongs to an `Employee’ and not to be treated as an `Asset’ of the ‘Corporate Debtor’ and cannot be touched by an `Interim Resolution Professional’/`Resolution Professional’/ `Liquidator’ as the case may be.

  • Therefore, it can be concluded that `Resolution Professional’ is right in seeking lifting of `Attachment Orders’ on `Bank Account’ of ‘Corporate Debtor’ and the ‘Adjudicating Authority’ should have done accordingly.

  • The Provident Fund referred to Section 36(4)(a)(iii) I & B Code, 2016 applies to Provident Fund Accounts maintained as per Section 16-A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952. 

  • The Exclusion from the Liquidation Estate Assets as well as from Recovery in Liquidation, as stipulated in Section 36(4)(a)(iii) of I&B Code, 2016, applies in respect of sums due to any workman or employee from the Provident Fund, when the Corporate Debtor has maintained an Establishment fund in terms of Section 16-A of the Employees Provident Fund, Miscellaneous Provisions Act,1952.

  • This `Tribunal’ gave clear verdict that where no fund is created by a Company, the `Liquidator’ should not have been directed to make provision for payment of Gratuity to the Workmen. 

  • Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund cannot be utilised, attached or distributed by the liquidator, to satisfy the claim of other creditors. 

  • Section 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate.

  • In a case, where no fund is created by a company, in violation of the Statutory provision the Section 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 `Resolution Professional’ is not duty bound to make adequate provisions for ‘Provident Fund’ when the `Corporate Debtor’ did not have separate `Provident Fund Account’. 

  • Further, in terms of Regulation 13, the ‘Resolution Professional’ is mandated to verify the `Claim’ and subsequently determine the amount of `Claim’ as per Regulation. 14. It is therefore, necessary that any person having `Claim’ over the ‘Corporate Debtor’ has to prefer `Claim’ as stipulated in such regulations.

[ Link Synopsis ]

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8). Supreme Court (2022.04.19) in Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others.  [Civil Appeal  No. 5910 Of 2019 ] held that;

  • The wages/salaries of the workmen/employees of the Corporate Debtor for the period during CIRP can be included in the CIRP costs provided it is established and proved that the Interim Resolution Professional/Resolution Professional managed the operations of the corporate debtor as a going concern during the CIRP and that the concerned workmen/employees of the corporate debtor actually worked during the CIRP.

  • In such an eventuality, the wages/salaries of those workmen/employees who actually worked during the CIRP period when the resolution professional managed the operations of the corporate debtor as a going concern, shall be paid treating it and/or considering it as part of CIRP costs and the same shall be payable in full first as per Section 53(1)(a) of the IB Code;

  • Considering Section 36(4) of the IB code and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds.

[ Link Synopsis ]

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9). NCLAT (2022.03.11) in Sikander Singh Jamuwal Vs. Vinay Talwar Resolution Professional. (Company Appeal(AT) (Ins)No. 483 of 2019) held that;

  • However, as no provisions of the Employees Provident Funds and Miscellaneous Provision Act, 1952’ is in conflict with any of the provisions of the ‘I&B Code’ and, on the other hand, in terms of Section 36 (4) (iii), the ‘provident fund’ and the ‘gratuity fund’ are not the assets of the ‘Corporate Debtor’

[ Link Synopsis ]

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10). NCLAT (2021.04.05) in Technology Development Board Vs.Anil Goel, Liquidator of Gujarat Oleo Chem Limited (GOCL) & Ors.  [Company Appeal (AT) (Insolvency) No.731 of 2020] held that;-

  • Appellate Tribunal in “J M Financial asset Reconstruction Co. Ltd. vs. Finquest Financial Solutions Pvt. Ltd. & Ors.”, held that only the first charge holder i.e. the Secured Creditor being highest in the inter creditor ranking is entitled to enforce his right for the realization of its debt out the secured asset.

  • While it is true that the relinquishment of security interest affects the order of distribution, it is equally true that the Secured Creditor does not lose its status of being a Secured Creditor though he has elected to forego his right of enforcing security interest. Whether the Secured Creditor holds first charge or second charge is material only if the Secured Creditor elects to realise its security interest

  • The two sets of Secured Creditors, one relinquishing the security interest and the other realising its security interest are treated differently. A creative interpretation has to be given to the provisions to make them workable and stand in harmony. It is significant to note that Section 53 has been given overriding effect and the non-obstante clause contained in the very opening words of the Section leaves no room for doubt that the distribution mechanism provided thereunder applies in disregard of any provision to the contrary contained in any Central or State law in force. 

  • Of course first charge holder will have priority in realising its security interest if it elects to realize its security interest and does not relinquish the same. However, once a Secured Creditor opts to relinquish its security interest, the distribution of assets would be governed by the provision engrafted in Section 53(1)(b)(ii) where under all Secured Creditors having relinquished security interest rank equally and in the waterfall mechanism are second only to the insolvency resolution process costs and the liquidation costs.

  • We accordingly allow the appeal and set aside the impugned order. I.A. 514 of 2019 in CP(IB) No. 04/2017, is held to be maintainable and we allow the same with direction to the Liquidator to treat the Secured Creditors relinquishing the security interest as one class ranking equally for distribution of assets under Section 53(1)(b)(ii) of I&B Code and distribute the proceeds in accordance therewith.

[ Link Synopsis]

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11). NCLAT (2020.02.11) in Mr Savan Godiwala Vs. Mr. Apalla Siva Kumar [Company Appeal (AT) (Insolvency) No. 1229 of 2019 ] held that;

  • Sec 36(2) of the I B Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any other property of the corporate debtor, which is not the part of the Liquidation Estate. 

  • 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.

  • In this case, we are not concerned with determination about the entitlement of Gratuity by the employees of the ‘Corporate Debtor‘. Payment of Gratuity to employees depends on their entitlement of Gratuity, subject to the fulfilment of the conditions laid down under the payment of Gratuity Act, 1972 and also on the availability of the fund in this regard. 

  • The annual cash flow statement for the ending 31st March, 2017 show that Gratuity Fund was proposed. However, it is noticed that no such fund was created. In the circumstances, the Liquidator should not have been directed to make provision for the payment of gratuity to the workmen as per their entitlement. 

[ Link Synopsis ]

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Registration of Charge on the Assets of CD , with reference to Section 11(2) of EPF & MP Act, 1952 ;


SARFAESI - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

# Section 26B. Registration by secured creditors and other creditors.—(1) The Central Government may by notification, extend the provisions of Chapter IV relating to Central Registry to all creditors other than secured creditors as defined in clause (zd) of sub-section (1) of section 2, for creation, modification or satisfaction of any security interest over any property of the borrower for the purpose of securing due repayment of any financial assistance granted by such creditor to the borrower. (2) From the date of notification under sub-section (1), any creditor including the secured creditor may file particulars of transactions of creation, modification or satisfaction of any security interest with the Central Registry in such form and manner as may be prescribed.

(3) A creditor other than the secured creditor filing particulars of transactions of creation, modification and satisfaction of security interest over properties created in its favour shall not be entitled to exercise any right of enforcement of securities under this Act.

(4) Every authority or officer of the Central Government or any State Government or local authority, entrusted with the function of recovery of tax or other Government dues and for issuing any order for attachment of any property of any person liable to pay the tax or Government dues, shall file with the Central Registry such attachment order with particulars of the assessee and details of tax or other Government dues from such date as may be notified by the Central Government, in such form and manner as may be prescribed.

(5) If any person, having any claim against any borrower, obtains orders for attachment of property from any court or other authority empowered to issue attachment order, such person may file particulars of such attachment orders with Central Registry in such form and manner on payment of such fee as may be prescribed.


# Section 26E. Priority to secured creditors.—Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.

Explanation.—For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.


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