NCLAT rules EPFO can begin assessment proceedings during liquidation

The National Company Law Appellate Tribunal (NCLAT) has ruled that there is no prohibition on assessment proceedings by statutory authorities, including the Employees’ Provident Fund Organisation (EPFO), after the liquidation process begins under the Insolvency and Bankruptcy Code (IBC). However, the tribunal clarified that during the moratorium period, once insolvency proceedings are initiated, EPFO cannot continue such proceedings.

In its decision to dismiss two petitions filed by EPFO, the NCLAT stated that once a company is under moratorium as per Section 14(1) of the IBC, assessment proceedings for determining the quantum of dues cannot continue. The tribunal said, “We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section (5), does not prohibit initiation or continuation of assessment proceedings.”

While emphasising that claims based on assessment carried out during the moratorium period are prohibited, the NCLAT noted that once a liquidation order is passed, the moratorium under Section 14 ends, and a new moratorium under Section 33(5) applies. The tribunal pointed out that Section 33(5) specifically bars “suit or other legal proceedings” but does not restrict assessment proceedings.

Thus, the NCLAT ruled that during the liquidation process, the EPFO can proceed with the assessment. The tribunal also observed that if a company fails to find a buyer during insolvency proceedings, it would face liquidation.

The three-member bench, which included Chairperson Justice Ashok Bhushan, upheld earlier rulings by the Ahmedabad and Mumbai benches of the National Company Law Tribunal (NCLT). After considering the common facts and legal issues in the two petitions, the NCLAT found no error in the previous orders and dismissed both appeals.