Mumbai News: NCLAT Upholds Rejection Of EPFO's ₹34.31 Crore Belated Claim In Nirmal Lifestyle Insolvency Case

Mumbai: The National Company Law Appellate Tribunal (NCLAT) has rejected the appeal filed by the Regional Provident Fund Commissioner, Employees Provident Fund Organisation (EPFO), challenging the order passed by the NCLT-Mumbai. The NCLT had upheld the decision of the Resolution Professional (RP) rejecting EPFO’s claim of Rs 34,31,98,854.

In its order, the Appellate Tribunal held that when claims are filed belatedly during the insolvency resolution process, the RP’s decision to reject them through a reasoned reply cannot be faulted.

On August 4, 2005, a development agreement was executed between M/s Ralliwolf Ltd. and M/s Nirmal Lifestyle Realty Pvt. Ltd., under which the latter assumed all liabilities and financial obligations of Ralliwolf Ltd. Later, on December 6, 2021, Nirmal Lifestyle Realty Pvt. Ltd. was admitted to the Corporate Insolvency Resolution Process (CIRP).

On December 21, 2021, the RP issued a public announcement inviting claims from creditors of the Corporate Debtor. Subsequently, on June 21, 2022, EPFO filed a claim of Rs 7,49,48,021 towards Provident Fund (PF) contributions due from Ralliwolf Ltd.

This claim was admitted by the RP on June 28, 2022, and EPFO was categorized as an Operational Creditor. The Committee of Creditors (CoC) of the Corporate Debtor approved the Resolution Plan submitted by Oberoi Construction Ltd., the Successful Resolution Applicant (SRA), on September 1, 2022. The plan reflected the EPFO’s claim of Rs 7.49 crore, which was proposed to be paid in full by the SRA.

The approved resolution plan was filed before the Adjudicating Authority by the RP on September 3, 2022. However, on November 11, 2022, a wage claim amounting to Rs 62,44,43,284 by the workmen was reportedly approved, leading the EPFO to work out an additional PF liability of Rs 34.31 crore.

In June 2023, EPFO filed an additional claim of Rs 34,31,98,854 for the period 2002 to 2023. This was rejected by the RP via email on July 5, 2023. On July 13, 2023, EPFO requested the RP to reconsider and admit the additional claim. Meanwhile, EPFO also filed an application before the NCLT challenging the rejection of the claim.

EPFO argued that the additional claim, submitted on June 8, 2023, was filed after the CoC had approved the resolution plan but before its final approval by the Adjudicating Authority on August 9, 2024. Since CoC’s approval does not amount to final acceptance, the RP should have admitted the legitimate claim.

However, the RP’s counsel argued that the rejection of the additional claim was justified, as it was submitted after the CoC’s approval. The Insolvency and Bankruptcy Code (IBC) lays down a structured framework for the CIRP, which does not permit the admission of claims after the CoC has approved the resolution plan.

It is a well-established principle that once the plan is approved by the CoC, no new claims, including statutory dues, can be entertained. The approved resolution plan becomes binding on all stakeholders, including government bodies and statutory authorities, under Section 31 of the IBC.

Any deviation at this stage would defeat the purpose of timely insolvency resolution and promote prolonged litigation. Admitting such belated claims would undermine the integrity and finality of the resolution process. Hence, the RP’s decision was well within the legal framework.

After hearing the arguments, the Appellate Tribunal stated in its order: “We have no doubt in our minds that once the CoC has approved a Resolution Plan, the same becomes binding on all stakeholders and no additional claims can be entertained.

The approved plan, as sanctioned by the Adjudicating Authority, is binding and must be implemented as per its terms. Any deviation at this stage would compromise the very purpose of insolvency resolution. If belated claims of creditors are casually and mechanically accepted by the RP even after approval of the plan by the CoC, it would imperil the successful resolution of the Corporate Debtor and frustrate the objectives of the IBC.

“The Adjudicating Authority did not commit any error, in the given facts and circumstances, in upholding the RP’s decision to reject the belated additional claim of the Appellant,” the NCLAT held.