Insolvency Appellate Tribunal Clarifies Assessment Proceedings During Liquidation

The insolvency appellate tribunal has determined that statutory authorities, like the EPFO, may initiate assessment proceedings once the liquidation process begins for a debt-laden company under the IBC. However, these proceedings cannot occur during the moratorium period initiated by insolvency proceedings.

The Insolvency Appellate Tribunal has stated that statutory bodies, including the Employees' Provident Fund Organisation (EPFO), can initiate assessment proceedings once the liquidation process begins for any insolvent company under the Insolvency and Bankruptcy Code (IBC).

Importantly, the tribunal also underscored that during the moratorium period triggered by the insolvency proceedings, no such assessment from EPFO is permissible. The tribunal's dismissal of EPFO's petitions emphasized the prohibition of these proceedings under Section 14 (1) of the IBC when a company comes under moratorium protection.

Once liquidation is ordered, the moratorium under Section 14 ceases, and a different moratorium under Section 33(5) takes effect, which does not bar assessment proceedings. The NCLAT, led by Chairperson Justice Ashok Bhushan, upheld past orders by the Ahmedabad and Mumbai benches of the National Company Law Tribunal (NCLT), concluding with the dismissal of the related appeals.

(With inputs from agencies.)