The Supreme Court has dismissed an appeal filed by the Employees Provident Fund Organisation (EPFO) seeking full recovery of interest and damages on provident fund dues from a company that went through insolvency proceedings. The bench made it clear that once a resolution plan is approved, such uncrystallized claims cannot resurface.
Background of the Case
The case arose after a company, referred to as the Corporate Debtor, was admitted into the Corporate Insolvency Resolution Process (CIRP) on 1 May 2023. EPFO submitted a claim of Rs.22,49,956 towards PF dues, which included Rs.73,120 as basic dues under Section 7A, Rs.9,32,805 as interest under Section 7Q, and Rs.12,44,031 as damages under Section 14B of the EPF Act.
However, the approved resolution plan provided only Rs.73,120, covering just the basic PF dues, and left out the interest and damages components entirely. EPFO argued that PF dues are protected from haircuts under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, since they don't form part of the liquidation estate. Both the Adjudicating Authority and later the NCLAT rejected this argument, noting that proceedings for interest and damages had begun only on 10 May 2023, after the moratorium had already kicked in on 1 May 2023. Since these claims were never determined before insolvency began, they didn't qualify for statutory protection.
Court's Observation
The bench, comprising Justice Manoj Misra and Justice Vijay Bishnoi, agreed with this reasoning. Relying on earlier rulings, the Court reiterated the "clean slate" principle behind insolvency law. Citing the Essar Steel judgment, the bench observed that a resolution applicant cannot be suddenly burdened with undecided claims after a plan is accepted, calling it a situation like "a hydra head popping up."
The Court explained that while PF dues themselves stay protected, interest and damages that were never finalized before insolvency began fall into the category of contingent liabilities. It's up to the Committee of Creditors, using its commercial wisdom, to decide whether to set aside funds for such uncertain claims.
Decision
Finding no statutory violation in the resolution plan, the Supreme Court dismissed EPFO's appeal and upheld the NCLAT's order.
Case Details
Case Title: Employees Provident Fund Organisation v. Rachna Jhunjhunwala & Anr.
Case Number: Civil Appeal No. 9768 of 2026 (@ Diary No. 18254 of 2026)
Judge: Justice Manoj Misra and Justice Vijay Bishnoi
Decision Date: 28 July 2026
