Supreme Court examines appeals by successful resolution applicants challenging orders requiring payment of provident fund and gratuity dues under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The court considers whether the statutory first charge under Section 11(2) prevails over the Insolvency and Bankruptcy Code waterfall and whether Section 14B penalty is discretionary rather than mandatory.

Civil appeals before the Supreme Court challenging orders passed at the instance of the Central Board of Trustees under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, which imported the finding that the share of workmen dues shall be kept outside liquidation and the successful resolution applicant must pay provident fund and gratuity in full before resolution plan implementation.

The appellants (successful resolution applicants) seek to challenge the impugned orders that imposed liability on them for full payment of provident fund and gratuity dues outside the liquidation waterfall under the Insolvency and Bankruptcy Code, 2016.

The impugned orders had applied the dictum in Maharashtra State Cooperative Bank and Jet Aircraft Maintenance Engineers Welfare Association to hold that provident fund dues must be paid in full by the successful resolution applicant despite the resolution plan being in operation, causing grievance to the appellants.

The impugned orders were passed following the NCLAT decision in Jet Aircraft Maintenance Engineers Welfare Association, which was upheld by the Supreme Court in common order dated 30.01.2023 rejecting Civil Appeal No.407 of 2023 and Civil Appeal Nos.465-469 of 2023. The Supreme Court later in State Bank of India v. Murari Lal Jalan, (2025) 4 SCC 354, reiterated that the successful resolution applicant must pay both provident fund and gratuity dues.

Whether provident fund and gratuity dues of workmen/employees are payable in full by the successful resolution applicant outside the liquidation waterfall under Section 53(1) of the Insolvency and Bankruptcy Code, 2016 Whether statutory first charge under Section 11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 overrides non-obstante clauses of SARFAESI Act and other laws Whether damages under Section 14B of the EPF & MP Act are mandatory or discretionary, especially after the 1988 amendment Whether Section 7Q interest is statutory and distinct from Section 14B penalty Whether Central Board can reduce or waive damages under Section 14B in a resolution plan scenario analogous to SICA rehabilitation scheme

Respondent EPFO asserted that the dictum in Maharashtra State Cooperative Bank applies to provident fund dues even when a resolution plan is in operation as per Jet Aircraft Maintenance Engineers Welfare Association, and that PF must be paid in full as per the EPF & MP Act. The impugned orders clearly found that provident fund has to be paid in full and the liability of the successful resolution applicant is beyond cavil, including interest under Section 7Q and penalty under Section 14B. The court noted that Section 14B was held mandatory in Horticulture Experiment Station, but expressed disagreement and held that after the 1988 amendment, the authority has discretion to decide whether circumstances justify complete absolution from penalty. The court observed that the second proviso to Section 11B (or Section 14B) empowers the Central Board to reduce or waive damages in relation to a sick industrial company, and that this discretion may be extended to a successful resolution applicant in an IBC resolution plan.

Section 11(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 creates a statutory first charge that prevails over non-obstante clauses and priorities under SARFAESI Act. Provident fund and gratuity dues of workmen and employees are not part of the liquidation estate under Section 36(4)(b)(iii) of the Insolvency and Bankruptcy Code, 2016, and must be paid in full by the successful resolution applicant outside the waterfall mechanism under Section 53(1) IBC. Section 7Q of the EPF & MP Act imposes statutory interest and is separate from Section 14B penalty after the 1988 amendment. Section 14B confers discretion on the authority to reduce or waive damages; it is not mandatory. The Central Board may consider waiver or reduction of damages under Section 14B for a successful resolution applicant in an IBC resolution plan as analogous to a SICA rehabilitation scheme.

Undisputedly, SARFAESI Act is the latter act and if the question was solely of the non-obstante clause giving it overriding effect from any law for the time being in force, the SARFAESI Act would prevail. However, in the EPF&MP Act, Section 11(2) creates a statutory first charge on the assets of the establishment for any amount due from an employer... Jet Aircraft Maintenance Engineers Welfare Association held that provident fund has to be paid to workmen and employees in full and that cannot be made subject of distribution under the waterfall mechanism of Section 53(1) of the IB Code. The interest under Section 7Q, thus, became statutory and was carved out of the discretion conferred on the Commissioner or the Authorized Officer. we are of the opinion, with abiding respect to the Co-ordinate Bench, that Section 14B even after its amendment confers a discretion on the authority to decide on whether the circumstances justify a complete absolution from penalty.

The appeals were filed before the Supreme Court against impugned orders passed at the instance of the Central Board of Trustees under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. These orders imported the finding that workmen dues shall be kept outside liquidation and successful resolution applicants must pay provident fund and gratuity in full. The NCLAT in Jet Aircraft Maintenance Engineers Welfare Association had held that PF and gratuity dues are not part of liquidation estate under Section 36(4)(b)(iii) IBC and cannot be subjected to waterfall under Section 53(1); the Supreme Court approved this by rejecting Civil Appeal No.407 of 2023 and Civil Appeal Nos.465-469 of 2023 by common order dated 30.01.2023. Subsequently, in State Bank of India v. Murari Lal Jalan, (2025) 4 SCC 354, the Supreme Court reiterated the obligation of the successful resolution applicant to pay both provident fund and gratuity dues. The present batch of appeals raises issues regarding the mandatory or discretionary nature of Section 14B damages and the applicability of the statutory first charge under Section 11(2) EPF & MP Act.

• Employees' Provident Funds and Miscellaneous Provisions Act, 1952: Section 11(2), Section 11B, Section 7Q, Section 14B, Section 15, Section 17
• Insolvency and Bankruptcy Code, 2016: Section 30(2)(e), Section 36(4)(b)(iii), Section 53(1)
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 13, Section 26-E, Section 35
• Sick Industrial Companies (Special Provisions) Act, 1985: Section 4
• Payment of Gratuity Act, 1972: