Corporate Law Daily – Editorial Team
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Today’s newsletter analytically summarizes the top Corporate Law stories reported at taxmann.com.
In the instant case, the question that arose was "whether protection/priority under section 11(2) of EPF Act would apply to investments made by Trustee of a PF in Non-Convertible debentures issued by the Corporate debtor? ?
The NCLAT observed that the protection under section 11(2) of EPF Act applies in the insolvency of Corporate Debtor (CD) only to amounts due by CD qua employer in respect of PF contributions w.r.t. its employees. ?
Section 11(2) does, not apply to investments by the Board of Trustees of a Provident Fund in Non-Convertible Debentures (NCDs) issued by the CD when there is no legal compulsion on the Trustees to invest the corpus of the Provident Fund in only NCDs and these can be invested in deposits with RBI or SBI or other Scheduled Bank as approved by Central Govt. from time to time. ?
Section 11 (2) of the EPF Act provides that in case of insolvency of an employer, any contributions of PF dues would be "paid in priority to all the other debts in the distribution of the property and shall be the 1st charge on the assets. ?
The plain reading of Section 11 (2) of the EPF act makes it clear that the applicability of the Section would arise firstly, where the entity under insolvency is the Employer. Secondly, the priority of payment is for contributions due from an employer under insolvency. ?
The EPF act prioritises payments where the Employer falls into insolvency. Thus, the Corporate Debtor DHFL is not the Appellants Employer, are mere investors in the DHFL. ?
Investments made in the Corporate Debtor are commercial decisions and transactions undertaken by the Board of Trustees of the Provident fund. Thus EPF Act is inapplicable to DHFL in the present factual metrics. ?
Section 17 (3) (a) of the EPF act does not make it mandatory for the Appellant to invest in the funds lying with it in the manner done by the Appellants. In the exercise of powers conferred on it by Section 5 of the EPF Act, the central government framed the Employees Provident Fund Scheme, 1952. Therefore, like any other investment making entity, the Appellant had a specific risk-taking capacity, and the appellant investment in the DHFL was a small component of its overall deposits. ?
Paragraph 52 of the Employees Provident Fund Scheme provides that money belonging to the fund can be deposited with the RBI or State Bank of India or in such other scheduled bank as may be approved by the central government subject to specific directions, the central government may, from time to time, give. Therefore, there was no such compulsion on the Appellant to invest its funds in the NCD's of the DHFL. ?
The Central Government vide its notification dated 28/01/2022 rescinds the appointment of Shri Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs (MCA) as an ex-officio member in the IBBI. He was appointed as the ex- officio member by the IBBI vide SO. 780(E), dated 22nd February, 2018. ?
The Central Government hereby appoints Dr. Anuradha Guru, Economic Adviser, Ministry of Corporate Affairs (MCA) as an ex-officio member in the IBBI to represent the said Ministry in that Board.
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