In a landmark judgment, the Bombay High Court in Nagpur has clarified that a company undergoing insolvency cannot shirk its statutory obligations towards employees.
The Court directed Dalmia Cement (Bharat) to settle over Rs 25 crore in outstanding Employees’ Provident Fund (EPF) dues owed to workers of Murli Industries, a company it had acquired through an approved resolution plan.
Murli Industries, which entered insolvency in April 2017 after proceedings initiated by Edelweiss Asset Reconstruction Company, saw its cement division revived under a resolution plan approved in 2019. The scheme, sanctioned by the National Company Law Tribunal (NCLT), explicitly stipulated that all employee liabilities, including provident fund dues, would be assumed by the acquiring entities.
Despite this, Dalmia Cement and its group companies contested recovery notices issued by the Employees’ Provident Fund Organisation (EPFO), arguing that EPF claims were extinguished during the insolvency process, citing a Supreme Court ruling in Ghanashyam Mishra & Sons (2021). The High Court rejected this argument, stating that provident fund dues are statutory obligations held in trust for employees and cannot be classified as company assets. Consequently, they cannot be overridden or written off under resolution plans formulated under the Insolvency and Bankruptcy Code (IBC).
The judgment reinforced the legal and constitutional protection afforded to employee contributions and clarified that such dues are distinct from “operational debts” under the IBC framework. The petition was dismissed, upholding the sanctity of employees’ rights post-insolvency.
