EPF Obligations: Treatment During Insolvency and Liquidation

Insolvency and Bankruptcy Code, 2016 provides for a comprehensive mechanism for resolving the claims of creditors, whether secured or unsecured, of an organization. Meanwhile, The Employees Provident Fund Act, 1952 was brought into force to ensure the social security of employees of an organization. The claims of the employees under EPF Act are often brought up whenever there is a formation of a Resolution Plan for a company undergoing Corporate Insolvency Resolution Process or when the liquidation of a company commences. This paper is an attempt to analyze the order of priority of EPF dues of the employees under the IBC mechanism while a company is undergoing Corporate Insolvency Resolution Process by analyzing the provisions of the relevant acts, the waterfall mechanism under IBC and various orders passed by the NCLAT and Supreme Court while dealing with the same issue. Moreover, this paper will also analyze the order of priority given to EPF dues during liquidation of a company and the difference in the treatment between the two.