Supreme Court on EPF Dues in Insolvency: Treatment of Unadjudicated Interest and Damages in a Resolution Plan

In Employees’ Provident Fund Organisation v. Rachna Jhunjhunwala and Another, Civil Appeal No. 9768 of 2026 (Supreme Court, July 2026), the Supreme Court, comprising Justice Manoj Misra and Justice Vijay Bishnoi, has held that unadjudicated claims for interest under Section 7Q and damages under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, not determined prior to the commencement of the corporate insolvency resolution process, need not be provided for in a resolution plan approved under the Insolvency and Bankruptcy Code, 2016.

The Court dismissed an appeal filed by the EPFO challenging a decision of the National Company Law Appellate Tribunal, which had upheld approval of a resolution plan excluding the Organisation’s claims towards interest and damages on the ground that these had not been crystallised through adjudication as on the insolvency commencement date. While reaffirming that provident fund dues in the nature of the principal contribution retain their protected character and priority under the Insolvency and Bankruptcy Code, the Court drew a clear distinction for ancillary claims for interest and damages that remain unadjudicated, holding that such claims, not having crystallised into a determined liability before the commencement of the insolvency process, are not required to be factored into the resolution plan.

Provident fund authorities, resolution professionals and committees of creditors dealing with corporate debtors that have pending or contemplated proceedings for levy of damages or interest under Sections 7Q and 14B of the 1952 Act should ascertain, at the earliest stage, whether such proceedings have reached formal adjudication, since claims still at a pre-adjudication stage as on the insolvency commencement date are liable to be excluded from the resolution plan on the present ruling. The EPFO and similarly placed statutory authorities would be well advised to pursue outstanding damages and interest proceedings to a stage of formal adjudication without delay, so as to preserve their position in the event of subsequent insolvency proceedings against the employer.

Last Updated on 21 September, 2026