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How to File and Realise Provident Fund, Pension and Gratuity Claims in a Liquidation Under the IBC

Writer: Kaustav Chowdhury
Kaustav Chowdhury
1 day ago
6 min read

Provident fund, pension and gratuity dues occupy a distinct position in an insolvency. Under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016 (IBC), sums due to workmen and employees from these funds are excluded from the liquidation estate altogether. They are not a high-ranking claim inside the Section 53 waterfall; they sit outside it. The Supreme Court's order of August 31, 2026 in State Bank of India v. Manoj Kumar Das, arising from the Jet Airways liquidation, confirms that the exclusion applies even where the employer maintained no segregated fund. This guide sets out how such claims are filed, verified and realised, and where they commonly go wrong.

Step 1: Identify the Correct Process Stage and Claimant

The filing route depends on whether the corporate debtor is in the resolution process or in liquidation, and on whether the claimant is an individual or a representative body.

  • During CIRP: Claims are submitted to the interim resolution professional or resolution professional in response to the public announcement under Section 15, in the form prescribed by the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

  • During liquidation: Claims are submitted to the liquidator following the public announcement under Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016. Regulation 19 governs proof of claim by a workman or employee, and by an authorised representative of workmen or employees.

  • By the EPFO: The Regional Provident Fund Commissioner may file in respect of assessed dues, including interest under Section 7Q and damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

  • By a union or authorised representative: A consolidated claim on behalf of a class of workmen avoids duplication and is generally easier for the liquidator to verify, provided the authorisation is properly evidenced.

In practice, an IBBI circular dated June 2, 2026 provides that stakeholders in liquidation may use the corresponding claim forms notified under the CIRP Regulations. Form D remains the proof of claim by a workman or an employee. Confirm the current form with the liquidator's public announcement before filing, since the announcement specifies the form and the submission channel for that process.

Step 2: Separate the Excluded Dues from the Waterfall Dues

This is the single most consequential step, and the one most often done badly. A workman's total entitlement usually comprises heads that are treated very differently:

  1. Provident fund, pension and gratuity: Excluded from the liquidation estate under Section 36(4)(a)(iii). Payable in full, outside the waterfall, with no temporal cap.

  2. Workmen's dues for the twenty-four months preceding the liquidation commencement date: Rank pari passu with secured creditors who relinquished security, under Section 53(1)(b)(i).

  3. Wages and unpaid dues of employees other than workmen for the twelve preceding months: Rank under Section 53(1)(c).

  4. Any remaining employee dues: Fall to the residual category under Section 53(1)(f).

A claim that lumps all heads into a single figure invites the liquidator to treat the whole amount as a waterfall claim subject to the statutory time limits. Present the provident fund, pension and gratuity components as a separate schedule, with their own computation and their own statutory basis.

Step 3: Assemble the Evidence

The liquidator verifies claims against the corporate debtor's records. Where those records are incomplete, which is common in an unfunded scenario, the claimant's own documentation carries the burden. Assemble:

  • Employment records: Appointment letter, confirmation, salary structure, and evidence of the date of joining and date of cessation, which together establish continuous service.

  • Provident fund records: Universal Account Number, member passbook, Form 3A and Form 6A annual returns, and the Electronic Challan cum Return filings showing contributions deducted and whether they were remitted.

  • Gratuity computation: Calculation under Section 4 of the Payment of Gratuity Act, 1972, at fifteen days' wages for each completed year of service based on the last drawn wages, with the statutory ceiling applied where relevant.

  • EPFO assessment orders: Any order under Section 7A determining dues, together with Section 7Q interest and Section 14B damages, which form part of the excluded sums.

  • Proof of non-remittance: Salary slips showing deduction of the employee's provident fund contribution, read against the passbook showing no corresponding credit, evidence both the deduction and the default.

Step 4: File Within Time, and Deal With Delay Properly

The public announcement specifies the last date for submission of claims. Under the Liquidation Process Regulations, claims are ordinarily to be submitted within thirty days of the liquidation commencement date. A claim filed late is not automatically extinguished, but it must be justified.

In practice, where a claim is delayed, file it with a separate application explaining the delay rather than filing it silently. Workmen frequently learn of the liquidation only after the window has closed, and tribunals have accepted that a delay attributable to lack of notice is condonable. A claim submitted without any explanation is easier for a liquidator to reject on limitation grounds alone.

Step 5: Engage With Verification and Collation

The liquidator verifies claims and prepares the list of stakeholders. Two points deserve attention.

  • Verification is a continuing process: An admitted claim may be revisited if later scrutiny shows the evidentiary basis is insufficient. The corollary is that a rejected or under-admitted claim may also be revisited when better material is produced. Supplying the missing document is often faster than appealing.

  • Ask for reasons: Where a claim is admitted at a figure lower than claimed, seek the liquidator's working. Under-admission frequently arises from a mechanical application of the twenty-four month cap in Section 53(1)(b) to provident fund and gratuity heads, which is precisely the error the Jet Airways line of authority corrects.

Step 6: Escalate to the Adjudicating Authority If Necessary

A stakeholder aggrieved by the liquidator's decision on a claim may apply to the Adjudicating Authority. Under Regulation 21A read with the Liquidation Process Regulations, and under the residuary jurisdiction in Section 60(5)(c) of the IBC, the NCLT can direct the liquidator to revise the admitted amount or to reclassify a head of claim.

The application should be framed as a question of characterisation rather than quantum where the dispute is whether Section 36(4)(a)(iii) applies. The relief sought should be a direction that the provident fund, pension and gratuity component be excluded from the liquidation estate and discharged in full, not merely that a larger sum be admitted within the waterfall.

Step 7: Monitor Distribution

Because the excluded sums do not form part of the liquidation estate, they should be discharged before the Section 53 distribution is computed rather than as part of it. Verify from the liquidator's progress reports under Regulation 15 that the computation has been done in that order. Where realisations are being distributed to secured creditors while the employee funds remain unpaid, that is a matter to raise promptly, since recovery becomes considerably harder once distribution has occurred.

Common Pitfalls to Avoid

  • Filing a single consolidated figure: Merging provident fund and gratuity with wage arrears in one claim invites the application of Section 53 time caps to the whole amount.

  • Accepting that no fund means no claim: The exclusion attaches to the sums due to the workman, not to the existence of a segregated corpus. An employer's failure to maintain the fund is not a defence.

  • Omitting interest and damages: Section 7Q interest and Section 14B damages under the EPF Act form part of the excluded sums and should be claimed with their computation, not left to the liquidator to infer.

  • Treating the exclusion as a first rank in the waterfall: An asset excluded under Section 36(4) never enters the estate. Framing it as a priority claim within Section 53 concedes the very point that matters.

  • Missing the announcement: Former employees rarely monitor the IBBI website. Where a union or representative exists, a standing arrangement to track announcements for former employers prevents avoidable limitation disputes.

Key Statutory Provisions

  • Section 36(4)(a)(iii) of the IBC: Exclusion of provident fund, pension fund and gratuity fund dues from the liquidation estate.

  • Section 53 of the IBC: Distribution of the proceeds of the liquidation estate in the order of priority.

  • Section 60(5)(c) of the IBC: Residuary jurisdiction of the Adjudicating Authority.

  • Regulation 12 of the Liquidation Process Regulations, 2016: Public announcement by the liquidator.

  • Regulation 19 of the Liquidation Process Regulations, 2016: Proof of claim by a workman or employee and by an authorised representative.

  • Regulation 9 of the CIRP Regulations, 2016: Claims by workmen and employees, submitted in Form D.

  • Sections 7A, 7Q and 14B of the EPF Act, 1952: Determination of dues, interest and damages.

  • Section 4 of the Payment of Gratuity Act, 1972: Entitlement to and computation of gratuity.

Sources and References


Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.

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