2020 (10) TMI 735 - Tri - Insolvency and Bankruptcy

Liquidation process - Priority of settlement of dues - Payment of dues of Applicant as Secured Creditors as provided under the provisions of Part II Chapter II of the Insolvency Bankruptcy Code, 2016 - main contention in the application are that the Petitioner is claiming to be a secured statutory creditor in view of the provision of section 48 of the Gujarat Value Added Tax and accordingly they want to be considered as Secured Statutory Creditor in petition which is under CIRP - HELD THAT - The dues of the Government, Central Government and/or State Government or any legal authority fall under the category of Operational Debt . That apart, the applicant is claiming that in view of the provision of section 48 of Gujarat Value Added Tax, 2003, he may be treated as secured statutory creditor. While deciding the issue of Operational Creditor and Financial Creditor , the Hon'ble Supreme Court observed in Swiss Ribbons Pvt. Ltd. Anr. vs. Union of India Ors. SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT wherein it is, inter alia, observed that an 'Operational Debt would include a claim in respect of the provision of goods or service, including employment, or a debt in respect of payment of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority. Statutory dues such as income tax, value added tax and other statutory dues arising out of law will arise only if the company/corporate debtor is operational and, therefore, such dues have a direct nexus with the company . Thus, any dues and services of the Government Departments are considered as Operational Creditor . Under such circumstances, even if, the Applications are restored by condoning the delay, the very purposes for which the IAs have been filed are not going to succeed, as they fall under the category of Operational Creditor as per the provision of IBC - However, the Applicant/State Tax Officer-2 have liberty to put their claim as Operational Creditor before the RP - Application dismissed.

Summary

Issues:
Delay in filing restoration application; Claim of being a secured statutory creditor; Interpretation of "Operational Creditor" and "Financial Creditor".

Delay in Filing Restoration Application:
The Applicant, a State Tax Officer-2, filed an application for condonation of delay in restoring IA No. 166/2019 and IA No. 167/2019, which were dismissed for want of prosecution. The delay of 29 days was attributed to administrative procedures. The applications sought direction to register claims of the State Tax Department as a Secured Statutory Creditor under section 48 of the Gujarat Value Added Tax, 2003. The Tribunal considered the delay and the reasons provided for it.

Claim of Being a Secured Statutory Creditor:
The main contention of the Applicant was to be recognized as a secured statutory creditor under the Gujarat Value Added Tax, 2003, in the Corporate Insolvency Resolution Process (CIRP) under section 48. The definitions of "Operational Creditor," "Operational Debt," and "Financial Creditor" were analyzed. The Tribunal noted that governmental dues fall under "Operational Debt" as per the definitions provided. However, the Applicant's claim as a secured statutory creditor was deemed not maintainable under section 238 of the Insolvency and Bankruptcy Code (IBC).

Interpretation of "Operational Creditor" and "Financial Creditor":
The Tribunal referred to legal precedents to interpret the definitions of "Operational Debt" and "Operational Creditor." The Supreme Court's observations in various cases emphasized the overriding effect of the IBC over other laws, ensuring a time-bound resolution process. The Tribunal concluded that the Applicant's claim did not align with the definitions and purposes of the IBC. It was suggested that the State Tax Officer-2 could present their claim as an "Operational Creditor" before the Resolution Professional (RP). Consequently, the Application was dismissed, highlighting that even if the delay was condoned, the nature of the claim would not succeed under the IBC.

In summary, the Tribunal addressed the delay in filing restoration applications, the claim of being a secured statutory creditor, and the interpretation of "Operational Creditor" and "Financial Creditor." The decision highlighted the importance of aligning claims with the definitions and objectives of the IBC, ultimately dismissing the Application due to lack of merit in light of the applicable legal provisions and precedents.