2019 (11) TMI 1391 - Tri - Companies Law

Lifting of attachment of the attached property and its sale thereafter - Distribution of the proceeds from the sale of the liquidation asset - Section 53 of the I B Code - HELD THAT - Under the various clauses of Section 53 the debt in question of APMC does fall under section 53 (1) (e) and shall rank equally between and among the Government dues. Since a water-fall mechanism has already been prescribed under the I B Code, therefore, this Bench has no jurisdiction to alter the list of priority as already enshrined in the Code. As per the priority list the government dues are at sub-clause (e) of Section 53(1) of the I B Code. The Liquidator is hereby directed to admit the claim of the Applicant (APMC) as submitted vide Form-G dated 21.01.2019 and should consider at the time of distribution of sale proceeds on liquidation of assets - the Application is partly allowed protanto.

Summary

Issues Involved:
1. Treatment of the Agricultural Produce Market Committee's (APMC) claim as a secured creditor.
2. Lifting of attachments on the assets of the Corporate Debtor by various government and semi-government authorities.

Issue-Wise Detailed Analysis:

1. Treatment of the Agricultural Produce Market Committee's (APMC) claim as a secured creditor:

The application by the Agricultural Produce Market Committee (APMC) sought an order to deal with the property attached by the Mamlatdar and realize the value of the secured asset towards the satisfaction of its claim amounting to ?7,72,77,837.96. Alternatively, the APMC requested that its claim be considered on par with other secured creditors and that the net sale proceeds from the liquidation of the company's assets be distributed on a pari-passu basis with secured creditors having the first charge on the assets.

The APMC argued that it is deemed a local authority under Section 10(2) of the Gujarat Agricultural Produce Markets Act, 1963, and thus should be treated as a secured creditor. The Corporate Debtor, formerly known as Jayant Oil Mills, had not paid the market fees levied on castor seeds purchased within the Market Area, leading to the claim.

The Tribunal noted that the liquidation order for the Corporate Debtor was passed on 31.12.2018, and the APMC had submitted its claim in Form-G on 21.01.2019, which the Liquidator rejected as a secured creditor. The Tribunal emphasized the mandatory provisions of Section 53 of the Insolvency and Bankruptcy Code (I&B Code), which prescribes the distribution of proceeds from the sale of liquidation assets in a specific order of priority. According to Section 53(1)(e), the APMC's debt falls under government dues and ranks equally among such dues.

Therefore, the Tribunal directed the Liquidator to admit the APMC's claim as submitted and consider it at the time of distributing the sale proceeds on liquidation of assets. The application was partly allowed to this extent.

2. Lifting of attachments on the assets of the Corporate Debtor by various government and semi-government authorities:

The Liquidator filed an application seeking an order to lift the attachments on the Corporate Debtor's assets by various government and semi-government authorities. The Liquidator also requested an exclusion of the time taken for the release of attachments for calculating the period for completion of liquidation under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

The Tribunal referred to its previous order dated 31.12.2018, which directed the Liquidator to obtain a list of attached properties from each department and adjudicate the same. Despite clear directions, the attachments were not lifted, causing hindrance in the liquidation process. The Tribunal cited a recent judgment by the Hyderabad High Court in Leo Edibles & Fats Ltd. v. Tax Recovery Officer (Central) IT Dept. Hyderabad & Ors., which held that an order of attachment by a government authority cannot bar the completion of the sale of liquidated assets.

The Liquidator informed the Tribunal that claims from various departments, including Sales Tax Departments of Mumbai and Vadodara, APMC, Income Tax Department, and Recovery Officer, DRT-II, Ahmedabad, had already been admitted.

The Tribunal directed the concerned authorities to lift the attachments to allow the Liquidator to sell the property as per the rules and regulations. The sale proceeds were to be distributed under Section 53 of the I&B Code in the prescribed order of priority. The Liquidator was instructed to report back to the Tribunal on compliance with these directions.