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2019 (6) TMI 1503 - Tri - Insolvency and BankruptcyDelay in payment of TDS - Direction to Liquidator to pay the outstanding TDS in relation to the salary of the Applicant - issuance of Form 16 to the Applicant - direction to respondent to restrain from taking any coercive steps for payment of TDS amount, pending adjudication of the present Application - CIRP process - HELD THAT - The TDS deducted from the salary of Applicant is to be credited to the account of IT Department. However, it is an undisputed fact that the TDS deducted from the salary was not credited to the IT Department. Therefore, notice was issued to the Applicant by the IT Department. The fault lies with the Corporate Debtor. It is the Corporate Debtor which failed to deposit TDS collected from the Applicant. He cannot be held responsible for default committed by the Corporate Debtor which is under Liquidation. The liability to pay TDS continues to lie on the Corporate Debtor whether liability is related to the period prior to CIRP or after starting of CIRP against Corporate Debtor. It is immaterial that whether default occurred prior to CIRP or after starting of CIRP. The question is who is at default. Indisputably Corporate Debtor should have remitted TDS collected from the Applicant to the IT Department. The Corporate Debtor failed to deposit the TDS amount. The Liquidator has also admitted that not only in the case of Applicant but also in the case of other employees, TDS was not deposited and therefore Form-16 could not be issued. It is the Corporate Debtor Company which committed default in not depositing TDS. Therefore, the liability if any is to be discharged by the Corporate Debtor. The Corporate Debtor is under Liquidation. Therefore, Liquidator has to pay the tax to the IT Department in respect of TDS collected from the Applicant - Application is allowed directing the Liquidator to pay the TDS and other charges if any in respect of amounts collected from the Applicant towards TDS to the IT Department. Direction to liquidator to keep on priority, the funds required for payment of compounding fees on behalf of the Corporate Debtor - It is the case of Applicant, the case is still pending and if offence is compounded before the court, then compounding fee to be paid and the same to be paid by the Liquidator as Corporate Debtor is under Liquidation - HELD THAT - The criminal case was filed against Corporate Debtor for its default. Though Applicant in the capacity as the then Managing Director is attending the court but proceedings were initiated against the Corporate debtor. The proceedings are pending during CIRP as well as during Liquidation. When criminal prosecution was launched against the Corporate Debtor, which is under Liquidation, the compounding fee if any payable is to be paid by the Liquidator. The default was committed by the Corporate Debtor. Whether it relates to the period prior to CIRP or after starting of CIRP, the responsibility nevertheless lies with the Corporate Debtor. Section 35 (1) (k) of IBC provides that if proceedings are initiated against Corporate Debtor, it is the duty of the Liquidator to defend any suit, prosecution or other legal proceedings, civil or criminal, in accordance with the provisions of the Code. So it is very clear, under Section 35 (1) (k), the Liquidator is to defend the proceedings whether civil or criminal since proceedings are already started against Corporate Debtor and the then Managing Director, the Applicant herein is attending the court in connection with prosecution launched against the Corporate Debtor, the expenses if any incurred for payment of compounding fee shall be made by the Liquidator. The Applicant in the alternative is seeking a direction to the Liquidator to make a provisions for reimbursement of any compounding fee paid by the Applicant since it is the duty of the Liquidator during Liquidation to defend the Corporate Debtor and if Applicant pays compounding fee, the Liquidator has to reimburse the compounding fee to be paid by the Applicant and for this purpose the Liquidator is directed to make sufficient provision for payment on priority basis. Therefore, the Liquidator cannot avoid the liability on the ground proceedings were initiated against the Corporate Debtor prior to CIRP. The fact remains proceedings are still pending against the Corporate Debtor even during Liquidation - Application is allowed, directing the Liquidator to reimburse to the Applicant, the amount incurred towards payment of compounding fee levied by the Court in connection with criminal case filed against Corporate Debtor pending before the Additional Chief Metropolitan Magistrate (Special Acts), Tis Hazari Court, New Delhi and the payment shall be attended on priority basis and 19 necessary provisions to be made to meet this expenditure. Direction to refund a sum of to the applicant - direction to Resolution Professional not to include the sum of Rs. as part of assets of the corporate debtor - HELD THAT - Counsel for Applicant reported no instructions to the applicant. Hence petition is dismissed for default.
Issues Involved:
1. Payment of outstanding TDS and issuance of Form 16. 2. Compounding fees related to a criminal case filed by the Income Tax Department. 3. Invocation of a bank guarantee and its legality. Detailed Analysis: 1. Payment of Outstanding TDS and Issuance of Form 16: The Applicant, an ex-employee of the Corporate Debtor, filed an application seeking directions to the Liquidator to pay the outstanding TDS amounting to ?3,58,737/- and issue Form 16. The Applicant received a notice from the Income Tax Department regarding the delay in TDS payment, which led to a demand for ?2,76,570/-. The Liquidator admitted the TDS dues but argued that these dues are operational debts and would be paid according to the waterfall mechanism under Section 53 of IBC. The Tribunal noted that the TDS deducted from the Applicant's salary should have been credited to the Income Tax Department. The Corporate Debtor's failure to deposit the TDS made the Applicant liable, but the Tribunal held that the responsibility lies with the Corporate Debtor. The Liquidator was directed to pay the TDS amount to the Income Tax Department and issue Form 16 to the Applicant. 2. Compounding Fees Related to a Criminal Case Filed by the Income Tax Department: The Applicant, the former Managing Director of the Corporate Debtor, sought directions for the Liquidator to prioritize funds for compounding fees related to a criminal case filed by the Income Tax Department. The case was filed due to delayed TDS payments. The Liquidator argued that the prosecution was initiated before the CIRP and thus, the Applicant should defend it personally. The Tribunal held that the Liquidator is responsible for defending any suit or prosecution against the Corporate Debtor, whether civil or criminal, as per Section 35(1)(k) of IBC. The Tribunal directed the Liquidator to reimburse the Applicant for any compounding fees paid and to make necessary provisions for this expenditure. 3. Invocation of a Bank Guarantee and Its Legality: The Applicant sought a declaration that the invocation of a bank guarantee by the Resolution Professional (RP) was illegal and against the provisions of the bank guarantee. The Applicant argued that the invocation was done after the CIRP period and was thus entitled to restitution. The Respondent (RP) argued that the invocation was done in accordance with the provisions of the Code and that the claim was duly verified. The RP also contended that the application for stay on the invocation had become infructuous as the bank guarantee had already been invoked. The Tribunal, after hearing both sides, dismissed the application for default as the counsel for the Applicant reported no instructions. Thus, the matter was not adjudicated on its merits. Conclusion: The Tribunal's judgments addressed the responsibilities of the Liquidator in handling TDS dues and defending criminal prosecutions against the Corporate Debtor. It emphasized the Liquidator's duty to adhere to the waterfall mechanism for debt repayment and to manage the Corporate Debtor's legal obligations during liquidation. The issue of the bank guarantee was dismissed for default, leaving the legality of its invocation unresolved.
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