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2020 (4) TMI 269 - HC - GSTRecovery of GST - CIRP proceedings initiated against the company - Approval of Resolution Plan - petitioner contended that the issue regarding the resolution plan being final and binding on all parties; whether or not they had been heard by the resolution professional or the COC - whether the resolution plan approved by the COC is binding on the department or not? - HELD THAT - It is trite to note that as per the amended Section 31 of the IBC referred to supra, the Central Govt., State Govt. or any other local authority to whom, a debt in respect of payment of dues arising under any law for the time being in force are owed, have been brought under the umbrella of the resolution plan approved by the adjudicating officer which has been made binding on such governments and local authorities. The purpose of the IBC is salutary as it has been enacted to ensure that an industry under distress does not fade into oblivion and can be revived by virtue of the resolution plan. Once the offer of the resolution applicant is accepted and the resolution plan is approved by the appropriate authority, the same is binding on all concerned to whom the industry concern may be having statutory dues. No right of audience is given in the resolution proceedings to the operational creditors viz. the Central Govt. or the State Govt. as the case may be. The purpose of the statute is very clear that it intends to revive the dying industry by providing an opportunity to a resolution applicant to take over the same and begin the operation on a clean slate. For that purpose, the evaluation of all dues and liabilities as they exist on the date of finalization of the resolution plan have been left in the exclusive domain of the resolution professional with the approval of the COC. The courts are given an extremely limited power of judicial review into the resolution plan duly approved by the COC. In the case at hand, the situation has proceeded much further. The operational creditors i.e. the Commercial Taxes Department of Govt. of Rajasthan as well as the respondent Commissioner of Goods and Service Tax assailed the resolution plan by filing appeals before Hon ble the Supreme Court with a specific plea that their dues have not been accounted for by the COC in the resolution plan. Thus, the respondents would be acting in a totally illegal and arbitrary manner while pressing for demands raised vide the notices which are impugned in this writ petition and any other demands which they may contemplate for the period prior to the resolution plan being finalized - demand notices are ex-facie illegal, arbitrary and per-se and cannot be sustained - petition allowed - decided in favor of petitioner.
Issues Involved:
1. Validity of demands raised by the Central Goods and Service Tax Department for the period before the petitioner took over Binani Cements Ltd. 2. Binding nature of the resolution plan approved under the Insolvency and Bankruptcy Code (IBC) on the Central Government, State Government, and local authorities. 3. Jurisdiction of the GST Department to raise demands post-approval of the resolution plan. 4. Impact of the amendment to Section 31 of the IBC on the binding nature of the resolution plan. 5. Role and precedence of financial creditors versus operational creditors in the resolution process. Detailed Analysis: 1. Validity of Demands Raised by GST Department: The petitioner, Ultra Tech Nathdwara Cement Ltd., challenged various notices and orders issued by the Central Goods and Service Tax Department demanding GST dues for the period before the petitioner took over Binani Cements Ltd. The petitioner argued that these demands were invalid as they pertained to a period before the resolution plan was finalized and approved under the IBC. 2. Binding Nature of the Resolution Plan: The court emphasized that the resolution plan, once approved by the Committee of Creditors (COC) and the adjudicating authority, is binding on all stakeholders, including the Central Government, State Government, and local authorities. This is in line with the amended Section 31 of the IBC, which explicitly states that the resolution plan is binding on all creditors, including statutory authorities. 3. Jurisdiction of GST Department Post-Approval of Resolution Plan: The court noted that the GST Department had no jurisdiction to raise demands for the period before the petitioner took over Binani Cements Ltd. once the resolution plan was approved. The court highlighted that the resolution plan had been affirmed by the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court, making it final and binding. 4. Impact of Amendment to Section 31 of IBC: The amendment to Section 31 of the IBC, which came into effect on 6.8.2019, clarified that the resolution plan approved by the adjudicating authority is binding on all creditors, including the Central Government, State Government, and local authorities. The court referred to the Finance Minister's statement in Parliament, which confirmed that the government would not raise any further claims after the resolution plan is approved. 5. Role and Precedence of Financial Creditors: The court reiterated that financial creditors are given precedence in the resolution process under the IBC. The resolution plan is primarily designed to maximize the value of the assets and ensure the revival of the distressed industry. The court referred to the Supreme Court's judgment in the Essar Steel case, which emphasized that the commercial wisdom of the COC is paramount and that operational creditors, including statutory authorities, do not have a right of audience in the resolution process. Conclusion: The court quashed the impugned demand notices and orders issued by the GST Department for the period before the resolution plan was finalized. The court held that these demands were illegal and arbitrary, as the resolution plan, once approved, is binding on all creditors, including statutory authorities. The court also criticized the GST authorities for persisting with the demands despite the clear legislative intent and judicial pronouncements, thereby unnecessarily burdening the courts with frivolous litigation. The writ petition was allowed, and no costs were awarded.
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