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2022 (9) TMI 317 - SC - VAT / Sales Tax


Issues Involved:
1. Whether the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), particularly Section 53, override Section 48 of the Gujarat Value Added Tax Act, 2003 (GVAT Act).
2. Whether the State Tax Department qualifies as a "Secured Creditor" under the IBC.
3. Validity of the Resolution Plan approved by the Committee of Creditors (CoC) and the Adjudicating Authority (NCLT).
4. Timeliness and admissibility of the State Tax Department's claim.

Issue-wise Detailed Analysis:

1. Overriding Provisions of IBC Over GVAT Act:
The core question was whether Section 53 of the IBC, which outlines the distribution of assets during liquidation, overrides Section 48 of the GVAT Act, which provides for the first charge on the property of a dealer for tax dues. The Supreme Court held that Section 53 of the IBC, which starts with a non-obstante clause, does not override Section 48 of the GVAT Act. It was clarified that Section 48 is not contrary to Section 53 of the IBC. The debts owed to a secured creditor, including the State under the GVAT Act, rank equally with other specified debts under Section 53(1)(b)(ii).

2. State Tax Department as a "Secured Creditor":
The court examined whether the State Tax Department qualifies as a "Secured Creditor" under Sections 3(30) and 3(31) of the IBC. It was determined that the statutory charge under Section 48 of the GVAT Act falls within the definition of "Security Interest" under Section 3(31) of the IBC, making the State a secured creditor under Section 3(30). The NCLAT's finding that the State is not a secured creditor was deemed erroneous.

3. Validity of the Resolution Plan:
The Supreme Court scrutinized whether the Resolution Plan met the requirements of Section 30(2) of the IBC, which mandates the inclusion of operational creditors' dues. It was found that the Resolution Plan did not conform to the statutory requirements, as it failed to account for the statutory dues of the State. Consequently, the court held that the Resolution Plan could not be approved, as it did not meet the mandatory conditions of Section 30(2). The court emphasized that a Resolution Plan ignoring statutory dues payable to the Government must be rejected.

4. Timeliness and Admissibility of the State Tax Department's Claim:
The court addressed the issue of the timeliness of the State's claim, noting that the State had initiated recovery proceedings and that the Books of Accounts of the Corporate Debtor reflected the liability. The court held that the time stipulations for submitting claims under Regulation 12 of the 2016 Regulations are directory, not mandatory. The rejection of the State's claim solely on the ground of delay was found to be unsustainable. The court stated that the Resolution Professional (RP) had a duty to verify and include the State's claim in the Resolution Plan.

Conclusion:
The Supreme Court allowed the appeals, set aside the impugned orders of the NCLAT and NCLT, and invalidated the approved Resolution Plan. The RP was directed to consider a fresh Resolution Plan that includes provisions for the dues of statutory creditors like the appellant. The judgment emphasized that statutory dues must be accounted for in any Resolution Plan, and the State qualifies as a secured creditor under the IBC.

 

 

 

 

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