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2023 (2) TMI 682 - HC - CustomsJurisdiction - power to issue SCN - CIRP proceedings - Approval of resolution plan - sustainability of the show-cause notice - DRI s stand is that prior to the amendment brought about in Regulation 12 of the 2016 Regulations it was only required to file proof of claim and the proof of claim not filed - stand taken vis- -vis non-filing of proof of claim is that SML had acknowledged the debt due and accordingly sought an extension of time to fulfilits export obligations - waterfall claim for distribution of proceeds from sale of Liquidation of assets - applicability of doctrine of forum non-conveniens. Whether Section 53 of the Code which provides for a waterfall mechanism for the distribution of proceeds obtained from the sale of liquidation of assets would override Section 48 of the GVAT Act? HELD THAT - In the instant case the DRI/DGFT neither submitted a proof of claim nor responded to a specific communication via e-mail dated 17.05.2017 addressed to respondent no.3. Section 48 of the GVAT Act is not pari materia with Section 142A of the 1962 Act. Section 142A of the 1962 Act plainly states that any amount payable by way of duty penalty interest or any other sum payable by an assessee or any other person under the Act shall have the first charge on the property of the assessee or the person as the case may be save as otherwise provided inter alia under the Code. Section 48 of the GVAT Act does not contain any such exception and/or carve out - the fact that extensions were sought to fulfil export obligations would not help the cause of the respondents. As a matter of fact respondent nos. 2 3 and 7 have in their counter-affidavit admitted that since the amounts due had not been crystallized they could not respond to the Public Announcement made by the IRP. If the law as enunciated by the Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. 2021 (4) TMI 613 - SUPREME COURT is applied then the dues if any owed to the respondents would have to be declared as having extinguished and if such is the position the adjudication of the impugned show-cause notice would be an exercise in futility. The doctrine of forum non-conveniens assumes that although the Court has jurisdiction in certain cases it takes the view that the action filed before it could be agitated conveniently before another forum. Therefore in such an eventuality the writ action is not entertained by the Court for the reasons of convenience and not on the ground that it does not have the jurisdiction to try and adjudicate the action lodged before it. This writ petition was filed in March 2021 and the objection concerning the Court s power to entertain the writ action was taken much later it would be unfair to return the writ petition on the ground that this Court is not a convenient forum for adjudicating the dispute arising between the parties. The impugned show-cause notice seeks to do what is in fact an exercise in futility given the law laid down by the Supreme Court in Ghanashyam Mishra. The Supreme Court has enunciated in no uncertain terms the clean slate principle; it cannot be set at naught by entertaining claims that concern the period obtaining before the approval of the Resolution Plan. The impugned SCN is quashed.
Issues Involved:
1. Sustainability of the show-cause notice dated 18.07.2019. 2. Jurisdiction and convenience of the Delhi High Court to adjudicate the writ petition. 3. Impact of the approved Resolution Plan on the statutory claims of the Directorate of Revenue Intelligence (DRI) and Directorate General of Foreign Trade (DGFT). Analysis of the Judgment: Issue 1: Sustainability of the Show-Cause Notice The primary issue revolves around the sustainability of the show-cause notice issued by the Additional Director General (ADG), Directorate of Revenue Intelligence (DRI), Hyderabad, on 18.07.2019. The petitioner, Sree Metaliks Limited (SML), contends that the notice should be quashed as it was issued after the Resolution Plan was approved by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). SML argues that the DRI/DGFT failed to register their claims with the Resolution Professional (RP) despite a public announcement and specific communication. The court observed that the DRI/DGFT did not submit their proof of claims or respond to the RP's communication, and thus, their claims were extinguished under the approved Resolution Plan as per the Supreme Court's ruling in Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657. Therefore, the court concluded that adjudicating the show-cause notice would be an exercise in futility and quashed the notice. Issue 2: Jurisdiction and Convenience of the Delhi High Court The respondents argued that the Delhi High Court was not a convenient forum since the show-cause notice was issued in Hyderabad, the petitioner is based in Orissa, and none of the goods were imported via Delhi. They cited the judgment in Sterling Agro Industries Ltd. vs Union of India & Ors. 2011 SCC OnLine Del 3162 to support their plea. However, the court noted that the adjudicating authority was in Delhi and thus had jurisdiction. The court also highlighted that the doctrine of forum non-conveniens assumes the court has jurisdiction but may choose not to entertain the writ for convenience reasons. Given that the writ petition was filed in March 2021 and the jurisdictional objection was raised much later, the court found it unfair to return the petition on convenience grounds and decided to entertain it. Issue 3: Impact of the Approved Resolution Plan The court examined whether the claims of the DRI/DGFT, which were not part of the approved Resolution Plan, stood extinguished. The Supreme Court in Ghanashyam Mishra had ruled that once a Resolution Plan is approved, all claims not part of the plan are extinguished and no proceedings can continue for such claims. The respondents relied on the Supreme Court's judgment in State Tax Officer (1) vs Rainbow Papers Ltd. 2022 SCC Online SC 1162, arguing that the Customs department should be treated as a secured creditor. However, the court distinguished the facts of the present case from Rainbow Papers, noting that the DRI/DGFT did not submit any proof of claim or respond to the RP's communication, unlike in Rainbow Papers where a claim was lodged, albeit late. Additionally, Section 142A of the Customs Act, 1962, which provides for the first charge on the property of the assessee, contains exceptions for other statutes, including the Insolvency and Bankruptcy Code (IBC), unlike Section 48 of the Gujarat Value Added Tax Act, 2003, considered in Rainbow Papers. Therefore, the court concluded that the claims of the DRI/DGFT were extinguished under the approved Resolution Plan. Conclusion: The Delhi High Court quashed the impugned show-cause notice dated 18.07.2019, holding that the adjudication of the notice would be futile given the extinguishment of the claims under the approved Resolution Plan. The court also decided to entertain the writ petition despite the respondents' objections regarding jurisdiction and convenience. The parties were directed to bear their respective costs.
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