2023 (5) TMI 1199 - AT - Insolvency and Bankruptcy

Maintainability of Section 9 application - it is argued that entire Operational Debt having been paid by the Corporate Debtor, there is no useful purpose in continuing the Section 9 proceeding any further - impleadment of Respondent as Corporate Debtor - Appellant submits that the Section 9 application was filed for Safeguard Duty reserving right to claim future interest or penalties or delay charges - HELD THAT - Admittedly, the levy by the Custom Department is by Assessment Order dated 04.10.2022 by which finalization of duty on the bill of entry was made. In the Safeguard Duty, on the date when application was filed, interest could not have included as the amount of interest has been crystalized only subsequently when provisional assessment has been finalized by letter dated 04.10.2022 - The claim of interest levied by order dated 04.10.2022 cannot be said to be included in the debt as claimed by the Applicant under Section 9. The impugned order records that Appellant has deposited on 14.11.2022, entire claim amount of Rs.16,41,96,213.38/- Principal amount and applicable GST making a total amount of Rs.18.68,55.290.82/-. On deposit of the aforesaid amount, thus, the debt as was claimed in the application stood paid. The order further notice that submission was made on behalf of the learned senior counsel for the Appellant that in view of the aforesaid deposit, the application should be rejected, which was opposed by learned counsel for the Respondent stating that interest is also to be paid by the Corporate Debtor - Operational Debt as was claimed in the application under Section 9 which is apparent from Part IV of the Application which clearly states that the Operational Debt was only Rs.17,24,06,024/- and Applicant has reserved its right to claim further interest, penalties or delayed charges, etc. - On payment of entire Operational Debt as was claimed in the application, there was no occasion to continue the Section 9 application any further. It is open for the Appellant to challenge the levy of interest, if they are so aggrieved to liability of interest which ultimately will come on them as per the supply agreement. Appellant cannot get away from liability of interest by saying that it has requested the Operational Creditor to challenge the levy of interest since if the liability of the interest is of the Appellant as per the Supply Agreement, it was open for the Appellant to take such recourse in accordance with law challenging the levy of interest. Section 9 application which was filed by the Operational Creditor, the entire Operational Debt having been paid by the Corporate Debtor, there is no useful purpose in continuing the Section 9 proceeding any further. The Adjudicating Authority ought to have closed the matter and the observation that the parties are permitted to settle the matter amicably within one week, was uncalled for. Appeal deserves to be allowed closing the application under Section 9 filed by the Operational Creditor - Appeal allowed.

Summary

Issues Involved:
1. Payment of Safeguard Duty and GST
2. Claim for Interest on Safeguard Duty
3. Jurisdiction and Decision of Adjudicating Authority

Summary:

1. Payment of Safeguard Duty and GST:
The Respondent, Mahindra Susten Pvt. Ltd., filed an application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, claiming an amount of Rs. 17,24,06,024.33 from the Appellant, Hindustan Zinc Ltd., for Safeguard Duty and GST. The Adjudicating Authority noted that the Appellant had paid the entire claim amount of Rs. 16,41,96,213.38 (principal amount) and applicable GST totaling Rs. 18,68,55,290.82 on 14.11.2022. Consequently, the debt as claimed in the application stood paid.

2. Claim for Interest on Safeguard Duty:
The Operational Creditor argued that the interest amount on the Safeguard Duty was yet to be paid by the Corporate Debtor, amounting to Rs. 10,59,37,689/-. The Adjudicating Authority observed that the claim of interest was not included in the original Section 9 application as the interest amount was crystallized only after the provisional assessment was finalized by the Customs Department on 04.10.2022. The Tribunal held that the claim of interest could not be included in the operational debt as claimed in the application under Section 9.

3. Jurisdiction and Decision of Adjudicating Authority:
The Appellant contended that the Adjudicating Authority erred in refusing to reject the Section 9 application after the debt was paid and instead directed the parties to settle the matter amicably. The Tribunal held that the Section 9 application should have been closed as the entire operational debt was paid. The Tribunal allowed the appeal, closing the application under Section 9 filed by the Operational Creditor. However, it noted that the Operational Creditor could take legal proceedings against the Corporate Debtor if the liability of interest was not discharged.

Conclusion:
The appeal was allowed, and the Section 9 application was closed. The Tribunal clarified that the Operational Creditor could pursue legal action for the interest liability, and the Appellant could challenge the levy of interest through appropriate legal proceedings.