2020 (3) TMI 761 - Tri - Insolvency and Bankruptcy

Direction to GST Department for detachment of the properties attached by them, being in the form of Finished Goods , raw materials and the machineries belonging to the Corporate Debtor and to hand over to IRP of the Corporate Debtor and lodge the claim with the IRP - section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the instant case, an application was filed by ICICI as financial creditors against the Innoventive Industries Ltd. On account of a default of payments due on credit availed by Innoventive Industries it is argued that pursuant to relief order passed by the Government of Maharashtra under the Maharashtra Relief Undertaking (Special Provisions Act) 1958 (MRUA), the Corporate Debtor is not liable to pay any due to ICICI. On the basis of the overriding effects of IBC over MRUA, National Company Law Tribunal (NCLT) declared a moratorium and appointed Insolvency Resolution Professional (IRP). In the appeal, NCLAT held that there is no repugnancy between MRUA and IBC as they are enactments of two diverse fields. IBC has an overriding effect over the provisions of MRUA. The period of completion of the CIRP is restricted to 180 days or 270 days or 330 days from the date of admission of the application. The Code in itself is a time-constrained process; hence, the attachment of assets during such process drastically affects the stakeholders of the Corporate Debtor. It is pertinent that obtaining a release of the assets from such statutory authorities is a task in itself and requires a substantial number of days or months for the final judgment to be pronounced. Hence, the precious time of a resolution professional will be spent in obtaining judgments in such matters. Directly or indirectly, such litigation hampers the whole process of CIRP. Accordingly, such litigation affects the stakeholders of the corporate debtor. It is loud and clear that IB Code is not a debt recovery tool - this Adjudicating Authority is of the considered view, that provisions of section 238 of the IB Code override the Gujarat State GST Act 2017 and Central GST Act 2017 - application allowed.

Summary

Issues:
1. Detachment of properties attached by GST Department and handing over to IRP
2. Activation of GST No. deactivated by GST Department
3. Conflict between IB Code and GST Act regarding attachment of assets
4. Interpretation of Section 238 of IB Code

Detachment of Properties Attached by GST Department and Activation of GST No.:
The Applicant, as IRP of the Corporate Debtor, filed an IA requesting the Tribunal to direct the GST Department to detach the properties attached and activate the GST No. The Corporate Debtor's operations were affected due to the attachment, hindering the IRP's ability to manage the company as a going concern. The Respondent Deputy Commissioner of State Tax stated that the properties were attached due to the Corporate Debtor's default in statutory dues. However, the Tribunal held that the IB Code overrides conflicting laws, directing the release of assets to facilitate the Insolvency Resolution Process.

Conflict Between IB Code and GST Act:
The Tribunal referred to various judgments, including Pr. CIT v. Monnet Ispat and Energy Ltd., Innoventive Industries Ltd. v. ICICI Bank, and Lalit Mishra and Ors v. Sharon Bio Medicine Ltd., to establish the supremacy of the IB Code over other laws in case of inconsistency. Section 238 of the IB Code was highlighted, emphasizing its overriding effect on conflicting laws. The Tribunal concluded that the IB Code prevails over the Gujarat State GST Act 2017 and Central GST Act 2017, directing the release of the Corporate Debtor's assets for the completion of the Insolvency Resolution Process.

Interpretation of Section 238 of IB Code:
Section 238 of the IB Code was analyzed to understand its non-obstante clause, empowering it to override contradictory provisions in other laws. Case examples such as Innoventive Industries Limited and Sterling SEZ Infrastructure Ltd. were discussed to illustrate the application of Section 238 in resolving conflicts between the IB Code and other statutes. The Tribunal emphasized that the IB Code is not a debt recovery tool but a framework for insolvency resolution, ensuring the maximization of asset value and economic interests of stakeholders.

Conclusion:
The Tribunal allowed the IA, directing the GST Department to release the assets of the Corporate Debtor to enable the IRP to manage the claims from creditors and complete the Insolvency Resolution Process within the stipulated timeline. The judgment reaffirmed the supremacy of the IB Code in insolvency proceedings, emphasizing the importance of resolving conflicts with other laws to facilitate efficient resolution processes.