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2021 (8) TMI 431 - AT - Insolvency and BankruptcyAuction of goods, detained by Customs Authority during moratorium period - allegation is that ignoring the intimation by IRP, the Dept. illegally auctioned the goods contained in the 256 containers - Whether the Adjudicating Authority was justified in directing the amount to be made over to the Corporate Debtor, in the light of Claims made by MSC Shipping and the Customs Dept.? - Applicability of Section 48 of the Customs Act, 1962. HELD THAT - MSC Shipping filed Form B on 04.06.2019 as an Operational Creditor prior to the filing of this Appeal. Additionally, its Agency MSC Agency (India) Pvt. Ltd. also filed Form B on 04.06.2019 as an Operational Creditor before the Resolution Professional. It is significant to mention that both MSC Shipping and its Agency have clearly specified in item 7 details of how when Debt occurred that the claimants provide marine containers and are engaged in the business of carriage of goods by sea. Briefly put, it is stated therein that in all the 15 Bills of Lading, the Corporate Debtor and its sister concern Bhuvee Profiles were declared as Consignee and/or Notified Party . As the consignee/and endorsee and/or holder of the goods being the receiver of the goods are bound by the terms conditions of the said Bills of Lading. Therefore, admittedly being the consignee of the goods, the Corporate Debtor has a right vested in him over the goods. The goods were undisputably purchased by the Corporate Debtor . Applicability of Section 48 of the Customs Act, 1962 - HELD THAT - In case of non-clearance of the goods within 30 days or within extended period or if the title of any imported goods is relinquished after notice to the importer and with the permission of the proper officer, the goods can be sold by the Custom Authority. Section 48 of the Customs Act, 1962 relates to sale of goods in the custody of the Customs in the manner prescribed therein. - In the present case, having failed to auction the goods prior to the CIRP period, the Customs Dept. cannot now, subsequent to the imposition of Moratorium, proceed to auction the goods. Having done so, the sale proceeds of the so conducted auction cannot be made over to the Customs Dept. . It is relevant to mention that a Review Application has been filed before the Adjudicating Authority on 30.08.2019 which was dismissed vide Order dated 19.11.2019 and the Customs Authority was directed to make payment to the Corporate Debtor . Company Appeal is dismissed. Company Appeal preferred by the Customs Dept. is partly allowed the penalty imposed by the Adjudicating Authority of ₹ 1 Lakh per day is set aside and the direction of the Adjudicating Authority that the Customs Dept. shall have the right to submit their Claim with the Liquidator and would be treated as Operational Creditor , is confirmed.
Issues Involved:
1. Validity of the auction of goods by the Customs Department during the moratorium period. 2. Entitlement to the sale proceeds of the auctioned goods. 3. Compliance with procedural requirements and principles of natural justice. 4. Applicability of the Customs Act, 1962, and the IBC Code, 2016. Issue-wise Detailed Analysis: 1. Validity of the Auction of Goods by the Customs Department During the Moratorium Period: The National Company Law Appellate Tribunal (NCLAT) examined whether the Customs Department was justified in auctioning goods during the moratorium period declared under Section 14 of the Insolvency and Bankruptcy Code (IBC). The moratorium prohibits actions to recover or enforce any security interest against the corporate debtor's property. The Tribunal noted that the Customs Department auctioned the goods on 26.04.2019, after the commencement of the Corporate Insolvency Resolution Process (CIRP) on 05.03.2019. The Tribunal referenced the Supreme Court's judgment in "Mr. Anand Rao Korada Resolution Professional vs. M/s. Varsha Fabrics (P) Ltd. & Ors.," which emphasized that assets of the corporate debtor should not be alienated during the pendency of insolvency proceedings. Consequently, the Tribunal held that the Customs Department's auction was in violation of the moratorium and thus invalid. 2. Entitlement to the Sale Proceeds of the Auctioned Goods: The Tribunal addressed whether the corporate debtor or MSC Shipping had a rightful claim to the sale proceeds of the auctioned goods. The Tribunal found that the corporate debtor, as the consignee and endorsee of the Bills of Lading, had ownership rights over the goods. The Tribunal cited Section 2(4) of the Sale of Goods Act, 1930, and the Indian Bill of Lading Act, 1856, which establish that the consignee named in the Bill of Lading has title to the goods. The Tribunal also referred to the Supreme Court's judgment in "Shipping Corporation of India Ltd. vs. C.L. Jain Woolen Mills and Ors.," which affirmed that the consignee has absolute rights over the goods. Therefore, the Tribunal concluded that the sale proceeds rightfully belonged to the corporate debtor. 3. Compliance with Procedural Requirements and Principles of Natural Justice: MSC Shipping argued that the adjudicating authority passed impugned orders without hearing them, violating the principles of natural justice. The Tribunal acknowledged that MSC Shipping's application was not listed despite their counsel's presence and requests. However, the Tribunal decided not to remand the matter back to the adjudicating authority due to the considerable time lapse and the need to balance equities. The Tribunal emphasized the importance of adhering to the time-bound process of the IBC. 4. Applicability of the Customs Act, 1962, and the IBC Code, 2016: The Customs Department contended that Section 48 of the Customs Act, 1962, which allows the sale of goods not cleared within a specified period, was applicable. However, the Tribunal held that the provisions of the IBC, particularly Section 14 (moratorium) and Section 238 (overriding effect of the IBC), took precedence over the Customs Act. The Tribunal cited its previous judgment in "Commissioner of Customs (Preventive) West Bengal vs. Ram Swarup Industries Ltd. and Ors.," which held that assets of the corporate debtor could not be sold during the moratorium period. Consequently, the Tribunal concluded that the Customs Department's actions were not justified under the IBC framework. Conclusion: The Tribunal dismissed the appeals filed by MSC Shipping and partly allowed the appeal by the Customs Department, setting aside the penalty imposed by the adjudicating authority. The Customs Department was directed to submit their claim as an operational creditor and comply with the liquidation process. The Tribunal emphasized the need for the Customs Department to release the remaining goods to facilitate the corporate debtor's operations as a going concern.
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