2022 (6) TMI 284 - HC - Insolvency and Bankruptcy

CIRP - Claim of successful resolution applicant over pre-deposit made the corporate debtor for filing of an appeal under VAT Act - right of state to recover the outstanding tax liability - recovery of claims or claim any debts owed to them by the corporate debtor accruing prior to transfer date and that consequences shall follow - Section 83 of the RVAT Act, 2003 - HELD THAT - As the original assessee, i.e. M/s. Binani Cement Ltd., was compelled to file the appeals with pre-deposits of a percentage of the tax liability by way of mandatory statutory obligation as per the assessment orders issued by the Commercial Taxes Department, the consequential relief pursuant to extinguishment of the demands under the assessment order would definitely require a direction for refund of the amount to the successful Resolution Applicant, i.e. the petitioner herein, who took over the assets and liabilities of the sick unit according to the Resolution Plan approved by the NCLAT. In the case of State of Gujarat Vs. Essar Steel Ltd. 2016 (5) TMI 221 - GUJARAT HIGH COURT , Hon ble Gujarat High Court directed refund of predeposit on acceptance of the appeals and decided the issue in favour of the assessee. In the present case, though the appeals have not been accepted, but an analogous situation has been created with acceptance of the Resolution Plan and extinguishment of all debts/liabilities of the sick unit towards the statutory creditor, i.e. the State Government/Commercial Taxes Department. The consolidated impugned order dated 28.12.2020 passed by the Rajasthan Tax Board, Ajmer in the appeals filed by the petitioner is set aside to the extent the applications filed by the petitioner for refund of pre-deposit amounts with interest were rejected. The amounts deposited by M/s. Binani Cement Ltd. as mandatory statutory obligation while filing the appeals before the Tax Board shall be reimbursed to the petitioner within a period of three months from today with interest at the rate applicable by law. These Revisions/ Sales Tax References deserve to be and are hereby allowed - the demands raised by the Commercial Taxes Department against the Corporate Debtor M/s. Binani Cement Limited except to the extent admitted by NCLAT are declared to be infructuous/ are quashed/struck down - the amounts deposited by the Corporate Debtor under protest and by way of pre-deposit as mandatory statutory obligation while filing the appeals, shall be refunded to the petitioner M/s. UltraTech Nathdwara Cement Limited being the Successful Resolution Applicant with applicable interest as per law within a period of 60 days.

Summary

Issues Involved:
1. Validity of demands raised by the Commercial Taxes Department against the Corporate Debtor.
2. Entitlement of the Successful Resolution Applicant to receive refunds of amounts deposited under protest and as mandatory statutory pre-deposits.

Detailed Analysis:

Issue 1: Validity of Demands Raised by the Commercial Taxes Department

The court addressed the fate of outstanding dues of the Corporate Debtor, M/s. Binani Cement Limited, following the approval of the resolution plan by the NCLAT and the Supreme Court. The resolution plan submitted by M/s. UltraTech Cement Limited was approved by the NCLAT on 14.11.2018 and declared binding on all stakeholders, including Operational Creditors, Financial Creditors, and Statutory Creditors, per Section 31 of the Insolvency and Bankruptcy Code, 2013. Consequently, all liabilities of the Corporate Debtor not included in the resolution plan were extinguished as of the approval date, rendering pending demands against the Corporate Debtor infructuous.

The court referenced a previous judgment (D.B. Civil Writ Petition No. 9480/2019) which clarified that financial creditors are given precedence in payment ratios during the resolution plan finalization, while operational creditors (like the Commercial Taxes Department) have no right of audience in the Committee of Creditors (COC). The Supreme Court had dismissed appeals by the Commercial Taxes Department challenging the resolution plan, affirming that the demands raised by the Department for periods prior to the resolution plan’s finalization were illegal and could not be sustained.

Issue 2: Entitlement to Refund of Deposited Amounts

The court also examined the entitlement of the Successful Resolution Applicant, M/s. UltraTech Nathdwara Cement Limited, to receive refunds of amounts deposited by the Corporate Debtor under protest and as mandatory statutory pre-deposits. The court referenced its previous order (D.B. Sales Tax Ref./Revision No. 9/2021) which held that any demand made by the State Commercial Taxes Department in excess of what was approved by the NCLAT must be struck off, and any amounts received over and above the approved amount must be refunded.

The court cited the Supreme Court’s judgment in Ghanshyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd., which clarified that once a resolution plan is approved by the Adjudicating Authority, all claims not part of the resolution plan are extinguished, and no proceedings for such dues could continue. The court concluded that the amounts deposited by M/s. Binani Cement Ltd. as mandatory statutory obligations while filing appeals must be reimbursed to the Successful Resolution Applicant with applicable interest.

Conclusion:

The court allowed the Revisions/Sales Tax References with the following directions:

(a) The demands raised by the Commercial Taxes Department against the Corporate Debtor, M/s. Binani Cement Limited, except to the extent admitted by NCLAT, are declared infructuous and are quashed/struck down.

(b) The amounts deposited by the Corporate Debtor under protest and as mandatory statutory pre-deposits while filing appeals shall be refunded to the petitioner, M/s. UltraTech Nathdwara Cement Limited, with applicable interest within 60 days.

The Revisions/Sales Tax References were allowed in these terms, and a copy of the order was directed to be placed in each file.