2022 (6) TMI 716 - Tri - Insolvency and Bankruptcy

Seeking extinguishment of claim of the respondent corporation as envisioned under Clause 6 of the resolution plan - demand raised after approval of Resolution Plan - Section 60(5) read with Section 32A of the IBC, 2016 - HELD THAT - In the present case, there was a defect in the title of the land itself and this issue has now been resolved after prolonged litigation. This fact was not a subject matter of discussion during the CIRP proceedings. The extra payment of compensation will only remedy the defect in the title to the land and PSIEC can cancel the lease as per the terms and conditions of the original allotment letter. The applicant has claimed that the demand notice can t be sustained in view of the provisions of Section 31 of the I B Code. The additional payment made in the demand notice is a payment towards removing the defect in the title to the land and is not linked to the CIRP. The approved Resolution Plan cannot preclude the control that PSIEC has under law to deal with its properties and the plot in question which is undeniably a public property - this Bench is of the opinion that the enhanced land compensation is a payment towards rectifying the defect in the title to the property and is not statutory dues within the meaning of the provisions of Section 31 of the I B Code - the impugned demand notice issued by the Respondent Corporation is rejected. Seeking release of attached and detained goods - seeking extinguishment of claim of the respondent as envisioned under Clause 6 of the resolution plan - HELD THAT - It is apparent that at the time of initiation of CIRP, the interest amounting to Rs.29,85,928/- stood as the liability of the applicant company towards payment of interest in view of the CESTAT order. The goods lying in the safe custody were only to secure the payment of the outstanding dues subject to the final orders of the Hon ble High Court of Himachal Pradesh. As per the provisions of the Insolvency and Bankruptcy Code, 2016, it was the duty of the Commissionerate of Central Excise to lodge its claim before the IRP in response to as per Regulation 7 dealing with claims by operational creditors as no claim was filed during the CIRP proceedings. There is no evidence on record to suggest that any such claim was lodged. It is also noted that the alleged offenses were committed prior to the initiation of the CIRP proceedings, the provisions of Section 32A will be squarely applicable to the present case. The impugned attachment and detention orders issued by the respondent is allowed, and the respondent is directed to release the attached and detained goods and any claim of the respondent against the applicant on the issues discussed is ordered to be extinguished - Application allowed.

Summary

Issues Involved:
1. Legality of the demand notice issued by the respondent corporation.
2. Applicability of Section 32A of the IBC, 2016 concerning attachment and detention orders by the Commissionerate of Central Excise.

Detailed Analysis:

IA No.598/2021:

1. Demand Notice Legality:
- The applicant, SEL Manufacturing Company Limited, sought to set aside a demand notice dated 05.03.2021 issued by Punjab Small Industries & Export Corporation Limited (PSIEC) for an amount payable before the Corporate Insolvency Resolution Process (CIRP).
- The applicant argued that the demand notice is unsustainable as it pertains to a period prior to the CIRP and is barred by Sections 31 and 32A of the IBC, 2016. The demand notice also hinders the sale of a non-core asset, which is crucial for repaying financial creditors.
- The respondent contended that the demand arises from conditions in the allotment letter dated 01.12.1995, which includes clauses about price variation and lease rent. The respondent emphasized that the applicant, as the successor, is liable for the unpaid amounts and that the demand was upheld by the High Court and Supreme Court.

2. Resolution Plan and Statutory Provisions:
- The applicant relied on Section 31 of the IBC, which states that an approved resolution plan is binding on all creditors and extinguishes claims not included in the plan. The applicant also cited Supreme Court judgments supporting their stance.
- The respondent argued that the enhanced land compensation is not a statutory due but a condition of the allotment, affecting the title of the property. They also highlighted that the respondent was unaware of the CIRP proceedings and that the applicant had not disclosed ongoing litigation regarding the enhanced compensation.

3. Tribunal’s Observations:
- The Tribunal noted that the enhanced compensation arises from conditions in the allotment letter and is not a statutory due. The PSIEC was unaware of the CIRP proceedings, and the applicant had not informed the IRP or CoC about the pending litigation.
- The Tribunal referred to the Supreme Court's decision in the Municipal Corporation of Greater Mumbai (MCGM) Vs. Abhilash Lal, emphasizing that Section 238 of the IBC does not override public authorities' rights to control their properties.
- The Tribunal concluded that the additional payment is for rectifying the title defect and not linked to the CIRP. Therefore, the resolution plan cannot override PSIEC's control over the property.

4. Judgment:
- The Tribunal dismissed the application, holding that the enhanced land compensation is not a statutory due under Section 31 of the IBC. The demand notice issued by PSIEC stands valid.

IA No.599/2021:

1. Attachment and Detention Orders:
- The applicant sought to set aside attachment and detention orders issued by the Commissionerate of Central Excise, arguing that the resolution plan extinguishes such claims and that Section 32A of the IBC applies.
- The respondent stated that the applicant had taken input credit and owed interest, which was confirmed by the CESTAT and the High Court of Himachal Pradesh. The respondent detained goods to secure payment, and the CoC did not consider this during the CIRP.

2. Tribunal’s Observations:
- The Tribunal noted that the interest liability existed before the CIRP initiation, and the goods were detained to secure payment. The respondent did not file a claim during the CIRP.
- The Tribunal emphasized that Section 32A of the IBC applies, as the offenses were committed before the CIRP, and the resolution plan results in a change of management.

3. Judgment:
- The Tribunal allowed the application, setting aside the attachment and detention orders. The respondent was directed to release the detained goods, and any claims against the applicant were extinguished.

Conclusion:
The Tribunal dismissed IA No.598/2021, upholding the demand notice by PSIEC, and allowed IA No.599/2021, setting aside the attachment and detention orders by the Commissionerate of Central Excise, applying Section 32A of the IBC.