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2022 (10) TMI 885 - AT - Insolvency and BankruptcyCIRP - recovery of arrear of sales tax / VAT - first charge in favor of revenue - removal of lien created over the factory premises and landed property - overriding effect covered under Section 238 of the IBC - the Adjudicating Authority vacated the lien marked on the Corporate Debtor on 13.05.2019 for two reasons i. It being subsequent to the admission of the company petition; and ii. This order will not have any primacy over the overriding effect covered under Section 238 of the IBC and allowed the application filed by the Liquidator vacating the lean marked on asset of the Corporate Debtor on 13.05.2019. HELD THAT - The Adjudicating Authority while passing the impugned order dated 01.10.2020 has not considered the ratio of the latest judgment of the Hon ble Supreme Court in the case of State Tax Officer (1) Vs. Rainbow Papers Limited bearing Civil Appeal No. 1661 of 2020 2022 (9) TMI 317 - SUPREME COURT - the impugned order passed by the Adjudicating Authority cannot be sustained in the eye of law, therefore, the impugned order dated 01.10.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Principal Bench, New Delhi.) is hereby set aside. Appeal allowed.
Issues Involved:
1. Validity of the lien marked by the Deputy Commissioner of Sales Taxes and Excise on the Corporate Debtor's property. 2. Overriding effect of Section 238 of the Insolvency and Bankruptcy Code (IBC) over other laws. 3. Applicability of the Supreme Court's judgments on statutory first charge and its precedence over other claims. 4. Timeliness of the appeal filed by the Appellant. Issue-wise Detailed Analysis: 1. Validity of the lien marked by the Deputy Commissioner of Sales Taxes and Excise on the Corporate Debtor's property: The appeal was filed by the Appellant against the order dated 01.10.2020 by the Adjudicating Authority (NCLT, Principal Bench, New Delhi), which vacated the lien marked on the Corporate Debtor's assets. The lien was marked on 13.05.2019 subsequent to the admission of the company petition on 11.12.2018. The Adjudicating Authority held that the lien was invalid as it was marked after the initiation of the Corporate Insolvency Resolution Process (CIRP) and did not have primacy over the overriding effect of Section 238 of the IBC. 2. Overriding effect of Section 238 of the Insolvency and Bankruptcy Code (IBC) over other laws: The Appellant argued that under Section 26 of the HP VAT Act, 2005, the State Taxes and Excise Authorities have a first charge on the property of the dealer, which should take precedence over other claims. The Appellant cited the Supreme Court's judgment in Central Bank of India vs. State of Kerala, which discussed the overriding impact of central acts like the DRT Act and SARFAESI Act over state laws. However, the Respondent contended that Section 238 of the IBC provides an overriding effect to the provisions of the Code over all other laws, including the HP VAT Act. 3. Applicability of the Supreme Court's judgments on statutory first charge and its precedence over other claims: The Appellant referred to several Supreme Court judgments, including State Bank of Bikaner and Jaipur vs. National Iron and Steel Rolling Corporation and State Tax Officer (1) vs. Rainbow Papers Limited, to argue that statutory first charges created by state laws should have precedence over other claims. The Supreme Court in the Rainbow Papers case held that Section 48 of the GVAT Act (similar to Section 26 of the HP VAT Act) is not inconsistent with Section 53 of the IBC and that statutory dues owed to the government should be treated as secured debts. 4. Timeliness of the appeal filed by the Appellant: The Respondent argued that the appeal was filed after more than 150 days from the date of the impugned order, making it time-barred. However, the Appellant filed an application for condonation of delay, citing the Supreme Court's order in Suo-Motu Writ Petition (Civil) No. 03/2020, which extended the period of limitation due to the COVID-19 pandemic. The Tribunal accepted this argument and condoned the delay. Conclusion: After considering the arguments and relevant Supreme Court judgments, the Tribunal found that the Adjudicating Authority did not consider the ratio of the latest Supreme Court judgment in the Rainbow Papers case. Therefore, the Tribunal set aside the impugned order dated 01.10.2020 and allowed the appeal, directing the Adjudicating Authority to proceed in accordance with the law.
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