2023 (2) TMI 281 - HC - Insolvency and Bankruptcy

Validity of assessment order - non application of mind to the fact that the NCLAT has passed a moratorium order, which is akin to a moratorium order passed under Section 14 of the Insolvency and Bankruptcy Code 2016 - no personal hearing was granted to the petitioner, despite a specific request having been made in the aforementioned replies by the petitioner - violation of principles of natural justice. HELD THAT - Admittedly, the contentions of the petitioner, which has been recorded by this Court in the earlier paragraphs were not considered by the respondent in the impugned Assessment Order. It is also not in dispute that the NCLAT had passed an order on 15.10.2018, which the petitioner claims is akin to a moratorium order passed under Section 14 of the Insolvency and Bankruptcy Code, 2016. It is for the respondent to consider the petitioner's contention and decide the issue on merits - this Court is not expressing any view on the merits of the matter. Admittedly, no personal hearing was afforded to the petitioner in the impugned assessment proceedings despite a request having been made by the petitioner for the same in their replies - Having not granted personal hearing to the petitioner in the impugned Assessment proceedings, despite a request having been made by the petitioner in their replies, this Court is of the considered view that principles of natural justice has been violated. The respondent has also not considered the petitioner's contention that Assessment Proceedings cannot be proceeded with in view of the fact that the NCLAT has passed an order on 15.10.2018, which according to the petitioner is akin to a moratorium order passed under Section 14 of the Insolvency and Bankruptcy Code, 2016. This Court is of the considered view that on account of the violation of principles of natural justice due to the fact that no personal hearing was afforded to the petitioner and on account of the fact that the contentions of the petitioner as raised in this writ petition have not been considered by the respondent, despite the same having been raised in their replies sent to the respondent, the impugned order has to be necessarily quashed and the matter has to be remanded back to the respondent for fresh consideration on merits and accordance with law. Petition disposed off.

Summary

Issues:
Challenge to Assessment Order and Recovery Notice based on non-application of mind, lack of personal hearing, violation of principles of natural justice.

Analysis:
1. The petitioner challenged the Assessment Order and consequential recovery notice based on several grounds. Firstly, it was argued that the Assessment Order was erroneous due to the respondent's failure to consider a moratorium order passed by the NCLAT, similar to one under the Insolvency and Bankruptcy Code. The petitioner had explicitly referred to this order in their replies, but it was allegedly ignored in the Assessment Order.
2. Another contention was the lack of a personal hearing, which was requested by the petitioner but not granted, violating Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017. The petitioner claimed that the Assessment Order was passed in violation of the principles of natural justice.
3. The petitioner's counsel highlighted the NCLAT's order, emphasizing that the Assessment Proceedings should not have proceeded in light of the moratorium order. The order was compared to a moratorium order under the Insolvency and Bankruptcy Code, 2016, indicating that the Assessment Order was procedurally incorrect.
4. The respondent argued that the petitioner had an alternative statutory appellate remedy available and contended that the NCLAT's order was not equivalent to a moratorium order under the Insolvency and Bankruptcy Code. The respondent maintained that the NCLAT's order was based on the Companies Act, 2013, not the Insolvency and Bankruptcy Code.
5. The respondent also disputed the relevance of a Calcutta High Court judgment cited by the petitioner, asserting that it did not apply to the present case as there were no Corporate Insolvency Resolution Process proceedings pending against the petitioner. The respondent argued that the Assessment Proceedings were not required to be stayed based on the NCLAT's order.
6. Ultimately, the Court found that the Assessment Order violated principles of natural justice by not granting a personal hearing to the petitioner and failing to consider the petitioner's contentions regarding the NCLAT's order. The Court quashed the Assessment Order and directed the respondent to reconsider the matter, ensuring adherence to natural justice principles and granting a personal hearing to the petitioner within twelve weeks. The consequential recovery notice was also quashed in line with the Assessment Order's quashing.