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2023 (7) TMI 156 - AT - Insolvency and BankruptcySeeking to release the attachment of the tiles relating to the Corporate Debtor - Attachment of goods by the GST department before initiation of CIRP - whether RP was entitled for a direction from the Adjudicating Authority for release of the goods, which were under attachment of Respondent since 02.02.2018? HELD THAT - The Respondent has filed a reply to the Appeal, where it has been stated that Respondent has auctioned the attached tiles, but it has to refund the money received from the auction purchaser under the orders of High Court, which amount has been refunded to auction purchaser and the end result is that the attachment by the Respondent for recovery of its excise dues still continues. The attachment was for the purposes of recovering the excise dues. After commencement of the CIRP, by virtue of Section 14 of the Code, no action to recover against the Corporate Debtor by any of the creditors can be undertaken. The Respondent has also filed their claim in Form-B, which has been accepted by the RP and revised claim has also been filed by the Respondent in Form-C, relying on judgment of the Hon ble Supreme Court in State Tax officer vs. Rainbow Paper Limited, which revised claim has not been accepted by the RP and an Application filed by Respondent with regard to revised claim is pending consideration before the Adjudicating Authority - In the present Appeal, we are not required to answer any question regarding nature of the claim of the Respondent. Only question which needs to be answered is that whether the Adjudicating Authority required to direct the Respondent to release the attachment so that assets of the Corporate Debtor can be used for the benefits of the creditors - In view of the Circular dated 23.03.2020 issued by Central Board of Excise and Customs, the Department itself has understood that when CIRP has been initiated for recovering any amount, the claim has to be filed and no recovery can be made since moratorium has been imposed under the Code. The Respondent after imposition of moratorium with effect from 27.04.2022 could not have recovered its dues. The attachment of the goods of the Corporate Debtor were made before initiation of CIRP. The assets, which were attached were still the assets of the Corporate Debtor, which were in the supurdagi of the Corporate Debtor. Respondent being unable to recover the amount from the attached assets, the RP has rightly filed the Application seeking a direction for release of the attachment, so that assets can be included in the assets of the Corporate Debtor for payment to the creditors. The Adjudicating Authority has committed error in rejecting Application filed by RP, by holding that Adjudicating Authority has no jurisdiction to issue direction to the State Authority, when the IRP is duty bound to take custody and control of the assets belonging to the Corporate Debtor, Application under Section 60, sub-section (5), sub-clause (c) was clearly maintainable and the Adjudicating Authority had ample jurisdiction to issue necessary direction. The order dated 07.02.2023 passed by the Adjudicating Authority - the Respondent are directed to release the attachment in question - appeal allowed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority to issue directions to State Authorities regarding actions taken prior to the initiation of Corporate Insolvency Resolution Process (CIRP). 2. Entitlement of the Resolution Professional (RP) to seek release of attached goods of the Corporate Debtor. 3. Status and treatment of government dues and attached assets during CIRP. Summary: Jurisdiction of the Adjudicating Authority: The primary issue was whether the Adjudicating Authority had the jurisdiction to direct the release of goods attached by the State Authorities before the initiation of CIRP. The Tribunal concluded that the Adjudicating Authority erred in rejecting the RP's application on jurisdictional grounds. It held that under Section 60(5)(c) of the Insolvency and Bankruptcy Code (IBC), the Adjudicating Authority has ample jurisdiction to issue necessary directions for the custody and control of the Corporate Debtor's assets. Entitlement of the RP to Seek Release of Attached Goods: The RP of the Corporate Debtor, M/s Cengres Tiles Limited, sought the release of vitrified tiles attached by the Assistant Commissioner of CGST & Central Excise for recovering excise dues. The Tribunal noted that the attachment was made before the initiation of CIRP, and the goods were still in the possession of the Corporate Debtor. The RP argued that the tiles should be included in the Corporate Debtor's assets for payment to creditors as per the 'waterfall mechanism' under Section 53 of the IBC. The Tribunal supported this view, referencing its previous judgment in Assistant Commissioner Central Goods and Service Tax vs. Pravin Charan Dwary, which upheld that no recovery measures should be taken during the pendency of CIRP. Status and Treatment of Government Dues and Attached Assets: The Tribunal emphasized that government dues, such as excise duty, which are crystallized and pending, should be treated as operational debts and adjudicated within the framework of the IBC. It referred to the Supreme Court's judgment in Embassy Property Developments (P) Ltd. vs. State of Karnataka, which clarified that such dues must be resolved according to the resolution plan approved by the Adjudicating Authority. The Tribunal also cited circulars from the Central Board of Excise and Customs, which instructed that no recovery actions should be taken during the pendency of CIRP and that claims should be filed as operational debts. Conclusion: The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order dated 07.02.2023. It directed the Respondent to release the attachment of the vitrified tiles, enabling the RP to include these assets in the Corporate Debtor's estate for the benefit of the creditors. The Tribunal reaffirmed the RP's duty to take control and custody of the Corporate Debtor's assets and upheld the jurisdiction of the Adjudicating Authority to issue necessary directions in this regard.
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