2023 (10) TMI 236 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - Dues of Income Tax liability - Appellant challenged the order contends that the Resolution Applicant has wrongly stated that the Income Tax Department did not file any claim pertaining to operational debt - HELD THAT - The question of approval of Resolution Plan was remitted to the Adjudicating Authority for fresh consideration. The Adjudicating Authority while hearing the parties afresh on the Resolution Plan permitted Income Tax Department and other Objectors to raise their objections and has considered the said objections. The Hon ble Supreme Court specifically in the Jaypee Kensington judgment 2021 (3) TMI 1143 - SUPREME COURT has not dealt with the claim of the Income Tax Department nor observed that claim of the Income Tax Department stands extinguished. There is one more reason to reject the submission of learned counsel for Respondent No.1 that claim of the Income Tax Department stands extinguished by judgment of Jaypee Kensington. In the impugned order, Para 131 onwards, the Adjudicating Authority has dealt with reliefs and concessions under heading X. Reliefs and Concessions . Para 132 expressly dealt with obligation of the Corporate Debtor vis- -vis Income Tax Department. The Adjudicating Authority held that the Adjudicating Authority is not inclined to grant such a blanket relief - It is made clear that reliefs from Income Tax liabilities have not been granted as prayed by the Successful Resolution Applicant. The claim which was submitted in the proceeding and the Successful Resolution Applicant has very well dealt with claim submitted by the Income Tax Department of Rs.3334.29 Crores. Even if the claim for the AY 2012-13 of Income Tax Department cannot be said to be extinguished, Appellant being an Operational Creditor, the liquidation value of the Income Tax Department is NIL. The payment of Rs.10 Lakhs cannot be said to be violative of provisions of Section 30(2)(e). Now coming to the question of relief which can be claimed by the Appellant in the present Appeal. Suffice it to say that Appellants claim for the AY 2012-13 cannot be said to be non-existent, as is the stand taken by the IRP. However, after admitting the aforesaid claim for the AY 2012-13 for total amount of Rs.1157.07 Crores, as claimed by the Appellant, Income Tax Department who has filed claim as Operational Creditor was entitle for amount not less than the amount to be paid in the event of liquidation as per Section 53. At the instance of the Appellant Income Tax Department, impugned order passed by the Adjudicating Authority need no interference - Appeal disposed off.

Summary

Issues Involved:
1. Treatment of the Income Tax Department's claim in the Corporate Insolvency Resolution Process (CIRP).
2. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC).
3. Extinguishment of liabilities as per the Supreme Court's judgment in Jaypee Kensington.

Summary:

1. Treatment of the Income Tax Department's Claim:
The Appellant, Income Tax Department, filed a claim of Rs. 3334.29 Crores plus interest for AY 2010-11 and AY 2012-13. The Interim Resolution Professional (IRP) informed that the liability for AY 2010-11 was reduced to NIL and for AY 2012-13, it was shown as a contingent liability. The Resolution Plan submitted by Respondent Nos. 2 and 3 was approved by the Committee of Creditors (CoC) and the Adjudicating Authority, which provided only Rs. 10 Lakhs towards the Income Tax Department's claim. The Appellant contended that the claim was wrongly treated and that their filed claim was within the prescribed time.

2. Compliance with Section 30(2) of the IBC:
The Successful Resolution Applicant argued that the Income Tax Department did not file the claim within the stipulated timeframe, hence no payment was provided in the Resolution Plan. The Adjudicating Authority observed that the Income Tax Department's claim was not admitted as it was shown as a contingent liability. The Appellant argued that the demand for AY 2012-13 was confirmed and should not be considered non-existent. The Tribunal held that the claim for AY 2012-13 could not be said to be non-existent, but since the Income Tax Department is an Operational Creditor with a liquidation value of NIL, the payment of Rs. 10 Lakhs was not violative of Section 30(2)(e).

3. Extinguishment of Liabilities as per Jaypee Kensington Judgment:
The Respondents argued that the liability of Rs. 33,000 Crores was extinguished by the Supreme Court's judgment in Jaypee Kensington. The Tribunal noted that the Supreme Court did not specifically deal with the claim of the Income Tax Department nor did it observe that the claim stands extinguished. The Adjudicating Authority, in its order, did not grant blanket reliefs and concessions sought by the Successful Resolution Applicant regarding Income Tax liabilities. The Tribunal concluded that the claim of Rs. 33,000 Crores, which was not filed in the CIRP process, could not be considered extinguished.

Conclusion:
The Tribunal found no merit in the appeal filed by the Income Tax Department. The treatment of the claim in the Resolution Plan was in compliance with the IBC, and the appeal was disposed of with no interference in the impugned order.