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TMI Blog2019 (6) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... starting of CIRP. The question is who is at default. Indisputably Corporate Debtor should have remitted TDS collected from the Applicant to the IT Department. The Corporate Debtor failed to deposit the TDS amount. The Liquidator has also admitted that not only in the case of Applicant but also in the case of other employees, TDS was not deposited and therefore Form-16 could not be issued. It is the Corporate Debtor Company which committed default in not depositing TDS. Therefore, the liability if any is to be discharged by the Corporate Debtor. The Corporate Debtor is under Liquidation. Therefore, Liquidator has to pay the tax to the IT Department in respect of TDS collected from the Applicant - Application is allowed directing the Liquidator to pay the TDS and other charges if any in respect of amounts collected from the Applicant towards TDS to the IT Department. Direction to liquidator to keep on priority, the funds required for payment of compounding fees on behalf of the Corporate Debtor - It is the case of Applicant, the case is still pending and if offence is compounded before the court, then compounding fee to be paid and the same to be paid by the Liquidator as Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi and the payment shall be attended on priority basis and 19 necessary provisions to be made to meet this expenditure. Direction to refund a sum of to the applicant - direction to Resolution Professional not to include the sum of Rs. as part of assets of the corporate debtor - HELD THAT:- Counsel for Applicant reported no instructions to the applicant. Hence petition is dismissed for default. - I.A. No. 98 of 2019 & Oths. - - - Dated:- 12-6-2019 - RATAKONDA MURALI, JUDICIAL MEMBER For the Appellant : Nitish Bandary and P. Vikram, Advs. For the Respondent : Vaijayanth Paliwal, L. Aravind Reddy, Ms. Rubaina S. Khatoon and Ms. Radhika, Advs. ORDER 1. Under consideration is the Application filed under Section 53 and 60(5) of IBC, 2016 R/w Regulation 19 of IBBI (LIQUIDATION) REGULATIONS, 2016 and Rule 11 of NCLT Rules, 2016, seeking directions to Liquidator and Respondents No. 1 2 to pay the outstanding TDS in relation to the salary of the Applicant amounting to ₹ 3,58,737/- and further to issue Form 16 to the Applicant. The Applicant also sought directions to Respondents No. 3 4 to restrain from taking any coercive steps against him in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,77,587/- Amount Payable by Corporate Debtor ₹ 3,58,737/- Refund Amount ₹ 87,490/- Demand amount ₹ 2,76,570/- (d) It is the case of Applicant that the Liquidator vide e-mail dated 03.02.2019 informed the Applicant about admission of his claim which was also confirmed through letter dated 11.01.2019. The Liquidator admitted that TDS amount is payable, but did not furnish any details or information to the Applicant regarding payment of TDS due to which the Applicant in turn could not furnish any details to Tax authorities, i.e. Respondent No.3 and Respondent No.4 herein which resulted in issuance of demand for payment of ₹ 2,76,570/- by Income Tax Department to the Applicant to make the payment immediately. It is averred by the Applicant that he is caught between the inaction of the Liquidator and demand of the Income Tax authorities and that having no other alternative remedy approached this Tribunal. (e) The Applicant prayed for a direction to Liquidator to pay amount of ₹ 3,58,737/to the Income Tax D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as entire TDS amount could not be deposited with the relevant authorities designated under the Income Tax Act. However, provisional Form 16 were issued individually to the employees. Further it is his case that Liquidator is bound by the provisions of the Code and cannot make payments of the TDS dues of the employees despite his best intentions in preference to the dues of other creditors of the Corporate Debtor. (g) As per the provisions of the Code the Liquidator is mandated under Section 36 to form a liquidation estate of the Corporate Debtor and is required to hold the same as a fiduciary for the benefit of all creditors. Section 53 provides that the proceeds from the sale of the liquidation assets to be distributed in the order of priority provided for under the Section itself. As per the distribution priority provided for under the Code the government dues rank at priority no. 5 and would be accordingly paid at that priority by the Liquidator. Any payment by the Liquidator in contravention of the provisions of Section 53 would not only be prohibited as per Section 53 but would also constitute a preferential payment or fraudulent or wrongful trading as defined in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IRP. It is the case of Liquidator that Corporate Debtor committed default in depositing the TDS not only in the case of Applicant, but also in the case of other employees. The tax due if any is to be treated as Operational debt and liquidator will look into the claim of IT Department regarding non-deposit of TDS and the same will be paid to the IT Department as per water fall mechanism provided in Section 53 of IBC. The form-16 also could not be given to the employees because of non-deposit of entire TDS with the IT Department. He contended that amount realised from the sale of assets of Corporate Debtor is to be distributed in terms of water fall mechanism provided in Section 53 of the IBC. 7. The TDS deducted from the salary of Applicant is to be credited to the account of IT Department. However, it is an undisputed fact that the TDS deducted from the salary was not credited to the IT Department. Therefore, notice was issued to the Applicant by the IT Department. The fault lies with the Corporate Debtor. It is the Corporate Debtor which failed to deposit TDS collected from the Applicant. He cannot be held responsible for default committed by the Corporate Debtor which is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IN THE NATIONAL COMPANY LAW TRIBUNAL BENCH: AT HYDERABAD IA. No. 97 of 2019 IN C.P. (IB). No. 111/7/HDB/2017 U/s 33 (5), 35 (1) (k) R/w 60 (5) of IBC, 2016 IN THE MATTER OF LANCO INFRATECH LIMITED Mr. G.Venkatesh Babu Ex-Management of Lanco Infratech Limited, Resident of 35-A 1, Prithviraj Road, New Delhi- 110003. Represented by its GPA holder Mr. Cherukuri Anjaneyulu, R/o Plot No B-34, Panchavati Colony, Manikonda, Hyderabad - 500089 ..Applicant Versus 1. Mr. Savan Godiawala, Liquidator of Lanco Infratech Limited, Deloitte Touche Tohmastsu India LLP, Level 7, Building 10 Toer B, DLF Cyber City Phase-Il, Gurgoan - 122 022 .. Respondent No.1/Liquidator 2. Lanco Infratech Limited, Plot No.4, Software Units Layout, Hitec City, Madhapur, Hyderabad- 500 081, Telangana .Respondent No.2/ Corporate Debtor 3. Chief Commissioner of Income Tax (TDS), Circle- 75(1), 413- Ayakar Bhavan, Disst Centre, Laxmi Nagar, Delhi- 110092 4. Asstt. Commissioner of Income Tax (TDS), Circle- 75(1), 413- Ayakar Bhavan, Dist Centre, Laxmi Nagar, Delhi- 110092 Date of order: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Year Direct Tax Amount Rs in Cr. 2008-09 134.82 2009-10 224.83 2010-11 170.20 2011-12 140.74 2012-13 47.71 Total 718.30 3) It is averred, the Corporate Debtor apart from being one of the major tax payer, was very diligent in its statutory payment obligations. The Corporate Debtor diligently discharged the statutory liabilities within the due dates. The Corporate Debtor remitted TDS amounts without delay during earlier years as mentioned in the below table. Rs. In Cr S. NO. FY TDS AMOUNT 1 2008-09 45.44 2 2009-10 75.73 3 2010-11 106.83 4 2011-12 127.36 4) It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (CCIT) (Respondent No.4 herein) filed prosecution case i.e. Criminal case No. 530366/2016 on March 31 st, 2016 before the Honorable Court of Additional Chief Metropolitan Magistrate (Spcl Acts), Tis Hazari Courts New Delhi against the Principal Officer of the Corporate debtor i.e. the Managing Director Mr. G. Venkatesh Babu / Applicant herein and the Corporate Debtor which is pending before the said court as on date. 9) In the meantime Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on a Company Petition filed by IDBI Bank under Section 7 of IBC, 2016 and after admission, the Corporate Debtor was under Moratorium from August 7th, 2017. The Resolution Professional took charge of the Corporate Debtor Company and the powers of Board of Directors were suspended. As such the then Managing Director can no longer represent the matter both officially and personally, and was advised to file an application for compounding. Even during the CIRP period Mr.G. Venkatesh Babu, the Applicant herein appeared before Ld. ACMM (Spl. Acts), Tis, Hazari Court, New Delhi, even though he ceased to be the Principal Officer of the Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oing prosecution process is to apply for compounding and pay the compounding fees and close the prosecution process and that any compounding fees payable to avoid the prosecution proceedings should be made as part of the Liquidation cost and the Liquidator should be empowered to pay the compounding fees and include the same in Liquidation cost. In case if the Liquidator is not having enough funds, immediately the Liquidator to be directed to keep aside on priority funds required for the compounding fees. 13) It is his case that under Section 33 (5) and 35 (1) (k) of the Code, the Liquidator is given such powers under the Code to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of/on behalf of the Corporate Debtor for the benefit of Corporate Debtor. It is further averred, any direction to pursue any case effectively and diligently on behalf of Corporate debtor shall be in the best interest of Corporate Debtor and as such no prejudice will be caused to any of the parties but if no order js passed the Corporate Debtor's exemployee who is the Ex-professional Director Mr G. Venkatesh Babu will be put to great hardship and loss, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 276B of the IT Act. This provision attach itself personally to the Applicant and not the Company. In this connection, the Liquidator relied on the decision of Hon'ble High Court of Kerala in ITO v Joseph reported in (1972) 83 ITR 362. As such the prosecution initiated by the IT Department should be defended by the Applicant appropriately and the Corporate Debtor which is already under Liquidation process should not be saddled with additional liabilities. (5) The Liquidator further avers that as per distribution priority provided for under the Code, the Government dues rank at priority no. 5 and would accordingly be paid at that priority by the Liquidator and that any payment by the Liquidator in contravention of the provisions of Section 53 of the Code would constitute a preferential payment or fraudulent or wrongful trading as defined in Section 43 or 66 of the Code respectively. (6) It is the case of Liquidator that an application for compounding is an admission of guilt by the Applicant and the Corporate Debtor or the Liquidator cannot be directed at the stage of liquidation to file compounding applications and bear the costs. (7) The Liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicate the Application and pass suitable orders. (7) It is again reiterated by Applicant that he is facing prosecution due to non-fulfilment of obligation by Corporate Debtor. Since the Corporate Debtor is under Liquidation and being represented by the Liquidator, it is his duty to defend the Corporate Debtor Company and further states that the entire prosecution is based on the action of the 2 nd Respondent. Under the IBC Code, the Liquidator is responsible for the affairs of the Corporate Debtor Company which is under liquidation. (8) The Applicant avers that he has rightly filed an application before this Tribunal because it has jurisdiction to decide all the issues in relation to liquidation of the Company. (9) The Applicant reiterates that as per the provisions of the Code and in accordance with law, once the Corporate Insolvency Resolution Process / Liquidation proceedings are initiated, any application with respect to the Company is to be filed before this Tribunal and after commencement of liquidation process, it is the liquidator who represents the Company. The stand of the liquidator differentiating the issues before the commencement of CIRP and after the commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment to stop proceedings. The interest was calculated for the delay period and TDS was remitted. However, IT Department did not accept the stand taken by the Corporate Debtor. In this connection, IT Department issued show cause notice under Section 279 of IT Act and thereafter filed criminal case and Applicant Shri G. Venkatesh Babu appeared in the capacity of Managing Director of Corporate Debtor. 7. It is the case of Applicant, the case is still pending and if offence is compounded before the court, then compounding fee to be paid and the same to be paid by the Liquidator as Corporate Debtor is under Liquidation. 8. On the other hand, the case of Liquidator that CIRP started on 07.08.2017 and order of liquidation was passed on 27.08.2018 and that proceedings were initiated against Corporate Debtor Company even prior to CIRP. So prosecution of Company occurred prior to CIRP and it is not in connection with any default committed during CIRP. It is contended that Applicant alone has to defend the case since proceedings initiated prior to CIRP. The tax due to the Government to be paid in the water fall mechanism. The tax due to the Government is at priority No.5. So it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation filed for compounding. 10. In the result, the Application is allowed, directing the Liquidator to reimburse to the Applicant, the amount incurred towards payment of compounding fee levied by the Court in connection with criminal case bearing No. 530366/2016 filed against Corporate Debtor pending before the Additional Chief Metropolitan Magistrate (Special Acts), Tis Hazari Court, New Delhi and the payment shall be attended on priority basis and 19 necessary provisions to be made to meet this expenditure. 11. The Application is accordingly disposed of. (RATAKONDA MURALI) MEMBER (JUDICIAL) IN THE NATIONAL COMPANY LAW TRIBUNAL HYDERABAD BENCH, HYDERABAD IA No. 167/2018 In CP (IA) No. 111/07/HDB/2017 Under Section 60(5) of IBC, 2016 In the matter of: M/S. Dynamic S.S.Engineering Co.Pvt Ltd 76/34, Vinayagam Street, C-4 Amutham Flats(2nd Floor) Venkatesh Nagar, Virugambakkam, Chennai- 600 092, Represented by its Manager Finance, Mr.C.Kalyanaraman....Applicant/ Operational Creditor AND IDBI Bank Ltd. R/o. IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai- 400 005....Petitioner/Financial Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant based on the information available. d. It is averred that CIRP is a time bound process and the proceedings do not envisage a process by which the RP is required to communicate the reason for rejection or acceptance of the claim. However, if such an obligation has been cast on the liquidator under Section 40 of the Code who is required to communicate its decision for acceptance or rejection of each claim within 7 days and the respondent has communicated its reason for rejection of the claim vide email dated 10.05.2018. e. It is averred that in the lights of above facts present application is liable to be dismissed. 4. Rejoinder to the reply filed by the applicant: a. Applicant denies the allegations made by the respondent. He avers that Resolution Professional has no reasons for rejecting the claim and stated how the applicant suffered by the corporate debtor. b. Applicant avers that the allegation made by RP regarding rejection of claim vide e-mail communication on 10.05.2018 is denied as applicant has not received such mail in this regard and the respondent even did not produce any documentary evidence in this regard. c. It is also averred that as per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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