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TMI Blog2021 (5) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... toms duty payable under the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 is an operational debt of the petitioner within the meaning of Section 5 (21) of the IBC Code, 2016 and whether the respondent Customs Department is an operational creditor within the meaning of Section 5 (20) of the IBC Code, 2016? - HELD THAT:- It should be remembered that Insolvency and Bankruptcy Code 2016 was enacted with a view to provide a speedy mechanism for resolving bankruptcy and insolvency of such person. It is being implemented in a phased manner. The provisions of the Companies Act, 1956 which contained provisions for winding up has been regrafted into the IBC, 206 with modification - Under the scheme of the IBC, 2016, any operational creditor or a financial creditor to whom a corporate debtor owes any amount above Rupees One Lakh and above is entitled to file an application for corporate insolvency resolution proceeding against such debtor under Section 9(2) of the IBC, 2016 read with Rule 6 in Form 5 before the NCLT with a fee of ₹ 2,000/- accompanied with documents and records as are required under Section 9(3) and under Regulation 7(2) - If Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained by the Petitioner from the National Company Law Board as to whether the Corporate Resolution Plan filed by the Corporate Applicant included the customs duty to be paid by the Petitioner on the import under the subject bill of entry - Petition allowed by way of remand. - W.P.No.31090 of 2015 And M.P.No.2 of 2015 - - - Dated:- 26-4-2021 - Honourable Mr.Justice C.Saravanan For the Petitioner : Mr.Rajesh Rawal Senior Counsel for M/s.V.Pushpa For the R2 R3 : M/s.R.Hemalatha Sr.Standing Counsel ORDER In the present writ petition, the petitioner has challenged the reassessment of the Bill of Entry No. 2606926 dated 15.9.2015. It is the case of the petitioner that the amendment to Serial No. 55 to Notification No. 12/2012-Customs dated 17.3.2012vide Notification No. 46/2015- Customs dated 17.9.2015 which increased the rate of duty from 7.5% to 12.5% cannot be said to have come into force on the date of assessment on 17.3.2012 as per the Section 25 of the Customs Act, 1962 as it stood on the date. 2. The petitioner had filed the above Bill of Entry in advance to clear the consignment of crude palm oil of edible grade in bulk. In the Bill of Entry, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records of Government of India Press, Mayapuri, New Delhi is 17.9.2015 (AN). The copy of record for that day is enclosed for further information 2. The Printed Gazette was dispatched from the Government of India Press, Mayapuri, New Delhi for sale on 21.9.2015 . 8. It is therefore submitted that the notification cannot be said to have come into force on the date of its publication in the official gazette on 19.09.2015. In this connection, reliance is placed on the decision of the Honourable Supreme Court in Union of India versus Param Industries Ltd 2015 (321) ELT 192 (SC) wherein the Court recognised that if the second condition was not satisfied, the notification cannot be said to have come into force. 9. Learned counsel for the petitioner fairly conceded that for a similar imports in West Bengal, the issue has been answered against the petitioner in Ruchi Soya Industries Ltd. Vs Union of India 2016 (336) ELT 463 which decision was also affirmed by the Division Bench of the Calcutta High Court in Ruchi Soya Industries Ltd. Vs Union of India 2017 (350) E LT 201 (Calcutta) and that the petitioner s appeal in SLP No. 7077 of 2016 has been admitted and that the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to state that no party has any right to dictate the terms of the order and that was made clear that while approving the Resolution Plan, the said Tribunal deliberated every aspect of the Resolution Plan in detail and all the claims which were admitted during corporate insolvency resolution plan were being dealt by in terms of the Resolution Plan and anyone who has not filed any claim will not have any right to agitate the same after approval of the resolution plan. 17. In this connection, learned counsel for the petitioner placed reliance on the decision of the Honourable Supreme Court rendered recently in the case of Committee of Creditors of ESSAR Steel India Ltd versus Sathish Kumar Gupta and others (2020) 8 SCC 531, wherein the Honourable Supreme Court dealt with the issue relating to rights of an operating creditor. It is submitted that since the respondent customs department was an operating creditor, it lost all its rights. 18. Opposing the prayer in the writ petition, learned counsel for the customs Department submitted that the writ petition was not maintainable as the petitioner has an alternate remedy by way of an appeal before the Appellate Commissioner. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Board of Excise and Customs on 17.9.2015but was also published in the official Gazette of Government of India on 17.9.2015. Therefore, the petitioner cannot complain that it was unaware of the change in the rate of duty merely because the sale of official Gazette was purportedly made only on 21.9.2015. 28. After all , the publication of any information in the official Gazette not only signifies its authenticity but also its dissemination to the public. The practice of purchasing printed copies of Gazette publication has been done away over a period of time as the information were made available to the citizens in the official website of the Central Board of Excise and Customs. 29. Thus, the second limb of section 25 (4) of the Customs Act, 1962 requiring publication and offer for sale on the date of receipt issued by the Directorate of Publicity and Public Relation of the Board, New Delhi had been rendered vestigial over a period of time having no useful purpose in the light of the publication of such information in the website. 30. Perhaps taking note of the above provisions of the Information Technology Act, 2000 and the advancement in the use of information technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id requirement would have suited before the intensive of the information technology in the dissemination of the information. 37. In my view, in 2015, the necessity offering for sale such publication as in the second limb of Sub-clause (4) of section 25 of the Customs Act, 1962 had become redundant and the Parliament has rightly taken note of the same and deleted it,though somewhat belatedly. 38. Before the Calcutta High Court, the Union of India had also filed an affidavit stating that the notification was also published and offered for sale nonetheless. The court has also taken the view that if the Union s assertion of copies of notification being put up for sale on September 17, 2015 is disbelief, at the highest, would amount to non-compliance of clause (b) which would have no effect on when the notification came into force. 39. Therefore, I am not inclined to take a different stand in this writ petition. Therefore, the present writ petition has to fail based on the arguments advanced that the amending notification came inot force only on 21.9.2015. 40. In the result, I hold that the amended notification came into on the date of its publication in the official Gazette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is defined as follows:- Section 5(20) of the IBC Code, 2016 Section 5 (21) of the IBC Code, 2016 Operational credito r means a person to whom an operational debt is owned and includes any person to whom such debt has been legally assigned or transferred; Operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 49. An Operational Debt in Section 5 (21) of the IBC Code, 2016. Operational debt includes both a claim and/or a debt . These, definitions intertwine and interlock with each other. These expressions have been defined in section 3(6) and 3(11) of IBC, 2016 as follows:- Section 3(6) of IBC, 2016 Section 3(11) of IBC, 2016 claim means- a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable or secure or u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any tax or impost, whether general or local or special, and tax shall be construed accordingly under Article 366 (28) of the Constitution of India. 57. The expression duty has been defined in Section 2(15) of the Customs Act, 1962 to means any duty of customs leviable under the Act, namely the Customs Act, 1962. 58. Tax as we understand it is a compulsory exaction by the Government. It is a very wide definition which has been employed in Article 366 of the Constitution of India. A tax once determined to be paid in accordance with law is a sovereign debt. 59. Such sovereign debts cannot be altered whether increased or decreased by any authority, whether by the Court or under a private arrangement or as the case may be approved by creditor, shareholders or by the committee of creditors under the Companies Act, 2013 or Insolvency Bankruptcy Code, 2016. Corporate re-structuring of financial debt under IBC, 2016 does not mean waiver of extinguishing of sovereign debts. 60. Operational debt is incurred by a corporate de btor by failing to meet his liability to pay or clear the Operational debt as defined in Section 5(21) of the IBC, 2016. Thus, tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, 2018 (Ordinance 6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. 74. It is important to bear in mind that once the resolution plan is approved by the Committee of Creditors and thereafter by the adjudicating authority, the aforesaid plan is binding on all stakeholders as follows: 31. Approval of resolution plan .-(1) If the adjudicating authority is satisfied that the resolution plan as approved by the Committee of Creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan: Provided that the adjudicating authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. 82. It is clear that once the Code gets triggered by admission of a creditor's petition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors who voted in favour of the resolution plan. 38.Mandatory contents of the resolution plan .- (1)The[CS2] amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors. (1-A)A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors , of the corporate debtor. 65. Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 also does not talk about crown debts such as taxes and duties. However, recently the Hon ble Supreme Court recently has given its decision on taxes and duties which are crown debts. 66. Thus, a debt has to be liability or obligation in respect of claim which is due from any person. It includes a financial debt and an operational debt . 67. Claim cannot include tax as we know , tax is a compulsory exaction of amount under law. It cannot be assigned. Under Article 366 (2) of the Constitution of India, Taxation includes the imposition of any tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order or priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India. 2. The Preamble to the Code lays down the objects of the Code to include the insolvency resolution in a time bound manner for maximisation of value of assets in order to balance the interests of all the stakeholders. Concerns have been raised that in some cases extensive litigation is causing undue delays, which may hamper the value maximisation. There is a need to ensure that all creditors are treated fairly, without unduly burdening the Adjudicating Authority whose role is to ensure that the resolution plan complies with the provisions of the Code. Various stakeholders have suggested that if the creditors were treated on an equal footing, when they have different pre-insolvency entitlements, it would adversely impact the cost and availability of credit. Further, views have also been obtained so as to bring clarity on the voting pattern of finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under:- 72. In the Rajya Sabha debates, on 29.7.2019, when the Bill for amending I B Code came up for discussion, there were certain issues raised by certain Members. While replying to the issues raised by certain Members, the Hon ble Finance Minister stated thus: IBC has actually an overriding effect. For instance, you asked whether IBC will override SEBI. Section 238 provides that IBC will prevail in case of inconsistency between two laws. Actually, Indian courts will have to decide, in specific cases, depending upon the material before them, but largely, yes, it is IBC. [ ] There is also this question about indemnity for successful resolution applicant. The amendment now is clearly making it binding on the Government. It is one of the ways in which we are providing that. The Government will not raise any further claim. The Government will not make any further claim after resolution plan is approved. So, that is going to be a major, major sense of assurance for the people who are using the resolution plan. Criminal matters alone would be proceeded against individuals and not company. There will be no criminal proceedings against successful resolution applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was approved by the Adjudicating Authority, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished. 86. As discussed hereinabove, one of the principal objects of I B Code is, providing for revival of the Corporate Debtor and to make it a going concern. I B Code is a complete Code in itself. Upon admission of petition under Section 7, there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure, that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the Corporate Debtor is revived and is made an on-goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor, a secured creditor, an unsecured creditor and a decree-holder . Operational creditor has been defined to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Operational debt has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 91. It is a cardinal principle of law, that a statute has to be read as a whole. Harmonious construction of sub-section (10) of Section 3 of the I B Code read with sub-sections (20) and (21) of Section 5 thereof would reveal, that even a claim in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of operational debt . The Central Government, any State Government or any local authority to whom an operational debt is owed would come within the ambit of operational creditor as defined under sub-section (20) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as taxes and duties payable to the Government and is distinct from the claim and debt as defined in Section 3 (6) and 3(11) of the IBC,2016, as mentioned above in the beginning of the discussion on the second part of this order, this Court is bound by the interpretation placed in the above decision of the Hon ble Supreme Court in Ghanashym Mishra and Sons Vs. Edelweiss Asset Construction, and the reasons given therein and in the light of the amendment to the IBC, 2016 in 2019 and in the light of the clarification of the Finance Minister when the 2019 bill was put to discussion in the parliament. 76. This Court therefore partly accepts the contention of the petitioner in so far as issue relating to extinguishment of the rights of the respondent customs department to claim the customs duty in the light of the decision of the Hon ble Supreme Court in Ghanashym Mishra and Sons Vs. Edelweiss Asset Construction referred to supra . 77. The case is therefore remitted back the respondent to await clarification to be obtained by the Petitioner from the National Company Law Board as to whether the Corporate Resolution Plan filed by the Corporate Applicant included the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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