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TMI Blog2022 (1) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of Sub Section 21 of the I B Code, 2016. As stated supra, the claim of the Appellant is an Operational Debt and for all purposes the I B Code, 2016 shall only apply. There is no special treatment or category made separately for such dues and the claim of the Appellant are to be treated as Operational Debt. - In view of the settled law, there is no special treatment that can be accorded to statutory dues under the scheme of the I B Code. Statutory dues stand on different footing than the Operational Creditors, whose claims have arisen pursuant to a contract - HELD THAT:- In the present case, the Committee of Creditors has complied with all the Rules and Regulations and the plan has been Approved by the Adjudicating Authority by 100% of voting in the 8th Committee of Creditors Meeting held on 06.12.2019. From the mandatory contents of the Resolution Plan, it is evident that the rules and regulations and Provisions of Law has been followed by the Committee of Creditors - having complied with all the rules and regulations the Adjudicating Authority rightly approved the plan of the Successful Resolution Applicant. In the Order of the Adjudicating Authority clearly states th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter to the Corporate Debtor to pay the difference in Service Tax payable for the Financial Year 2015-16 followed by a reminder letter dated 28.06.2019. In response to the above, the Respondent No.1 herein vide letter dated 26.07.2019 intimated the Appellant that he has been appointed as the Resolution Professional and the Corporate Debtor is into CIRP. The Appellant on 23.08.2019 submitted its claim before the Respondent No.1 for a sum of ₹ 2,75,46,497/-. Thereafter, the Appellant vide letter dated 10.01.2020 sought copy of the Resolution Plan from the Respondent No.1 seeking details of allocation of dues of Operational Creditors. However, the Respondent No.1 refused to share copy of the Resolution Plan for the reason that the Plan is a confidential document. However, on 09.07.2020 the Respondent No.1 informed the Appellant that the Plan submitted by the Respondent No.3 has been approved whereby a sum of ₹ 1,00,00,000/- has been provided towards the claim of the Appellant. 4) On the legal issue it is stated that in the Resolution Plan, if the debts of the Operational Creditors to be complied with in accordance with Section 30(1)(b) of the I B Code, 2016, if any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUBMISSIONS: 11) It is submitted that the Impugned Order in the present appeal dated 02.03.2020 of the Adjudicating Authority passed under Section 31(1) of the Code affirming the Resolution Plan dated 06.12.2019 submitted by the 3rd Respondent (Arcelor Mittal), which had been approved by the Committee of Creditors of the Corporate Debtor. It is submitted that the Appellant was not a party before the Adjudicating Authority which passed the Impugned Order. 12) As stated supra, this Respondent vide letter dated 26.07.2019 informed the Appellant that the initiation of CIRP in respect of Corporate Debtor is in pursuance to the Order dated 14.05.2019 of the Adjudicating Authority. The Appellant filed its claim on 23.08.2019 in the prescribed Form-B before this Respondent for an amount of ₹ 2,75,46,497/-. The claim of the Appellant was duly verified and admitted and indicated in the list of creditors. 13) In the 8th meeting of Committee of Creditors held on 06.12.2019, the Resolution Plan submitted by the 3rd Respondent was approved by 100% of the COC members. The Appellant vide letter dated 10.01.2020 requested this Respondent to provide a copy of Resolution Plan approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority. Even otherwise, the Appellant has been paid a sum of ₹ 1 Crore which constitutes 36.30% of the amount claimed by the Appellant. 18) It is stated that the Plan has been complied with the CIRP Regulations and dealt with the interest of all the stakeholders of the Corporate Debtor including Financial Creditors and Operational Creditors. 19) It is stated that the statutory dues as claimed by the Appellant are not a separate clause within Operational Debt. There is no Provision under the Code to differentiate between the allocation for statutory and non-statutory dues in a Resolution Plan. All Operational Creditors are categorized together for the purposes of the Code. Further, as per Section 31 of the Code the Resolution Plan approved by the Adjudicating Authority is binding on Creditors including the Central Government in respect of statutory dues. Further Section 238 of the Code mandates that the Provisions of the Code shall have overriding effect over any other law for the time being in force. 20) In response to the Judgment of the Hon ble Supreme Court in Essar Steel it is stated that the Appellant misplaced the said judgment. The Appellant failed to note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Provisions of the Code are also Provisions of Law for the time being in force. It is also held that the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors. 24) It is stated that the Resolution Plan as approved by the Hon ble Adjudicating Authority is in compliance with the Provisions of the Code as well as the law laid down by the Hon ble Supreme Court of India in re-Essar Steel supra. 25) It is also stated that prior approval for extinguishing statutory dues is not required. This Hon ble Tribunal in the case of State of Harayana v Putham Strips Ltd. and Ors. Company Appeal (AT)(INS) No.319 of 2020 held that the statutory dues or operational debts, and once a resolution plan is approved by the NCLT, the treatment of all stakeholders, including Operational Creditors, is to be determined as per the terms of the approved Resolution Plan. Further the Resolution Plan has been approved by the Hon ble Adjudicating Authority and it would binding on Government Authorities being Operational Creditors and no beneficial treatment would be accorded to them. 26) In view of the reasons as stated above, it is stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument of the Appellant that the Resolution Plan cannot extinguish statutory dues without seeking approval of the concerned authority is an argument of desperation by the Appellant. It is submitted that the Hon ble Supreme Court in Essar Steel clarified the law on extinguishment of claims and the concept of a Resolution Applicant commencing on a clean state after the Resolution Process. (Page 12 Para 67). As per the decision of the Hon ble Supreme Court, once the payout is made in terms of the approved Resolution Plan by the Resolution Applicant, of the claims admitted by the Resolution Professional then the Resolution Applicant takes over the Corporate Debtor on a fresh slate and cannot be saddled by liability towards the same claim. Therefore, after the Resolution Process, the claims of all creditors gets settled and extinguish by Operation of the I B Code. Therefore, the argument of the Appellant that there can be no extinguishment is clearly misconceived in view of the Judgment of the Hon ble Supreme Court. 32) It is submitted that the argument of the Appellant that the claim of the Appellant is a statutory liability of the Corporate Debtor, stands on a different footi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of Principal Director General of Income Tax v M/s. Synergies Dooray Automotive Ltd. and Ors. in Company Appeal (AT)(INS) No.205 of 2007, held as under: Para 29 As Income Tax, value added tax and other statutory dues arising out of existing law, arises when the Company is operational, we hold such statutory dues as direct nexus with operation of the company. For the said reason also we hold that all statutory dues including income tax value added tax etc. come within the meaning of Operational Debt. 37) In view of the settled law, there is no special treatment that can be accorded to statutory dues under the scheme of the I B Code. Further this Tribunal in State of Haryana v Uttam Strips Ltd. and Ors. company Appeal (AT)(INS)No.319 of 2020 wherein it has been categorically held that the statutory dues are operational debts, and once the resolution plan is approved by the NCLT, the treatment of all stakeholders, including Operational Creditors, it is to be determined as per the terms of the approved Resolution Plan. The present appeal therefore ought to be dismissed on this ground alone. 38) The other contention raised by the Appellant that the Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has made its claim before the Resolution Professional and the Resolution Professional has admitted the claim. 42) The contention of the Appellant that the Adjudicating Authority has ignored the Judgment of the Hon ble Supreme Court in Essar Steels India Ltd. supra in the Impugned Order. We have carefully examined the Impugned Order and do not find any infirmity or illegality. Further, the contention of the Appellant with regard to the decision of the Hon ble Supreme Court in Essar Steel India Ltd. to say that the Adjudicating Authority has limited scope to interfere with the Resolution Plan provided if the interests of all the stakeholders are not taken care of and contended that the Adjudicating Authority has not taken care of the claim of the Appellant in toto. The Hon ble Supreme Court in the above Judgment held that the ultimate discretion of what and how much is to be paid to each class or sub class of Creditors is with the Committee of Creditors held as under. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the Corporate Debtor, it must necessarily take into account these key features ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 cannot be read to mean that financial and Operational Creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, para 77 itself makes it clear that there is a difference in payment of the debts of financial and operational Creditors, Operational Creditors having to receive a minimum payment, being not less than liquidation value, the which does not apply to Financial Creditors. The amended regulations 38 set out in para 77 again does not lead to the conclusion that Financial and Operational Creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the Resolution Plan before it can pass muster. Pay and equitable dealing of Operational Creditors rights under the said Regulation in view of all Resolution Plans stating as to how it has deal with the interest of operational Creditors, which is not the same thing as saying that they must be paid the same amount of the debt proportionately. So long as the Provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a Resolution Plan, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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