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TMI Blog2023 (2) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to respondent no.3. Section 48 of the GVAT Act is not pari materia with Section 142A of the 1962 Act. Section 142A of the 1962 Act plainly states that any amount payable by way of duty, penalty, interest or any other sum payable by an assessee or any other person under the Act shall have the first charge on the property of the assessee or the person, as the case may be, save as otherwise provided inter alia under the Code. Section 48 of the GVAT Act does not contain any such exception and/or carve out - the fact that extensions were sought to fulfil export obligations would not help the cause of the respondents. As a matter of fact, respondent nos. 2, 3 and 7 have, in their counter-affidavit, admitted that since the amounts due had not been crystallized, they could not respond to the Public Announcement made by the IRP. If the law, as enunciated by the Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT] is applied, then the dues, if any owed to the respondents would have to be declared as having extinguished, and if such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w Tribunal, Kolkata Bench [in short "NCLT"] on 07.11.2017, received the imprimatur of the National Company Law Appellate Tribunal [in short "NCLAT"]. 3. In support of this plea, SML adverts to two significant documents. 3.1 Firstly, the Public Announcement made by one Mr Vinod Kumar Kothari i.e., the Interim Resolution Professional (IRP) on 01.02.2017, calling upon all creditors of SML to submit proof of their claims on or before 13.02.2017 in such Forms as prescribed under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ["2016 Regulations"] with him i.e., the IRP. 3.2 Secondly, the e-mail dated 17.05.2017 addressed by the Resolution Professional (RP) i.e., one Mr Kuldeeep Verma to Senior Intelligence Officer, Directorate of Revenue Intelligence, Bhubaneshwar Regional Unit/respondent no.3. Via this e-mail, the RP informed respondent no.3, that Corporate Insolvency Resolution Process (CIRP) had been initiated qua SML, pursuant to an order dated 30.01.2017 passed by the NCLT. 4. The aforementioned communication i.e., the e-mail dated 17.05.2017 also adverted to the following aspects: (i) First, the power of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications dated 17.09.2004, 09.05.2008 and 11.09.2009. 11. It is also averred by respondent nos. 2,3 and 7, that since SML had not fulfilled obligations under the 16 licences/authorizations issued in its favour, it has violated the conditions of EPCG authorisations, as enunciated in Chapter 5 of the Foreign Trade Policy, 2004-2009 and 2009-2014 as also the conditions of EPCG Bonds and relevant applicable Customs Notifications. 12. Pertinently, the impugned show-cause notice was issued at a point in time when SML's networth stood eroded, which had propelled SML to file a reference before the Board for Industrial and Financial Reconstruction (BIFR) and register itself under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 [in short "SICA"]. 12.1 The BIFR registered the petitioner's reference on 18.11.2014. However, before a final decision could be taken with regard to SML's reference by the BIFR, SICA was repealed, with the enactment of the Code. Consequently, all references stood abated, given the provisions of the Eighth Schedule, read with Section 252 of the Code. 13. Although the Code was published in the Gazette of India, Extra, Part II, Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, vested with the RP. 21. Consequently, on 17.05.2017, the RP, as alluded to hereinabove, wrote to respondent no.3 inter alia calling upon it to furnish details concerning SML in the backdrop of the summons which had been issued to SML under Section 108 of the 1962 Act. 22. The record shows, that Mr Agarwal, the erstwhile managing director of SML was also the resolution applicant. Evidently, he submitted a Resolution Plan on 17.08.2017, which was amended and finally approved by the COC, with 78.53% voting share favouring approval of the Resolution Plan. 23. Since SREI preferred an appeal to NCLAT, the operation of the Resolution Plan, as approved by the NCLT, was stayed on 28.11.2017. However, finally, the NCLAT approved the Plan with certain modifications via an order dated 13.12.2018. 24. We are informed, that since then, the revised/modified Resolution Plan has been implemented. 25. In the interregnum though, SML not only informed respondents nos. 4 and 5 concerning the initiation of CIRP qua itself but also sought an extension of time for fulfilling export obligations. 26. As far as information with regard to the fact that CIRP was on, the same was furnished by SML via ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L. The record also shows that SML had also moved an application i.e., CM APPL. 44248/2021 during the pendency of the writ petition for issuance of the following directions: "(a) Direct the Respondents and more specifically Respondent No.4 to take no coercive action during the pendency of the present Writ Petition. (b) Pass an order directing [the] Respondent No. 4 to remove the Petitioner's/Applicant's name from the DEL, enabling the Petitioner/Applicant to obtain [a]fresh EPCG License and avail its lawful entitlement to the EPCG Scheme issued by the Government of India. (c) Set aside the deficiency letter dated 01.11.2021 and 22.11.2021 issued by Respondent No.4 to obtain the fresh EPCG License." 31.1 This application was not entertained, since according to the Court, the main relief sought in the writ petition was for setting aside and/or quashing the impugned show-cause notice issued by respondent no.2, which as noted above is required to be adjudicated by respondent no.1. 32. We may also note, that a counter-affidavit in the matter has been filed only by respondent nos. 2, 3 and 7, and written submissions have been filed by respondents nos. 1 to 3, although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Sterling Agro Industries Ltd. vs Union of India & Ors. 2011 SCC OnLine Del 3162. (ii) Section 142A of the 1962 Act recognises the fact, that the liability of the assessee under the Act is a first charge on its property. The Supreme Court, in the judgement dated 06.09.2022 rendered in the case of State Tax Officer (1) vs Rainbow Papers Ltd. 2022 SCC Online SC 1162, in the context of a pari materia provision i.e., Section 48 of the Gujarat Value Added Tax, 2003 [in short "GVAT Act"] has held, that such authorities were "secured creditors" under Section 3(30) of the Code, and accordingly, their claims had a higher priority under the waterfall mechanism, contemplated in Section 53 of the said Code. Since the Resolution Plan approved by NCLAT did not treat the Customs department as a secured creditor, it was liable to be set aside, on this short ground alone. (iii) SML never disputed its dues. This situation obtained, both before and during the period when insolvency proceedings were on. Although SML was aware of its customs dues, it deliberately chose to ignore the same. In this context, reference is made to the EPCG bonds executed by SML to pay customs duty, along with inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not submit their proof of claims. Furthermore, respondent no.3 neither replied nor furnished any information, as required by the RP via the e-mail dated 17.05.2017. 38. Given this position, one would have to examine, which side of the Rubicon [i.e., the law enunciated by the Supreme Court] SML's case falls on. 39. The Supreme Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657 was inter alia called upon to rule on the following: (i) Whether the claims reflected in the Resolution Plan as approved under Section 31 of the Code would stand frozen, and thus bind all stakeholders? (ii) Whether statutory dues, owed to the central government, state government or local authority, which did not form part of the approved Resolution Plan would stand extinguished, and thereby disable the continuation of any proceedings qua claims which concerned the period arising prior to the approval of the Resolution Plan by the adjudicating authority under Section 31 of the Code? 40. Vis-a-vis these issues, the following conclusions were reached by the Supreme Court. "102.1. That once a resolution plan is duly approved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956, the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993, [the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 and the Insolvency and Bankruptcy Code, 2016], be the first charge on the property of the assessee or the person, as the case may be.]" 45. Mr Sharma, in effect, has sought to draw a parity between Section 48 of the GVAT Act, which came up for consideration in the context of Section 53 of the Code, and Section 142A of the 1962 Act. Pertinently, Section 48 of the GVAT Act does not save provisions of other statutes, in particular the Code, as noticed above. For the sake of convenience, Section 48 of the GVAT Act, as extracted in Rainbow Papers is set forth hereafter:- "48. Tax to be first charge on property.- Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case maybe, such person." 46. Thus, the controversy which arose for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, that the timeline for submission of claims under the 2016 Regulations was not mandatory, but only directory. (ii) Second, prior to the amendment carried out via notification dated 03.07.2018 [with effect from 04.07.2018] the creditor was required to submit "proof of claim" before the expiration of the last date mentioned in the public announcement. [See Regulation 12(1) read with sub-Regulation (2)]. However, with effect from 04.07.2018, the creditor is required to submit a "claim with proof" on or before the last date mentioned in the public announcement. (iii) Third, in case the Resolution Plan did not meet the requirements of Section 30(2) of the Code, it would be invalid, and thus not binding on the Central Government, any State Government, any statutory or other authority, any financial creditor, or other creditors to whom a debt in respect of dues arising under any law for the time being in force is owed. (iv) Fourth, if a Resolution Plan ignores the statutory demands payable to any State Government or legal authority, altogether, the NCLT is bound to reject the Resolution Plan. (v) Fifth, in the event the corporate debtor is unable to pay its debts, which sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not contain any such exception and/or carve out. 51. This is a case, where despite knowledge, the statutory authorities chose not to submit their proof of claim. Mr Sharma's argument, that since it was known to SML that amounts were due, proof of claim [under the unamended Regulation i.e., Regulation 12] was not required to be filed, is difficult to accept, because if this argument were to be sustained, then whatever the assessee [in this case SML] were to state before the RP would have to be taken as the gospel truth. In a given case, the assessee could state, that nothing was due to the concerned creditor. In our view, once a Public Announcement was made, it was incumbent upon all creditors, which included the statutory creditors, to submit the proof of claim. 52. Therefore, the fact that extensions were sought to fulfil export obligations would not help the cause of the respondents. As a matter of fact, respondent nos. 2, 3 and 7 have, in their counter-affidavit, admitted that since the amounts due had not been crystallized, they could not respond to the Public Announcement made by the IRP. 52.1 According to us, this argument is flawed. If this was the stand of the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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