9911796707
TMI Blog2023 (9) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... ading Section 52 would indicate that a secured creditor in the liquidation proceedings may relinquish its security interest to the liquidation asset and receive proceeds on the sale of assets by the liquidation in the manner specified under section 53 or realise its security asset by enforcing its claim or settling it. In the facts of the present case having failed to assert its claim the State as an operational creditor/stakeholder/secured creditor would have to fall in line as per the waterfall mechanism under Section 53 of the IBC. Once having relinquished its interest under Section 52, the State cannot continue the insistence of maintaining the charge in the revenue records and its claim will have to stand in priority. The argument of the State that since the asset was sold on a condition of AS IS WHERE IS BASIS , the charge of the State was rightly recorded is misconceived as the deed already records that the purchaser shall not be liable for payment of any outstanding dues of the government. This too was, in the opinion of the Court a clause that would relieve the petitioner of the liability to pay tax dues - Even otherwise as per Section 100 of the Transfer of Prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale deed dated 17.12.2021 from the liquidator of M/s. Gran Electronics Private Limited. 2.3 M/s. Gran Electronics Private Limited has purchased the land from one Neha Ashwin Mehta vide sale deed dated 30.08.2005. The company had obtained permission for bona-fide industrial use as provided under the Bombay Tenancy and Agricultural Lands Act. Since, M/s. Gran Electronics Private Limited was desirous of availing financial facilities, it approached the Indian Overseas Bank for availing financial facilities. In order to secure financial assistance from Indian Overseas Bank and Saraswat Bank an equitable mortgage deed dated 02.06.2006 was created. The loans were repaid and the mortgage deed was released. Desirous of obtaining additional financial facilities, M/s. Gran Electronics Private Limited approached IFCI Limited and secured the said financial facility by executing an indenture of mortgage dated 03.12.2015. Since the company had to close its operations, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was filed by one Universal Digital Connect Limited against M/s. Gran Electronics Private Limited. By an order dated 17.01.2020, the National Company L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quest made by the petitioner on 16.02.2022 to certify the entry, the Talati-cum-Mantri refused to do so on the ground that there existed a charge of the SGST department. By the impugned order dated 05.01.2022, the respondent no. 3 has demanded an amount of Rs. 56,01,79,095/- towards outstanding GST dues and mutated entry no. 6295, inter-alia, recording a charge on the property of the SGST Department. Hence, the petition. 3. Mr. Devan Parikh learned Senior Advocate appearing with Mr. S.P. Majmudar learned advocate for the petitioner would make the following submissions: 3.1 That the Insolvency and Bankruptcy Code is divided into two halves. Firstly, Sections 1 to 32 are concerned with reconstruction of the company by a resolution process. Secondly, Section 33 onwards deals with the liquidation if the resolution plan is not possible. 3.2 That IBC is a complete code which deals with solutions on a holistic perspective concerning a company and all stakeholders, irrespective of whether the provision pertains to the resolution plan or the liquidation process which is settled law that all concerns including the company, creditors, purchasers start with a clean slate . He would s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge is vested. He would submit that as per the proviso to Section 100, a charge cannot be enforced against any property in the hands of the person to whom such property has been transferred for consideration and without any notice of change. 3.6 He would rely on the covenant in the sale deed wherein it was specifically stated that the purchaser will not be responsible to pay any due amount to the Government / Bank / Financial Institution / GST Department etc. 3.7 Mr. Parikh would submit that even as per Section 26E, no person can claim a preexisting charge against the purchaser. 3.8 He would therefore submit that under the IBC or under the general law, the charge under VAT Act 2005 cannot be enforced against the petitioner in the facts of the case. 4. Mr. Pranav Trivedi, learned AGP would oppose the petition and make the following submissions: 4.1 He would submit that pursuant to the dues, a charge is created in Section 48 under the Value Added Tax Act, 2003. Charge of the State Government being a crown dues would have precedence on the charge. 4.2 He would submit that once the property was sold on as is where is basis the dues of the State Government cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCLT Mumbai, on 12.02.2021 passed an order liquidating M/s. Gran Electronics Private Limited ( GEPL for short). The relevant portion of the order of the NCLT reads as under: 5. The Applicant further submitted that the estimated liquidation value of fixed assets of the Corporate Debtor is Rs. 8,59,59,303/- and the total amount of claims admitted by the Applicant against the Corporate Debtor is Rs. 13,20,90,326/-. This apart from the claim of IFCI Limited which is in the amount of Rs. 191,09,39,984/- which could not be admitted because of the judgment of the Hon'ble National Company Law Appellate Tribunal (NCLAT) in the matter of Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Limited [Company Appeal (AT) (Insolvency) No. 346 of 2018]. The claim of the Sales Tax Department was also not admitted as requisite documents supporting the claim of Rs. 77,08,69,644/- were not submitted. Further in the said meeting, a plan for the contribution of the liquidation costs was discussed, showcasing the estimated total value of the assets to the tune of Rs. 190.08 Lakhs. Thereafter, the RP had informed the CoC that substantial funds in order to meet the said costs were available. . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deed was executed on 17.12.2021. A sale certificate was issued by the liquidator of GEPL. The relevant extract of the covenant with respect to past dues reads as under: The purchaser will not responsible to pay any due amount to the government / Bank / Financial Institute / Semi Government Office / GST Department / VAT Department / Labour Department / Central Excise Department / Income Tax Department or any other Government Department or to the Gram Panchayat or any other public body or authority in respect thereof since the same will fall under the waterfall mechanism and will be dealt with in the manner specified in Section 53(1) of IBC, 2016. 5.6 Therefore, there was a clear stipulation thereunder that the purchaser i.e. the petitioner will not be responsible to pay any due amount to the government since the same would fall under the waterfall mechanism and will be dealt with in the manner specified in Section 53(1) of IBC, 2016. Certain other covenants in the sale deed read as under: THE VENDOR have not received any notice for acquisition of the said property from the government nor any suit or any recovery proceeding or any proceeding is pending in any cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Journal English Navakal Marathi 2. Gandhidham, Kutch The Indian Express English Navakal Marathi Further, in compliance with Regulation 16 of the Liquidation Regulations, 2016, I had requested your good office to kindly submit or update their claim on or before 20 March, 2021 in Form C as on the liquidation commencement date Le. 12 February, 2021 so as to enable me to verify the same and admit in accordance with Regulation 30 of Liquidation Regulations, 2016. Subsequent to which, in accordance with Regulation 31(1) (2) of the Liquidation Regulations, 2016, I had filed the List of Stakeholders with the Hon'ble NCLT and 1881 on 44 May, 2021. Further, In accordance with Regulation 31A of Liquidation Regulations, 2016 a Stakeholders Consultation Committee was formed considering the claims received and admitted by me. However, I have not received any claim from your good office either physically or through email till date. KRBL L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and principal office, if any, of the corporate debtor and any other location where in the opinion of the interim resolution professional, the corporate debtor conducts material business operations; (ii) on the website, if any, of the corporate debtor; and (iii) on the website, if any, designated by the Board for the purpose, (ba) state where claim forms can be downloaded or obtained from, as the case may be; (bb) offer choice of three insolvency professionals identified under Regulation 4-A to act as the authorised representative of creditors in each class; and (c) provide the last date for submission of proofs of claim, which shall be fourteen days from the date of appointment of the interim resolution professional. (3) The applicant shall bear the expenses of the public announcement which may be reimbursed by the committee to the extent it ratifies them. 7. Claims by operational creditors. ( 1) A person claiming to be an operational creditor, other than workman or employee of the corporate debtor, shall submit claim with proof to the interim resolution professional in person, by post or by electronic means in Form B of the Schedule: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erification of claims. ( 1) The interim resolution professional or the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date of the receipt of the claims, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims, and update it. (2) The list of creditors shall be (a) available for inspection by the persons who submitted proofs of claim; (b) available for inspection by members, partners, directors and guarantors of the corporate debtor or their authorised representatives; (c) displayed on the website, if any, of the corporate debtor; (ca) filed on the electronic platform of the Board for dissemination on its website: Provided that this clause shall apply to every corporate insolvency resolution process ongoing and commencing on or after the date of commencement of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2020; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, when he comes across additional information warranting such modification, and shall modify the entry in the manner directed by the Adjudicating Authority. (4) The liquidator shall modify an entry in the list of stakeholders filed with the Adjudicating Authority, in the manner directed by the Adjudicating Authority while disposing off an appeal preferred under section 42. (5) The list of stakeholders, as modified from time to time, shall be- (a) available for inspection by the persons who submitted proofs of claim; 21 (b) available for inspection by members, partners, directors and guarantors of the corporate debtor; (c) displayed on the website, if any, of the corporate debtor. 31A. Stakeholders consultation committee. (1) The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32. (2) The composition of the consultation committee under sub-regulation (1) shall be as shown in the Table below: Table Class of St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code and these regulations, representatives in the consultation committee shall have access to all relevant records and information as may be required to provide advice to the liquidator under sub-regulation (1). (6) The liquidator shall convene a meeting of the consultation committee when he considers it necessary and shall convene a meeting of the consultation committee when a request is received from at least fifty-one percent of representatives in the consultation committee. (7) The liquidator shall chair the meetings of consultation committee and record deliberations of the meeting. (8) The liquidator shall place the recommendation of committee of creditors made under sub-regulation (1) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the consultation committee for its information. (9) The consultation committee shall advise the liquidator, by a vote of not less than sixty-six percent of the representatives of the consultation committee, present and voting. (10) The advice of the consultation committee shall not be binding on the liquidator: Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) any professional appointed by him. (3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor s related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties. 5.12 Sections 7, 29, 31, 33, 52 and 53 of the IBC read as under: 7. Appointment of professionals. (1) A liquidator may appoint professionals to assist him in the discharge of his duties, obligations and functions for a reasonable remuneration and such remuneration shall form part of the liquidation cost. (2) The liquidator shall not appoint a professional under sub-regulation (1) who is his relative, is a related party of the corporate debtor or has served as an auditor to the corporate debtor in the five years preceding the liquidation commencement date. (3) A professional appointed or proposed to be appointed under sub-regulation (1) shall disclose the existence of any pecuniary or personal relationship with any of the stakeholders, or the concerned corporate debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Schedule I when- (a) the asset is perishable; (b) the asset is likely to deteriorate in value significantly if not sold immediately; (c) the asset is sold at a price higher than the reserve price of a failed auction; or (d) the prior permission of the Adjudicating Authority has been obtained for such sale: Provided that the liquidator shall not sell the assets, without prior permission of the Adjudicating Authority, by way of private sale to (a) a related party of the corporate debtor; (b) his related party; or (c) any professional appointed by him. (3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor s related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties. 52 A secured creditor in the liquidation proceedings may (1) A secured creditor in the liquidation proceedings may (a) relinquish its security interest to the liquidation estate and receive proceeds from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts to the liquidator to be included in the liquidation estate. (9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53. 53-Distribution of assets. (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely : (a) the insolvency resolution process costs and the liquidation costs paid in full; (b) the following debts which shall rank equally between and among the following : (i) workmen s dues for the period of twenty-four months preceding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52; (c) wages and any unpaid dues owed to employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by CoC meets the requirements as referred to in subsection (2) of Section 30, it shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I B Code is, revival of the Corporate Debtor and to make it a running concern. 66. The resolution plan submitted by successful resolution applicant is required to contain various provisions, viz., provision for payment of insolvency resolution process costs, provision for payment of debts of operational creditors, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the Corporate Debtor under section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in subsection (1) of section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of 62 the resolution plan, which also shall not be less than the amount to be paid to such creditors in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the successful resolution applicant. The dominant purpose is, that he should start with fresh slate on the basis of the resolution plan approved. 69. This aspect has been aptly explained by this Court in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra). 107. For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted as 65 this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jya 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. There will be no criminal procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local authority including tax authorities, which were not part of the resolution plan shall stand extinguished. 93. 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 ongoing concern. After CoC approves the plan, the Adjudicating Authority is required to arrive at a subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority Grants its approval under Section 31 could be continued. 5.14 What therefore emerges is that on the facts of the present case the CIRP was undertaken. Claims were invited and the State during the process failed to substantiate it and at the stage of liquidation did not lodge its claim. In light of the judicial pronouncement above the debt therefore did not form a part of the resolution plan and therefore stood extinguished. 5.15 Admittedly state tax dues and the State would be a claimant as an operational creditor. The claim lodged during insolvency process stood rejected and during the liquidation, no such claim was lodged. This fact is reiterated at the cost of repetition as this would lead us thus to examine the provisions of Section 52 and 53 of the IBC. 5.16 Reading Section 52 would indicate that a secured creditor in the liquidation proceedings may relinquish its security interest to the liquidation asset and receive proceeds on the sale of assets by the liquidation in the manner specified under section 53 or realise its security asset by enforcing its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceding the liquidation commencement date; (ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; (f) any remaining debts and dues; (g) preference shareholders, if any; and (h) equity shareholders or partners, as the case may be. 14 (2) Any contractual arrangements between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction. Explanation - For the purpose of this section (i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and (ii) the term workmen's dues shall have the same meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d financing (including the development of bond markets). In the long run, this would increase the availability of finance, reduce the cost of capital, promote entrepreneurship and lead to faster economic growth. The government also will be the beneficiary of this process as economic growth will increase revenues. Further, efficiency enhancement and consequent greater value capture through the proposed insolvency regime will bring in additional gains to both the economy and the exchequer. ****************** *************** For the remaining creditors who participate in the collective action of Liquidation, the Committee debated on the waterfall of liabilities that should hold in Liquidation in the new Code. Across different jurisdictions, the observation is that secured creditors have first priority on the realizations, and that these are typically paid out net of the costs of insolvency resolution and Liquidation. In order to bring the practices in India in-line with the global practice, and to ensure that the objectives of this proposed Code is met, the Committee recommends that the waterfall in Liquidation should be as follows: 1. Costs of IRP and liquidation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above discussion, the Committee agreed that the priority for recovery to secured creditors under Section 53(1)(b)(ii) should be applicable only to the extent of the value of the security interest that is relinquished by the secured creditor. The Committee was of the opinion that this issue stands clarified in terms of the reasoning provided above and does not necessitate any further amendment to the provisions of the Code. 31. The Preamble to the IBC expressly recognizes the shift in the law, with respect to ordering priority of claims, especially with respect to government dues: An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 32. In response to the comments received on this aspect from Parlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it. (5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected therewith in taking possession of, selling or otherwise disposing of the security, the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force. (6) The Adjudicating Authority, on the receipt of an application from a secured creditor under subsection (5) may pass such order as may be necessary to permit a secured creditor to realise security interest in accordance with law for the time being in force. (7) Where the enforcement of the security interest under sub-section (4) yields an amount by way of proceeds which is in excess of the debts due to the secured creditor, the secured creditor shall (a) account to the liquidator for such surplus; and (b) tender to the liquidator any surplus funds receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance from the corporate debtor or any other person connected therewith in taking possession of, selling or otherwise disposing off the security. Subsection (6) to Section 52 of the Code applies when an adjudicating authority is in receipt of an application Under Sub-section (5) to Section 52 of the Code. Sub-section (7) to Section 52 of the Code, however, is important as it states that where on enforcement of the security interest, an amount by way of proceeds is in excess of the debts due to the secured creditor, the secured creditor shall account for and pay the excess/surplus amount to the liquidator from enforcement of such secured assets. The amount of insolvency resolution process costs, due from secured creditors who realise their security interests in the manner provided in the section, are to be deducted from the proceeds of any realisation by such secured creditors. They are to be transferred and included in the liquidation estate. Sub-section (9) to Section 52 of the Code states that where proceeds for realisation of the secured assets are not adequate to repay the debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d security in the manner set out in Section 52 of the Code shall rank equally between and amongst the workmen and the secured creditors. The Explanation to Section 53 of the Code states that 'workmen's dues' shall have the same meaning as assigned to it in Section 326 of the Companies Act, 2013. In other words, Explanation to Section 326 of the Companies Act, 2013 has been incorporated and applies to the waterfall mechanism as prescribed in Clause (b) to Sub-section (1) to Section 53 of the Code. What is significant here is that under Clause (b) to Sub-section (1) to Section 53 of the Code, the workmen's dues are for the period of twenty four months preceding the liquidation commencement date. The liquidation commencement date, as defined in terms of Sub-section (17) to Section 5 of the Code, is much earlier in point of time and need not coincide with the date of winding up. This is in the interest of the workmen. Clause (i) of Explanation to Section 53 of the Code states that where the distribution of proceeds in respect of class of recipients that rank equally, each of the debts would be paid either in full or would be paid in equal proportion within the same clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the arguments of the Petitioners. 72. The Code is based on the organic evolution of law and is a product of an extensive consultative process to meet the requirements of the Code governing liquidation. It introduced a comprehensive and time-bound framework to maximise the value of assets of all persons and balance the interest of the stakeholders. The guiding principle for the Code in setting the priority of payments in liquidation was to bring the practices in India in line with global practices. In the waterfall mechanism, after the costs of the insolvency resolution process and liquidation, secured creditors share the highest priority along with a defined period of dues of the workmen. The unpaid dues of the workmen are adequately and significantly protected in line with the objectives sought to be achieved by the Code and in terms of the waterfall mechanism prescribed by Section 53 of the Code. In either case of relinquishment or non-relinquishment of the security by the secured creditor, the interests of workmen are protected under the Code. In fact, the secured creditors are taking significant haircut and workmen are being compensated on an equitable basis in a j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the separate and distinct treatment of amounts payable to secured creditor on the one hand, and dues payable to the government on the other clearly signifies Parliament s intention to treat the latter differently - and in the present case, having lower priority. As noticed earlier, this intention is also evident from a reading of the preamble to the Act itself. 5.18 Reading of the aforesaid paras would indicate that once having relinquished its interest under Section 52, the State cannot continue the insistence of maintaining the charge in the revenue records and its claim will have to stand in priority. 5.19 The argument of the State that since the asset was sold on a condition of AS IS WHERE IS BASIS , the charge of the State was rightly recorded is misconceived as the deed already records that the purchaser shall not be liable for payment of any outstanding dues of the government. This too was, in the opinion of the Court a clause that would relieve the petitioner of the liability to pay tax dues. In light of the decision in the case of Ghanshayam Mishra and Sons Private Limited (supra), the petitioner was entitled to a clean slate. 5.20 Even otherwise as per Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
