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TMI Blog2024 (5) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in force including the statutory dues owned of the Central Government, any State Government or any other local authority which does not formed part of the approved resolution shall stand extinguished. However, in respect of the dues for the period prior to 16.08.2018, wherein Section 7 states that, petition shall be admitted and it has been held that the amendment is clarificatory in nature. Once such a resolution plan is approved by the adjudicating authority, all such claims and dues owned to Central Government, State Government or any other local authorities, including the tax authorities which were not part of the resolution plan shall stand extinguished. The Supreme court, however, in the case of the State Tax Officer [ 2022 (9) TMI 317 - SUPREME COURT ] while taking note of the judgment in case of Ganshyam misra while interpreting the provisions of Section 30 (3) and 31 (3) and another provisions of Sections 30 and 31 held that if the resolution plan is not in conformity with the statutory provisions of Section 31 (2) of the IB Code, the said plan cannot be accepted under Section 30 (2) (b) of the IB Code. There is an obligation on the resolution professional to examine e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is a company registered under the Companies Act, 1956 and is a dealer registered under the provisions of the Kerala General Sales Tax Act, 1963 ( the Act for short). The Union Bank of India (Financial Creditor) filed a Company Petition against the petitioner company (Corporate debtor) before the National Company Law Tribunal, Chennai ( the NCLT for short) under the Insolvency and Bankruptcy Code, 2016 ( the IB Code for short). The NCLT admitted the petition and ordered commencement of the Corporate Insolvency Resolution Process. Mr. S. Rajendran, had been appointed as Resolution Professional of the petitioner company as per the NCLT order dated 13.12.2018. Vide the order dated 01.11.2018 (Ext. P1), the NCLT issued moratorium till the completion of Corporate insolvency resolution process for the purposes referred to in Section 14 of the Code, in respect of the following: (i) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or authority. (ii) transferring, encumbering, alienating or disposing of by the corporate debtors any of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor up to the date of approval of the Resolution Plan by the Hon ble Adjudicating Authority arising out of any document, instrument, guarantee, disputes, proceedings, arbitrations etc, whether disputed or undisputed, equitable, legal, secured, unsecured or otherwise, to which the Corporate Debtor is a party shall, unless or otherwise stated in this Resolution Plan and irrespective of the final outcome of the disputes/legal proceedings, stand irrevocably and unconditionally abated, settled and extinguished in perpetuity . .. (xviii) All claims whether contingent or crystallized or disputed or undisputed and whether or not filed with Government authorities in relation to all taxes, levies or other statutory dues including but not limited to Income Tax, Goods and Service Tax, Sales Tax, VAT, Water, Electricity, Excise Duty, Custom Duty, Royalties and Fees, and/ or penalties including but not limited to fines and interest on FEMA/FERA/AML and other compliances and fines which the Corporate Debtor was or may be liable to pay (including with respect to Financial years under Assessments), all deductions and all withholding taxes on any payment, as required under applicable laws and per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount has been issued in Ext. P11. 5. Learned Senior counsel for the petitioner has submitted that after the resolution plan is approved by the NCLT under Section 31 (1) of the Code, 2016, the claims as provided in the resolution plan stand frozen and also that all claims including the statutory dues of the Central Government, State Government or any other local authority, if not part of the resolution plan would get extinguished and no proceeding 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. 6. Learned counsel for the petitioner has placed reliance on the following judgments in Ghanasyam Mishra and sons Private limited vs. Edelweiss Asst Reconstruction company Ltd. [(2021) 9 SCC 657], Ruchi Soya Industries Limited vs. Union of India and ors [2022 Livel Law (SC) 207]. 7. Learned counsel for the petitioner submitted that the resolution plan was approved on 20.01.2020. The period covered by Ext. P9 is prior to the date of approval of the resolution plan, and therefore, Ext. P9 and the impugned notices for recovery of the tax are illegal and barred by Section 31 of the IB Code 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option but to finalize the case as best judgment assessment relying on the materials available on the records. 11. Notices for the assessment year 2018-2019 under Section 17 (3) of the KGST Act was issued intimating the discrepancies. The petitioner had filed reply to the said notice on 01.04.2023 but did not appear in person or filed any books of account as called for. The petitioner was only interested in prolonging the proceedings and instead of filing replies to the show cause notices, sought one after another opportunity to produce the documents, but did not submit the relevant documents. After the NCLT passed the order, the petitioner is claiming that it is not liable to pay any amount as tax, as the petitioner has been taken over under insolvency process after the resolution plan got approved by the NCLT. 12. On merit, it is submitted that, as no assessment orders were passed for the year 2017-2018 or subsequent thereto at the time of approval of resolution plan, the liability in pursuance to the assessment orders would not get extinguished, as they were not part of the resolution plan approved by the NCLT. Assessment for the year 2017- 2018 was not finalised before the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2018-2019 was not bared under Section 238 of IB Code. It is therefore submitted that the writ petition is to be dismissed. 16. The IB Code has been enacted with objective to bring the insolvency law under single enactment. Under the Scheme of the Code insolvency resolution process commences when a debt becomes due and is not paid. The provisions of the Code come into play the movement default is of rupees One Lakh or more. A Corporate insolvency resolution process may be sit in motion by the corporate debtor itself for the financial creditor or an operational creditor. Financial creditor and operational creditors are defined under Section 5 (7) and Section 5 (21) of the Code respectively. The procedure for setting in motion the resolution process plan by financial creditor or by corporate debtor is prescribed under Sections 7 and 8 of the Code. Section 30 of the Code provides that a person who is interested in reviving a corporate body as a going a concern may submit the resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This plan must provide for payment of insolvency resolution process caused, management of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution plan got approved, all the dues including the statutory dues owned to the Central Government, State Government or any local authority, if not part of the resolution plan would stand extinguished. The assessment was completed on 12.09.2023, after giving enough opportunities and personal hearing. Notices under Form 50 were issued on 20.07.2019, 17.11.2020, 28.06.2021 and 20.11.2022. The preassessment notice dated 18.03.2023, was issued to the petitioner for producing books of accounts with personal hearing within fifteen days of the receipt of the said notice, then the petitioner had filed reply only on 01.04.2023 and 20.04.2023. The assessment was completed after considering the objections and granting the opportunity of being heard. 20. The resolution plan was approved by the NCLT by order dated 20.01.2020. The notices have been issued after the resolution plan was approved by the NCLT. The preassessment notice was issued to the resolution professional on 18.03.2023, there was no bar for undertaking the proceedings after the resolution plan got approved. It is further submitted that the respondents were entitled to issue notices and pass orders pertaining to the sale tax du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time being enforced or any instrument having effect by virtue of any law. The Supreme Court considered the amendment brought under Section 31 of the IB Code with effect from 16.08.2019 and held that after 16.08.2019 any debt in respect of the payment of dues arising under any law for the time being in force including the statutory dues owned of the Central Government, any State Government or any other local authority which does not formed part of the approved resolution shall stand extinguished. However, in respect of the dues for the period prior to 16.08.2018, wherein Section 7 states that, petition shall be admitted and it has been held that the amendment is clarificatory in nature. Once such a resolution plan is approved by the adjudicating authority, all such claims and dues owned to Central Government, State Government or any other local authorities, including the tax authorities which were not part of the resolution plan shall stand extinguished. In Paragraph 95 of the said judgment, the questions had been answered as under:- (i) That once are solution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IB Code, all the amount that would have been paid to such operational creditors, if the amount is to be distributed under the resolution plan have been distributed in accordance with the order of priority under Section 53 (2), which ever is higher. 27. A resolution plan does not meets the requirement of Section 30 (2) of IB Code could be invalid and not binding on the Central Government, State Government, Statutory authority any financial creditor or other creditor to whom in respect of dues arising under any law for the time being in force is void. Such a resolution plan would not bind the State when there are outstanding statutory dues of Corporate debtors. Paragraphs 48, 52, 54 of the judgment in State Tax Officer v. Rainbow papers limited (supra) are extracted hereunder:-- 48. A resolution plan which does not meet the requirements of Sub-section (2) of Section 30 of the IBC, would be invalid and not binding on the Central Government, any State Government, any statutory or other authority, any financial creditor, or other creditor to whom a debt in respect of dues arising under any law for the time being in force is owed. Such a resolution plan would not bind the State when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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