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TMI Blog2024 (8) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 05.04.2018 vide Annexure P-1. As per sub-Section (4) of Section 14 of the Code, the said order of moratorium would have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process - Since the provisions of the said Code had overriding effect on all laws in view of Section 238 of the Code, it was not permissible for the respondents to create a charge on the property of the petitioner-Company during the currency of the moratorium vide Annexure P-4 dt. 07.01.2020 in violation of the provisions of the IBC. Therefore, ex facie, the said order Annexure P-4 is void in law. When the IBC permits Sale of Assets of a Company in Liquidation as a going concern under Regulation 32 (e) 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, and in such an e-auction conducted by the Liquidator, the current management made a plan for acquisition vide Annexure P-5A for Rs.49.95 crore and the same was approved by the NCLT on 11.05.2022 vide Annexure P-6 and Sale Certificate was also issued vide Annexure P-7 on 31.05.2022, all the claims of the respondents stood extinguished - the legislative intent was to extinguish al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial discipline by the erstwhile management of the Company, the State Bank of India had initiated Corporate Insolvency Resolution Process (in short the CIRP) of the petitioner-Company by filing C.P. no. (IB)-540(PB)/2017 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short the IBC or Code ) before the National Company Law Tribunal (for short the NCLT) at New Delhi, Principal Bench, where the registered office of the 1st petitioner-Company was situated. 7. The said petition came to be admitted on 05.04.2018 and a Resolution Professional was appointed replacing the earlier management which stood suspended, and by operation of Section 14 of the IBC, 2016 a moratorium was imposed. Annexure P-1 is the said order dt. 05.04.2018. 8. Pursuant to the initiation of the CIRP process, expressions of interest were invited from prospective resolution applicants, but to no avail. 9. Faced with the above, the Committee of Creditors resolved to initiate liquidation proceedings, and resultantly, the Resolution Professional filed an application under Section 33 (1) (a) of the IBC, for liquidation of the 1st petitioner-Company. 10. Vide Annexure P-2 dt. 03.04.2019, the same was all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the 1st petitioner-Company as a going concern. This is consistent with Regulation 32 (e) and Regulation 32-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 (for short the Liquidation Regulations, 2016 ) which permit the Liquidator to sell the corporate debtor as a going concern. 20. Expressions of interest were received from interested parties including by petitioner no. 2 for taking over of the 1st petitioner-Company as a going concern. 21. The present management of the Company participated in the e-auction process and was the highest successful bidder with bid value of Rs.49.95 crore and submitted Annexure P-5A, acquisition plan for taking over the 1st petitioner-Company as a going concern. In the acquisition plan, it was proposed by the 2nd petitioner and the current management that Upon the distribution of the proceeds in terms of Section 53 of the IBC, the liability of the Corporate Debtor towards the dues owed to Operational Creditors/statutory dues shall stand settled in full, including any claims whether filed or not, whether admitted or not, whether asserted or not and whether or not set out in the audited balance sheet or the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in rem and is the final document having force of law. 30. Subsequently, even the liquidation process was closed on 02.11.2022 by the NCLT, New Delhi, vide Annexure P-10. 31. In view of all these events, the claims of respondents no. 1 2 are deemed to be settled in terms of the manner of distribution of sale proceeds as per Section 53 of IBC, and by operation of law, they are not left with any claim against petitioner no. 1/Company with its new management. 32. In spite of this settled legal position and in spite of the 1st petitioner-Company writing letters on 06.06.2022 (Annexure P-11) and on 17.11.2022 (Annexure P-12) to respondent no.3 for taking note of the order dt. 11.05.2022 of the NCLT approving the acquisition plan and pointing out that their claim is extinguished by operation of law, the entries made on the properties of the 1st petitioner-Company in question were not removed. Reminder e-mails sent vide Annexure P-12A on 10.02.2023, 04.03.2023 19.03.2023, also did not yield any result. 33. Therefore the petitioners filed this Writ Petition. Contentions of petitioners 34. Petitioners contend that after approval of acquisition plan, it became binding on all including resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter/communication dated 07.01.2020 (Annexure P-4), issued by Respondent No. 2, vide which the red entries/charge on account of dues recoverable from erstwhile management of Petitioner Company under Himachal Pradesh Goods and Service Tax Act, 2017 has been created over the properties of Petitioner No. 1 Company in an illegal and arbitrary manner, in view of the order dated 11.05.2022 (Annexure P-6) passed by National Company Law Tribunal, New Delhi approving acquisition plan of the Petitioner Company as Going Concern in view of the principle of Clean Slate as laid down by the Hon ble Supreme Court in Ghanshyam Mishra and sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited (SC) 2021 (9) SCC 657. ii. It is still further prayed that this Hon ble Court may be pleased to issue a writ or order or direction in the nature of mandamus, directing Respondent No. 4, to remove its charge/red entries/claim pertaining to Himachal Pradesh Goods and Services Tax Act, 2017 over the properties of the petitioner company mentioned at paragraph No. 7 from the revenue record. iii. It is still further prayed that this Hon ble Court may be pleased to issue any other appropriate writ, order or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the approved resolution plan, shall stand extinguished. 68. The only question, which remains is, what happens to such dues if they pertain to a period wherein Section 7 petitions have been admitted prior to 16.8.2019. 69. To answer the said question, we will have to consider, as to whether the said amendment is clarificatory/declaratory in nature or a substantive one. If it is held, that it is declaratory or clarificatory in nature, it will have to be held, that such an amendment is retrospective in nature and exists on the statute book since inception. However, if the answer is otherwise, the amendment will have to be held to be prospective in nature, having force from the date on which the amendment is effected in the statute. 70 to 76. xxx xxx xxx 77. It is clear, that the mischief, which was noticed prior to amendment of Section 31 of I B Code was, that though the legislative intent was to extinguish all such debts owed to the Central Government, any State Government or any local authority, including the tax authorities once an approval was granted to the resolution plan by NCLT; on account of there being some ambiguity, the State/Central Government authorities contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead 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 Section 5 of the I B Code. Consequently, a person to whom a debt is owed would be covered by the definition of creditor as defined under subsection (10) of Section 3 of the I B Code. As such, even without the 2019 amendment, the Central Government, any State Government or any local authority to whom a debt is owed, including the statutory dues, would be covered by the term creditor and in any case, by the term other stakeholders as provided in sub-section (1) of Section 31 of the I B Code. 92 to 93. xxx xxx xxx 94. Therefore, in our considered view, the aforesaid provisions leave no manner of doubt to hold, that the 2019 amendment is declaratory and clarificatory in nature. We also hold, that even if 2019 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leading to the approval of the takeover acquisition plan of the 1st petitioner-Company by the current management and also not denying that the proceedings of the NCLT approving the approval plan submitted by the current management, got confirmed upto the Supreme Court, it is, however, pleaded that the State Debts have priority over rights of secured creditors. 46. Reliance is placed on the judgments in Central Bank of India vs. State of Kerala Ors. (2009) 4 SCC 94, to contend that there is priority of State Debt over Debts of other Secured Creditors. 47. It is contended that the dues claimed by the respondents had legitimately accrued against the 1st petitioner-Company in accordance with the provisions of the H.P. Vat Act, 2005 CST Act, 1956, and the respondents are well within jurisdiction to create charge on properties of defaulting dealer to safeguard the Government revenue. 48. It is insisted that the respondents have first charge over the properties of the 1st petitioner-Company and so the Writ petition is devoid of merits. Consideration by the Court 49. We have considered the submissions of the learned counsel for the petitioners and the learned Advocate General for the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguished. 57. The respondents are also estopped from continuing the red entry/charge on the properties of the 1st petitioner-Company, since they had never objected to the acquisition plan submitted by the current management of the 1st petitioner-Company and that they had also not challenged the said order dt. 11.05.2022 (Annexure P-6) passed by the NCLT approving the acquisition plan for the 1st petitioner-Company. 58. Once the said order had been upheld by the NCLAT vide Annexure P-8 dt. 03.02.2023 and by the Supreme Court on 07.08.2023, it is not permissible for the respondents to act, as if they still have a right over the properties of the petitioner-Company. 59. Thus, as held in the above decision of the Supreme Court in Ghanashyam Mishra s case (supra-1), the legislative intent was to extinguish all debts owed to the Central Government or any State Government or any Local Authority including the Tax Authorities, when once an approval was granted to Resolution Plan by the NCLT. 60. As per the amended Section 31 of the Code, the said principle of taking over Corporate Debtor under a Resolution Plan, will also apply to taking over by way of acquisition plan. This is referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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