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TMI Blog2024 (9) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue and sought to be defended as if they relate to liabilities that somehow emerge after the CIRP, are wholly misconceived and untenable. The resolution plan, upon its approval, brought a quietus to all claims pursued or capable of being pursued by the Revenue against the Petitioner-Assessee for any operation prior to the CIRP. The stance of the Revenue in the Reply Affidavit, namely, that if the tax claim amount had not been crystallised, would be future dues and not past dues, is totally untenable. Ghanshyam Mishra makes it clear that the continuation of existing proceedings and the initiation of new proceedings, as they relate to operations prior to the CIRP, are totally prohibited after the approval of the resolution plan. Consequently, nothing would survive insofar as the Impugned Proceedings relate to the Petitioner-Assessee. In Alok Industries Ltd. [ 2024 (3) TMI 1083 - BOMBAY HIGH COURT ] a Division Bench of this Court held in favour of the Assessee quashing various proceedings for reassessment initiated against a corporate debtor that had undergone a resolution under the IBC. Evidently and admittedly, the tax proceedings against the Vinod Jatia Group pre-date the CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered on May 6, 2020.] . The resolution plan, as approved by the NCLT, entails a full waiver of all tax and tax-related interest dues pertaining to the period prior to commencement of the CIRP. 5. Evidently prior to the commencement of the CIRP, on April 17, 2018, the Revenue had carried out search and seizure action under Section 132 of the Act against the Vinod Jatia group and it was alleged by the Revenue that certain companies belonging to the Vinod Jatia group had engaged in bogus transactions and had made bogus entries in their books of accounts. Such companies are said to have entered into transactions with the Petitioner-Assessee too. 6. On March 15, 2021 i.e., well after the approval of the resolution plan, the Revenue wrote to the Petitioner-Assessee initiating proceedings under Section 153C of the Act in respect to Assessment Year 2013-14 to 2018-19. Thereafter, the Revenue also issued notices under Section 143 (2) and 142 (1) of the Act for Assessment Year 2019-20. The Petitioner-Assessee was also issued multiple summons under Section 133 (6) (Power to call for information) of the Act. 7. On January 4, 2022 the Petitioner-Assessee made a detailed representation obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability because these liabilities did not exist in a crystallized form prior to the CIRP, and therefore such liabilities would not stand resolved by the resolution plan. 10. On March 28, 2022, a Division Bench of this Court, on a prima facie examination of the matter granted ad interim relief by restraining the Revenue from taking any further steps, whether coercive or otherwise in relation to the Impugned Proceedings. Such interim relief has continued till date. Section 31 (1) of IBC and its import: 11. At the outset, it would be necessary to extract the provisions of Section 31 (1) of the IBC, since it makes the terms of resolution of corporate debtors binding on the world at large. They are extracted below: 31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant submitting a plan is aware of the assets and liabilities of the corporate debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by the Government and statutory authorities are also required to be contained in the information memorandum . So also the details regarding the number of workers and employees and liabilities of the corporate debtor towards them are required to be contained in the information memorandum. 68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0) operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment 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; 97. Creditor therefore has been defined to mean any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder . Operational creditor has been defined to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Operational debt has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment 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. 98. It is a cardinal principle of law that a statute has to be read as a whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority grants its approval under Section 31 could be continued. [Emphasis Supplied] 15. It is therefore crystal clear that once a resolution plan is duly approved under Section 31 (1) of the IBC, the debts as provided for in the resolution plan alone shall remain payable and such position shall be binding on, among others, the Central Government and various authorities, including tax authorities. All dues which are not part of the resolution plan would stand extinguished and no person would be entitled to initiate or continue any proceedings in respect of any claim for any such due. No proceedings in respect of any dues relating to the period prior to the approval of the resolution plan can be continued or initiated. 16. In this clear view of the matter, there can be no manner of doubt that the Impugned Proceedings initiated by the Revenue and sought to be defended as if they relate to liabilities that somehow emerge after the CIRP, are wholly misconceived and untenable. The resolution plan, upon its approval, brought a quietus to all claims pursued or capable of being pursued by the Revenue against the Petitioner-Assessee for any operation prior to the CIRP. The stance of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the consequential impugned notices issued under Section 142 (1) of the Act by Respondent No. 2 and all subsequent communications issued by Respondent No. 2 pursuant to the aforementioned impugned notices are bad in law since assessment and inquiry under the Act is sought to be initiated in gross violation of provisions of the Code in as much as it relates to a period prior to the Effective Date. [Emphasis Supplied] Conclusion: 18. The aforesaid position in law squarely applies to the facts of the instant case, and necessitates quashing the Impugned Proceedings. Evidently and admittedly, the tax proceedings against the Vinod Jatia Group pre-date the CIRP and no matter when the liabilities are purported to get crystallised, even if they are allowed to get crystallised, they would relate to the period prior to the approval of the resolution plan of the Petitioner-Assessee, and therefore stand extinguished. This is why the Supreme Court has clearly ruled that initiation and continuation of proceedings relating to the period prior to the approval of the resolution plan cannot be indulged in. Upon completion of the CIRP, the Petitioner-Assessee has completely changed hands and has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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