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TMI Blog2024 (9) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... e dues of the workmen and secured creditors are discharged. This contention was totally rejected by the Hon ble Supreme Court in the aforesaid case KTC Tyres holding that reading sections 529A and 530 together, there is no escape from the conclusion that the liability towards workmen s dues and debts due to secured creditors as provided under clause (b) of Section 529A(1) has to be paid in priority to all other debts including tax dues to the revenue. In the case of Zicom Saas Pvt. Ltd. [ 2023 (2) TMI 1170 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], the Department of State Tax of Maharashtra filed the claim before the RP of an amount of Rs. 43,72,97,479/- out of which Resolution Professional accepted the claim of Rs. 36,68,12,729/-and in the plan they were allotted only 1% of the admitted claim. In this case also reliance has been placed upon in the case of Rainbow Papers alleging that the claim of the State Tax Maharashtra has to be treated as secured charge in terms of Section 37 of the MVAT Act, however, while interpreting Section 48 of the GVAT Act vis a vis Section 37 of the MVAT Act, this Court has found that Section 37 was made subject to any provision regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority (National Company Law Tribunal, Indore Bench) on 26.03.2021 and appointed Ms Teena Saraswat as the Interim Resolution Professional. 2. The IRP formed the CoC of the following financial creditors which is reproduced as under:- Sr. Name of FC % Voting share 1. State Bank of India 23.24% 2. Volark Auto Pvt. Ltd. 1.61% 3. Suraksha ARC 42.36% 4. AU Small Finance Bank Limited 12.45% 5. Sudaaram Finance Limited 0.63% 6. Shri Ram City Union Finance Ltd. 7.98% 7. Toyota Financial Services India Ltd. 11.12% 8. PPG Asian Paints Pvt. Ltd. 0.60% 3. The resolution plan submitted by Agarwal Real City Pvt. Ltd. (PRA) was approved by the CoC with 90.41% votes in 17th meeting held on 17.12.2021. 4. The Liquidation value and fair value of the CD was reported at Rs. 18,39,91,863/- and Rs. 23,22,47,203/- respectively. 5. The Prospective Resolution Applicant proposed to pay a sum of Rs. 22,61,33,000 against the total admitted claim which is as follows:- Sr. Particulars Claim admitted by RP (Rs.) Resolution Plan Proposal (Rs.) 1. Insolvency Resolution Process costs NIL 30,33,000 2. Secured Financial Creditor 23,02,07,114 19,11,00,000 3. Unsecured Financial creditor 76,01,44,603 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with Regulation 10, the appellant would only be required to substantiate the claim by production of such materials as might be called for. The time stipulations are not mandatory as is obvious from Sub-Regulation (2) of Regulation 14 which enables the Interim Resolution Professional or the Resolution Professional, as the case may be, to revise the amounts of claims admitted, including the estimates of claims made under Sub- Regulation (1) of the said Regulation as soon as might be practicable, when he came across additional information warranting such revision. 25. In this case, at the cost of repetition, it may be noted that there was no obligation on the part of the State to lodge a claim in respect of dues which are statutory dues for which recovery proceedings have also been initiated. The appellants were never called upon to produce materials in connection with the claim raised by the Appellants towards statutory dues. The Adjudicating Authority as well as the Appellate Authority/NCLAT misconstrued the Regulations. 55. In our considered view, the NCLAT clearly erred in its observation that Section 53 of the IBC over- rides Section 48 of the GVAT Act. Section 53 of the IBC b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 and Devarajan Raman Liquidator Vs Principal Commissioner Income Tax, CA (AT) (Ins) No. 977 of 2023. It is further submitted by Counsel for Respondent No. 2 that the decision in the case of Rainbow papers (Supra) has been held to be a decision in the facts of that case in a subsequent judgment by the Hon ble Supreme Court in the case of Paschimanchal Vidyut Vitran Nigam Limited Vs. Rama Ispat Pvt. Ltd. Ors. Civil appeal No. 7976 of 2019 decided on 17.07.2023. In order to bring all the facts of record, he has referred to a decision in the Review Petition (Civil) No. 1620 of 2023 filed in the matter of Rainbow Papers (Supra) which came to be dismissed on 31.10.2023. Counsel for Respondent No. 2 has further submitted that Section 530 of the Companies Act, 1956 which is para materia with Section 327 of Companies Act, 2013 stipulates the order of payments which are to be made in the case of winding up of a company whereunder the dues of all revenues, taxes, cesses and rates due from the company shall be paid in priority subject to the provisions of Section 529A of the Act, 1956. He further submitted that Section 529A of the Act, 1956 states that during the winding up of a company the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als and the same are accordingly dismissed. 13. The contention of the R2 is that priority has to be given in terms of Section 529A of the Act, 1956. 14. State Bank of India also filed an application to intervene in this matter and Counsel appearing on its behalf has argued that SBI had a voting share of 23.24% in the CoC, the SBI was the sole secured creditor having admitted claims of Rs. 23 Cr. and was paid around Rs. 19 Cr. under the resolution plan which has been approved by voting share of 98.39% of the CoC. He has also supported the argument of Respondent No. 2 to contend that the decision in the case of Rainbow papers (Supra) is not applicable to the facts of this case because Section 48 of the GVAT Act and Section 33 of the MPVAT Act are not pari materia. 15. In rebuttal, Counsel for the Appellant has submitted that even if the claim submitted by the Appellant in Form-B is concerned, it would not change its status. In this regard, he has relied upon a decision of the Hon ble Supreme Court in the case of Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni Anr. 2024 SCC OnLine SC 922 to contend that the claim cannot be rejected solely because it was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date [* * *] [ Certain words omitted by Act 35 of 1985, Section 6 (w.e.f. 24.5.1985).], subject to the limit specified in sub-section (2); (c) all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution; (d) unless the company is being wound-up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees' State Insurance Act, 1948 (34 of 1948), or any other law for the time being in force; (e) unless the company is being wound-up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge. (6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them, and in the case of the debts to which priority is given by clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed. (7) In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof: Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made. (8) For the purposes of this section- (a) any remuneration in respect of a period of holiday or of absence from work through s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insufficient to meet them, in which case they shall abate in equal proportions.] 21. In the case of Commissioner of Income Tax Vs. KTC Tyres (India) Ltd. (Supra), the argument raised was that the capital gain tax which was payable by the company must be treated as liquidation expenses and therefore, must be paid first even before the dues of the workmen and secured creditors are discharged. This contention was totally rejected by the Hon ble Supreme Court in the aforesaid case KTC Tyres (Supra) holding that reading sections 529A and 530 together, there is no escape from the conclusion that the liability towards workmen s dues and debts due to secured creditors as provided under clause (b) of Section 529A(1) has to be paid in priority to all other debts including tax dues to the revenue. 22. In the case of Zicom Saas Pvt. Ltd. (Supra), the Department of State Tax of Maharashtra filed the claim before the RP of an amount of Rs. 43,72,97,479/- out of which Resolution Professional accepted the claim of Rs. 36,68,12,729/-and in the plan they were allotted only 1% of the admitted claim. In this case also reliance has been placed upon in the case of Rainbow Papers (Supra) alleging that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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