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TMI Blog2025 (1) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, Advocates for R-2. JUDGMENT ASHOK BHUSHAN, J. These two Appeal(s) raising common questions of facts and law, have been heard together and are being decided by this common judgment. 2. Company Appeal (AT) (Ins.) No.1062 of 2024 has been filed challenging order dated 19.10.2023 passed by National Company Law Tribunal, Ahmedabad, Division Bench, Court-1 in IA No.1111(AHM) 2023 filed by the Appellant in CP(IB) 387 of 2020. By the impugned order IA filed by the Applicant/ Appellant has been rejected. Aggrieved by which order this Appeal has been filed. 3. Company Appeal (AT) (Ins.) No.1065 of 2024 has been filed challenging order dated 22.08.2023 passed by National Company Law Tribunal, Mumbai Bench, Court-II in IA No.743/2023 in C.P.(IB)/3484(MB) 2019. By the impugned order, Application - IA No.743 of 2023 filed by the Applicant/ Appellant has been rejected. Aggrieved by which order this Appeal has been filed. 4. We need to notice brief background facts giving rise to these two Appeal(s): Company Appeal (AT) (Ins.) No.1062 of 2024 (i) The Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor - Decent Laminate Pvt. Ltd. Commenced after an order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,89,938/-. IRP sent a letter dated 12.07.2022 to the Appellant informing that Resolution Plan of the CD has been approved by the CoC on 23.06.2022 and RP is prohibited to accept any claim from any creditor, including the Appellant. (iii) The Appellant filed IA No.743 of 2023 on 30.01.2023seeking a direction to the RP to accept and pay the claim of Rs.10,89,938/- towards PF dues. During pendency of IA No.743 of 2023, the NCLT Mumbai Bench passed order dated 13.04.2023 in IA No.1785 of 2022 approving the Resolution Plan in the CIRP. The Appellant has also filed an Appeal, challenging the order dated 13.04.2023 in this Tribunal. IA No.743 of 2023 was heard and rejected by order dated 22.08.2023 passed by the Adjudicating Authority. The Adjudicating Authority took the view that order under which amount of Rs.10,89,938/- is claimed was passed by EPFO on 29.08.2022, i.e., during moratorium period. It was also noticed that Resolution Plan has been approved by the CoC on 01.06.2022 and prior to approval of Resolution Plan, no claim by the EPFO was lodged with the RP. It was held that order dated 29.8.2022 was hit by Section 14 of the IBC. The Adjudicating Authority held that at this stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was approved by the CoC and the assessment proceedings were carried out and final order under Section 7A of the EPF & MP Act was passed during the CIRP is in violation of the moratorium. When assessment order has been passed post moratorium, it is bad in law and on the basis of said assessment, no claim can be admitted in the CIRP. Learned Counsel for the Respondent has also placed reliance on the judgment of the Hon'ble Supreme Court of India in Sundresh Bhatt, Liquidator of ABG Shipyard (supra). It is submitted that post approval of Resolution Plan by the CoC, no claim can be considered by the RP. In both the Appeal(s), the claims were filed by the Appellant(s) subsequent to the approval of Plan by the CoC and further assessment orders were made subsequent to imposition of moratorium. Hence, the said claims cannot be accepted. 8. We have considered the submissions of learned Counsel for the parties and have perused the records. 9. From the submissions of learned Counsel for the parties, following issues arise for consideration: (1) Whether after imposition of moratorium under Section 14 of the IBC, assessment proceedings can be carried on by the EPFO under Section 7A, 14B an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period." 11. The Hon'ble Supreme Court had occasion to consider effect and consequence of imposition of moratorium. The Hon'ble Supreme Court in (2020) 13 SCC 208 - Rejendra K. Bhutta vs. Maharashtra Housing and Area Development and Anr. held that after the imposition of moratorium, a statutory freeze takes place. In paragraph 25 of the judgment, following was held: "25. There is no doubt whatsoever that important functions relating to repairs and reconstruction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, hand over execution of any housing scheme under its own supervision. However, when it comes to any clash between MHADA Act and the Inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 SCC 17] states the raison d'être for Section 14 in para 28 as follows : (SCC p. 55) "28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protect the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or High Court." 15. The words used in Section 446, sub-section (1) is "no suit or other legal proceeding shall be commenced ..., except by leave of the Court". The Hon'ble Supreme Court dwell upon the expression "legal proceeding" in sub-section (1). The Hon'ble Supreme Court in the above case was considering the assessment proceeding qua winding up proceeding under the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition filed by respondent in respect of this set off was rejected by the Commissioner of Income Tax. Thereafter, petition under Article 226 filed by the respondent to set aside the orders of the Income Tax Officer and Commissioner was allowed by the High Court, mainly on the ground that the demand for Rs 8737 in respect of 1948-49, being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department; it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor. In the appeal to this Court it was contended on behalf of the appellant that Section 49-E gave statutory power to Income Tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law. Held : The Income Tax Officer was in error in applying Section 49-E and setting off the refund due to the respondent. The effect of Sections 228 and 229 of the Companies Act, 1913, is inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid pari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Five different notices were issued. Order of liquidation was passed on 25.04.2019. The claim was filed by the Custom Authorities before the Liquidator. The question, which essentially came for consideration before the Hon'ble Supreme Court is as to whether any demand notice can be issued demanding customs' due from the Corporate Debtor, after initiation of CIRP. Sections 14 and 33(5) was considered by the Hon'ble Supreme Court and in paragraphs 36, 37, 38, 39, 40 and 41, following was observed: "36. Section 14 of the IBC prescribes a moratorium on the initiation of CIRP proceedings and its effects. One of the purposes of the moratorium is to keep the assets of the corporate debtor together during the insolvency resolution process and to facilitate orderly completion of the processes envisaged under the statute. Such measures ensure the curtailing of parallel proceedings and reduce the possibility of conflicting outcomes in the process. In this context, it is relevant to quote the February 2020 Report of the Insolvency Law Committee, which notes as under: "8.2. The moratorium under Section 14 is intended to keep 'the corporate debtor's assets together during the insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial Assets and Enforcement of Security Interest Act, 2002 and the IBC, 2016. Accordingly, such an exception created under the Customs Act is duly acknowledged under Section 238 of the IBC as well. Additionally, we may note that Section 238 of the IBC clearly overrides any provision of law which is inconsistent with the IBC. Section 238 of the IBC provides as under: "238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 39. The NCLAT, while playing down the effect of Section 142A of the Customs Act and Section 238 of the IBC, has held that the Customs Act is a complete code in itself and no person can seek removal of goods from the warehouse without paying customs duty. The NCLAT relies on the judgment in Collector of Customs v. Dytron (India) Ltd., MANU/WB/0334/1998 : 1999 ELT 342 Cal., by the High Court of Calcutta, which laid down that customs duty carry first charge even during the insolvency process Under Section 529 and 530 of Companies Act, 1956. However, reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he its judgment in S.V. Kandoakar v. V.M. Deshpande (supra) and held following in paragraphs 44 and 45: "44. Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context. 45. From the above discussion, we hold that the Respondent could only initiate assessment or re-assessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive." 20. In paragraph 46, the Hon'ble Supreme Court noticed that demand notice dated 11.07.2019 was issued under Section 72 of the Customs Act, which was in clear breach of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. iii) In any case, the IRP/RP/liquidator can immediately secure goods from the Respondent authority to be dealt with appropriately, in terms of the IBC. 22. In the case before the Hon'ble Supreme Court in Sundresh Bhatt, Liquidator of ABG Shipyard, demand notice was issued subsequent to initiation of CIRP and that was not the case of any assessment carried out by Customs Authorities and the liquidation order was passed on 25.04.1999 and notice under Section 72 was issued on 11.07.2019, i.e. after the liquidation. Hence, applicability under Section 33, sub-section (5) found to be there as held in paragraph 46 of the judgment as noted above. It is well settled law that a judgment of the Court has to be read in the context of the facts and ratio of judgment has to be read in reference to the facts, which have come for consideration before the Court. It is well settled that ratio of a judgment cannot be read as statute and above judgment of the Hon'ble Supreme Court, does not support the submission of the Appellant that after imposition of moratorium under Section 14, sub-section (1), it was open for the EPFO Authority to proceed with the assessment and conclude the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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