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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 ..... d in the CIRP. Whether after imposition of moratorium under Section 14 of the IBC, assessment proceedings can be carried on by the EPFO under Section 7A, 14B and 7Q of the EPF MP Act, 1952? - Whether any claim on the basis of assessment, subsequent to imposition of moratorium, can be admitted in the CIRP? - HELD THAT:- The plain reading of Section 14, sub-section (1) indicates that expression suits or proceedings against the corporate debtor has been used. The word proceeding is not qualified, so as to confine it to proceedings before the Civil Court. The proceedings, which have the effect on the assets of the CD are all covered in the expression proceeding . The question to be answered is as to whether after moratorium has been imposed, it was open for EPFO to proceed with the assessment proceeding. Learned Counsel for the parties state that during moratorium proceeding, no recovery proceeding can be initiated against the CD. However, submissions of the learned Counsel for the Appellant is that assessment proceedings against the CD may continue. Hence, the orders of assessment passed during moratorium period, were fully permissible and the claim on the basis of the said proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium is hit by Section 14, sub-section (1) of the IBC, no such claim can be admitted in the CIRP. Conclusion - After initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings. No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP. When the claim on the basis of assessment, which has been made subsequent to initiation of moratorium is hit by Section 14, sub-section (1) of the IBC, no such claim can be admitted in the CIRP. There are no error in the order impugned in the present Appeal(s) passed by Adjudicating Authority - appeal dismissed. - [ Justice Ashok Bhushan ] Chairperson , [ Barun Mitra ] Member ( Technical ) And [ Arun Baroka ] Member ( Technical ) For the Appellant : Mr. Sandeep Vishnu, Advocate Appearance not marked For the Respondents : Mr. Vashisht, Advocate for R-1 For the Appellants : M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been approved by the Committee of Creditors ( CoC ) (iv) An IA No.1111 of 2023 was filed by the Appellant praying for direction to the IRP to admit the total claim of Rs.2,35,00,179/-. The Adjudicating Authority heard the Applicant/ Appellant as well as the RP and by the impugned order rejected the Application. The Adjudicating Authority noticed in the order that order under Section 7A, 14B and 7Q was passed only on 11.08.2023 and the Resolution Plan has been approved by the CoC long back. It was held that IBC (Insolvency and Bankruptcy Code, 2016) is a time bound process and the claim, which was submitted by the Applicant at a belated stage, after the approval of Resolution Plan was rightly rejected by the RP. With the above observation the Adjudicating Authority rejected IA No.1111 of 2023. Aggrieved by which order this Appeal has been filed. Company Appeal (AT) (Ins.) No.1065 of 2024 (i) CIRP against the Corporate Debtor Apollo Soyuz Electricals P. Ltd. commenced on 12.07.2021. On 18.10.2021, IRP wrote to the Appellant to submit their PF claim and other related information with proof. (ii) Inquiry under Section 7A was initiated against the Establishment in the year 2019. An o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgo is only against its enforcement. It is submitted that in the proceedings under Section 7A, the Establishment delayed to give its reply and it was the CD, who is to blame for delay in passing order under Section 7A. The CD at no point of time in proceedings under Section 7A has raised objection to inquiry proceedings and always took time to produce the relevant records. The assessment under Section 7A related to period prior to CIRP initiation. By rejection of the Application filed by the Appellant, prejudice has been caused to the Appellant, since its claim has not been accepted. PF dues, inclusive of damages and interest, are excluded from the liquidation estate in light of Section 36(4)(a)(iii) of the IBC. The order rejecting the claim is in contravention of the law laid down by NCLAT and Hon ble Supreme Court of India in Tourism Finance Corporation of India Ors. vs. Rainbow Papers Ltd. Ors., where it was held that no provisions of the EPF MP Act is not in conflict of IBC. The priority of PF dues operates against all other debts including secured and unsecured creditors. 7. Learned Counsel appearing for the Respondent refuting the submissions of learned Counsel for the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd., the Hon ble Supreme Court had occasion to interpret the expression proceeding in Section 14. The object and purpose of moratorium has been captured in paragraph 30 of the judgment, which is as follows: 30. It can be seen that Para 8.11 refers to the very judgment under appeal before us, and cannot therefore be said to throw any light on the correct position in law which has only to be finally settled by this Court. However, Para 8.2 is important in that the object of a moratorium provision such as Section 14 is to see that there is no depletion of a corporate debtor's assets during the insolvency resolution process so that it can be kept running as a going concern during this time, thus maximising value for all stakeholders. The idea is that it facilitates the continued operation of the business of the corporate debtor to allow it breathing space to organise its affairs so that a new management may ultimately take over and bring the corporate debtor out of financial sickness, thus benefitting all stakeholders, which would include workmen of the corporate debtor. Also, the judgment of this Court in Swiss Ribbons (P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court had occasion to consider provisions of Section 446 of the Companies Act, 1956 in context of re-assessment proceedings under Section 148 of the Income Tax Act, 1961. Section 446, which came for consideration before the Hon ble Supreme Court has been extracted in paragraph 4 of the judgment, which is as follows: 4. Section 446 of the Act reads: (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of (a) any suit or proceeding by or against the company; (b) any claim made before against the company (including claims by or against any of its branches in India); (c) any application made under Section 391 by or in respect of the Company; (sic) (d) any question of priorities or any other question whatsoever, whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the High Court in October 1950. The headnote in that cases gives a clear idea of the facts and the decision. It reads: The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October 1950. In December 1950, the respondent was assessed to tax amounting to Rs 8737 for the year 1948-49. A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April 1952. The Liquidator declared a dividend of 9 annas in the Rupee in August 1954, and paid a sum of Rs 5188 to the Department, leaving a balance of Rs 3549. In June 1954, the Department made a demand from the respondent and was paid Rs 2565 as advance tax for the year 1955-56. On a regular assessment being made for that year, only Rs 1126 was assessed as payable so that a sum of Rs 1460, inclusive of interest, became refundable to the respondent. However, the Income Tax Officer, purporting to exercise the power available to him under Section 49-E of the Income Tax Act, 1922, set off this amount against the balance of Rs 3549 due for the year 1948-49. A revision petition filed by respondent in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act. Section 446, sub-section (1) uses the expression suit or other legal proceeding . There is marked difference in the expression used in Section 14, sub-section (1) of the IBC. Section 446, sub-section (1) uses expression other legal proceeding , while Section 14, sub-section (1) uses the expression proceedings . In view of the law laid down by the Hon ble Supreme Court in Rejendra K. Bhutta (supra), it is clear that no proceeding can continue after imposition of moratorium, which has effect of depleting the assets of the CD or creating new liabilities on the CD, since the object or purpose of IBC is to resolve the CD. 17. Now we come to the judgment of the Hon ble Supreme Court relied by learned Counsel for the Appellant in Sundresh Bhatt, Liquidator of ABG Shipyard (supra). In the above case, the Hon ble Supreme Court had occasion to consider Section 14, 25 and 33(5) of the IBC in reference to the provisions of Customs Act. In the above case, CIRP against the CD commenced on 01.08.2017. Notice for payment of custom dues was issued by the Customs Authorities on 29.03.2019 and thereafter on 02.04.2019 and 07.04.2019. Five different notices were issued. Order of liquidation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to continue as a going concern and rehabilitate itself. Any contrary interpretation would crack this shield and would have adverse consequences on the objective sought to be achieved. 37. Even if a company goes into liquidation, a moratorium continues in terms of Section 33(5) of the IBC which reads as under: 33. (5) Subject to Section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor : Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the adjudicating authority. 38. We may note that the IBC, being the more recent statute, clearly overrides the Customs Act. This is clearly made out by a reading of Section 142-A of the Customs Act. The aforesaid provision notes that the Customs Authorities would have first charge on the assets of an assessee under the Customs Act, except with respect to cases under Section 529-A of the Companies Act, 1956; Recovery of Debts and Bankruptcy Act, 1993; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the IBC, 2016. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent issued a notice Under Section 72 of the Customs Act against the Corporate Debtor. The various demand notices have therefore clearly been issued by the Respondent after the initiation of the insolvency proceedings, with some notices issued even after the liquidation moratorium was imposed. 18. The Hon ble Supreme Court in paragraph 42 held that demand notice to seek enforcement of the customs dues during the moratorium period, clearly violate the provisions of Section 14 or 33(5) of the IBC. In paragraph 42, following was held : 42. We are of the clear opinion that the demand notices to seek enforcement of custom dues during the moratorium period would clearly violate the provisions of Sections 14 or 33(5) of the IBC, as the case may be. This is because the demand notices are an initiation of legal proceedings against the Corporate Debtor. However, the above analysis would not be complete unless this Court examines the extent of powers which the Respondent authority can exercise during the moratorium period under the IBC. 19. Ultimately the Hon ble Supreme Court relied on the its judgment in S.V. Kandoakar v. V.M. Deshpande (supra) and held following in paragraphs 44 and 45: 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of customs duty and other levies. The Respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. b) Whether the Respondent could claim title over the goods and issue notice to sell the goods in terms of the Customs Act when the liquidation process has been initiated? answered in negative. 54. On the basis of the above discussions, following are our conclusions: i) Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the Respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The Respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. ii) After such assessment, the Respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority. iii) In any case, the IRP/RP/liquidator can immediately secure goods from the Respondent authority to be dealt with appropriately ..... X X X X Extracts X X X X X X X X Extracts X X X X
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