Tribunal orders Liquidator to pay outstanding TDS, defend criminal cases, and manage legal obligations

The Tribunal directed the Liquidator to pay the outstanding TDS amount to the Income Tax Department and issue Form 16 to the ex-employee. It held the Liquidator responsible for defending criminal cases against the Corporate Debtor and ordered reimbursement of compounding fees. The issue of the bank guarantee's legality was left unresolved as the application was dismissed for default. The judgments emphasized adherence to the debt repayment mechanism and management of legal obligations during liquidation.

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Issues Involved:
1. Payment of outstanding TDS and issuance of Form 16.
2. Compounding fees related to a criminal case filed by the Income Tax Department.
3. Invocation of a bank guarantee and its legality.

Detailed Analysis:

1. Payment of Outstanding TDS and Issuance of Form 16:
The Applicant, an ex-employee of the Corporate Debtor, filed an application seeking directions to the Liquidator to pay the outstanding TDS amounting to Rs. 3,58,737/- and issue Form 16. The Applicant received a notice from the Income Tax Department regarding the delay in TDS payment, which led to a demand for Rs. 2,76,570/-. The Liquidator admitted the TDS dues but argued that these dues are operational debts and would be paid according to the waterfall mechanism under Section 53 of IBC.

The Tribunal noted that the TDS deducted from the Applicant's salary should have been credited to the Income Tax Department. The Corporate Debtor's failure to deposit the TDS made the Applicant liable, but the Tribunal held that the responsibility lies with the Corporate Debtor. The Liquidator was directed to pay the TDS amount to the Income Tax Department and issue Form 16 to the Applicant.

2. Compounding Fees Related to a Criminal Case Filed by the Income Tax Department:
The Applicant, the former Managing Director of the Corporate Debtor, sought directions for the Liquidator to prioritize funds for compounding fees related to a criminal case filed by the Income Tax Department. The case was filed due to delayed TDS payments. The Liquidator argued that the prosecution was initiated before the CIRP and thus, the Applicant should defend it personally.

The Tribunal held that the Liquidator is responsible for defending any suit or prosecution against the Corporate Debtor, whether civil or criminal, as per Section 35(1)(k) of IBC. The Tribunal directed the Liquidator to reimburse the Applicant for any compounding fees paid and to make necessary provisions for this expenditure.

3. Invocation of a Bank Guarantee and Its Legality:
The Applicant sought a declaration that the invocation of a bank guarantee by the Resolution Professional (RP) was illegal and against the provisions of the bank guarantee. The Applicant argued that the invocation was done after the CIRP period and was thus entitled to restitution.

The Respondent (RP) argued that the invocation was done in accordance with the provisions of the Code and that the claim was duly verified. The RP also contended that the application for stay on the invocation had become infructuous as the bank guarantee had already been invoked.

The Tribunal, after hearing both sides, dismissed the application for default as the counsel for the Applicant reported no instructions. Thus, the matter was not adjudicated on its merits.

Conclusion:
The Tribunal's judgments addressed the responsibilities of the Liquidator in handling TDS dues and defending criminal prosecutions against the Corporate Debtor. It emphasized the Liquidator's duty to adhere to the waterfall mechanism for debt repayment and to manage the Corporate Debtor's legal obligations during liquidation. The issue of the bank guarantee was dismissed for default, leaving the legality of its invocation unresolved.

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