Customs auction during insolvency process ruled illegal, emphasizing Insolvency Code supremacy. Parties can submit claims as Operational Creditors.

The Tribunal ruled in favor of the Resolution Professional, holding that the Customs Authority's auction of goods post initiation of Corporate Insolvency Resolution Process (CIRP) was illegal. It directed the Customs Authority to remit the sale proceeds and hand over the remaining containers to the Resolution Professional. The decision emphasized the supremacy of the Insolvency and Bankruptcy Code over the Customs Act during CIRP, allowing parties to submit claims as Operational Creditors for the Resolution Plan. Compliance formalities were outlined for issuing certified copies to relevant parties.

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Issues:
1. Auction of goods by Customs Authority post initiation of Corporate Insolvency Resolution Process.
2. Ownership and disposal of goods in containers.
3. Rights of Resolution Professional over goods and raw materials.
4. Legal precedence regarding conflict between Insolvency and Bankruptcy Code and Customs Act.

Issue 1: Auction of goods by Customs Authority post initiation of Corporate Insolvency Resolution Process

The Tribunal addressed the issue of the Customs Authority retaining custody over 923 containers of goods belonging to the Corporate Debtor post initiation of Corporate Insolvency Resolution Process (CIRP). It was noted that out of the 923 containers, 256 had been auctioned by the Customs Authority, leading to a dispute over the sale proceeds and the legality of the auction during the moratorium period.

Issue 2: Ownership and disposal of goods in containers

The Tribunal examined the ownership and disposal of the goods in the containers, highlighting that the Corporate Debtor had imported the goods which were retained by the Customs Authority. The dispute arose as the Customs Authority claimed ownership due to non-cooperation by the Corporate Debtor, leading to legal proceedings and directions from the Hon'ble High Court regarding destuffing and storage of the cargo.

Issue 3: Rights of Resolution Professional over goods and raw materials

The Resolution Professional asserted rights over the goods and raw materials in the remaining 667 containers, arguing that these could be utilized for the Corporate Debtor's operations during the CIRP. The Resolution Professional sought immediate handover of the containers to avoid additional costs incurred in purchasing raw materials from the market.

Issue 4: Legal precedence regarding conflict between Insolvency and Bankruptcy Code and Customs Act

In considering legal precedence, the Tribunal referred to judgments by the National Company Law Appellate Tribunal and National Company Law Tribunal, highlighting the overriding effect of the Insolvency and Bankruptcy Code over the Customs Act. The Tribunal emphasized that post initiation of CIRP and declaration of moratorium, the Customs Authority should not have auctioned the goods, and directed the Customs Authority to remit the sale proceeds and hand over the remaining containers to the Resolution Professional.

In conclusion, the Tribunal ordered the Customs Authority to remit the sale proceeds and hand over the remaining containers to the Resolution Professional within a specified timeline. It also allowed all concerned parties, including the Customs Authority and other applicants, to submit their claims as Operational Creditors for consideration in the Resolution Plan implementation. The Registry was directed to communicate the order to relevant parties, ensuring compliance with formalities for issuing certified copies.

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