2021 (4) TMI 1277 - Tri - Insolvency and Bankruptcy

Assistant Commissioner's Tax Claim Rejected Due to Delay: Importance of Timely Submission in Liquidation

The Tribunal dismissed the Assistant Commissioner of Commercial Tax's application to set aside the rejection of a claim due to a 52-day delay in ... Rejection of claim of application - initiation of CIRP - Condonation of delay of 52 days (12.01.2021 to 04.03.2021) in submission of the claim by the Applicant before the 2nd Respondent in the liquidation process - HELD THAT:- CIRP in respect of CD was initiated by Adjudicating Authority vide its order dated 29th October, 2019, at the instance of M/s. Sri Visveswaraya Co-operative Bank Ltd. Accordingly, Public Announcement was given on 20th November, 2019, by inviting claims from creditors of CD in prescribed form with last date as 4th December, 2019 and also specified estimated date of closure of CIRP as 26th April, 2020. Subsequently exclusion/extension of time was granted by Adjudicating Authority, and having failed to get suitable Resolution Plan, the CD was placed under Liquidation process as early as on 2nd December, 2020. However, the Applicant pleading ignorance about the said developments, has in casual way awoke and responded only to public Announcement given under Liquidation process, by submitting its claim only on 04.03.2021, that too after last date was over by citing untenable grounds. The reasons cited by the Applicant that it was unaware of the CIRP/Liquidation of Corporate Debtor, the State would lose its legitimate dues viz., the tax collected from public, it is duty of Liquidator alone to verify its records etc., are not at all tenable. While alleging that the Liquidator has failed to discharge his duties, the Applicant has failed to take any action at appropriate time to recover tax and they cannot wait for proceeding to be initiated by others under provisions of the Code. The Applicant has absolute independent right to initiate appropriate action to recover the tax in question but they have failed to discharge their duties. The reasons cited for delay in approaching the Liquidator are not at all tenable. The Respondent has followed extant provisions of law in continuing proceedings under the provisions of the Code, and the impugned order cannot be interfered with - application dismissed. Issues:1. Delay in submission of claim by the Assistant Commissioner of Commercial Tax in a liquidation process.2. Rejection of the claim by the Liquidator and the subsequent legal implications.3. Interpretation of regulations regarding the submission of claims in liquidation proceedings.4. Duty of the Applicant to take timely action to recover taxes owed.Analysis:Issue 1: Delay in submission of claimThe Assistant Commissioner of Commercial Tax filed an application seeking to set aside an order rejecting the claim due to a delay of 52 days in submission. The claim covered tax dues under the KVAT and CST Acts for AY 2016-17 amounting to INR 75,82,617. The delay was attributed to the Applicant's lack of awareness regarding the liquidation process until March 2021. Despite the delay, the claim was filed promptly after becoming aware of the situation.Issue 2: Rejection of the claimThe Liquidator rejected the claim citing Regulation 16(1) of IBBI (Liquidation Process) Regulations, 2016, which required claims to be submitted by January 11, 2021. The rejection was based on the technicality of the claim being filed after the specified deadline. The Applicant contested the rejection, highlighting the genuine delay in filing and the lack of prior knowledge about the liquidation proceedings.Issue 3: Interpretation of regulationsThe Tribunal analyzed the Applicant's claim and the Liquidator's rejection in light of the regulations governing liquidation proceedings. The Tribunal emphasized the importance of timely submission of claims to ensure the efficient administration of liquidation processes. It concluded that the Liquidator acted in accordance with the law by rejecting the claim due to the late submission.Issue 4: Duty of the ApplicantThe Tribunal underscored the Applicant's duty to proactively pursue the recovery of taxes owed, irrespective of the ongoing liquidation process. It noted that the Applicant failed to take timely action to recover the dues, relying instead on the liquidation proceedings to address the issue. The Tribunal held that the Applicant's reasons for the delay were not acceptable and dismissed the application, emphasizing the need for parties to fulfill their obligations promptly.In conclusion, the Tribunal dismissed the application, stating that the Liquidator correctly rejected the claim due to the late submission, as per the regulations governing liquidation proceedings. The judgment highlights the importance of timely action and adherence to legal procedures in insolvency and liquidation cases.