2021 (9) TMI 1330 - HC - Insolvency and Bankruptcy

Court declares respondent's actions illegal, extinguishes debts post-IBC approval

Shree Raghv Ispat (India) Private Limited Versus State of Telangana and Ors.

Shree Raghv Ispat (India) Private Limited Versus State of Telangana and Ors. - TMI Issues Involved:Challenge to inaction of 2nd respondent in withdrawing property listing in prohibitory list under Registration Act, 1908; Validity of proceedings initiated by 2nd respondent; Extinction of debts due to 2nd respondent post approval of resolution plan by NCLT; Binding effect of resolution plan on government authorities; Classification of subject land as agricultural land and registration authority.Analysis:1. The petitioner challenged the inaction of the 2nd respondent in not withdrawing the property listing in the prohibitory list under Section 22(A) of the Registration Act, 1908, claiming it to be illegal and violative of constitutional rights. The petitioner sought to declare the proceedings initiated by the 2nd respondent null and void.2. The petitioner's company faced insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), and a resolution plan was approved by the NCLT, transferring management to a new entity. The petitioner argued that post-approval of the resolution plan, all debts due to the 2nd respondent, a part of the State Government, should be extinguished as per Section 238 of the IBC, overriding any other law.3. The Government Pleader for Commercial Tax representing the 2nd respondent contended that the resolution plan approved by NCLT did not waive statutory obligations, as mentioned in the NCLT order. However, an amendment to Section 31(1) of the IBC made the resolution plan binding on government authorities to whom dues are owed, including statutory dues.4. The court relied on the Supreme Court's decision in a similar case to conclude that since the 2nd respondent's dues were not part of the resolution plan, they stood extinguished. The court held that the 2nd respondent had no authority to prevent alienation of the petitioner's properties, declaring the actions of the 2nd respondent as illegal and void.5. Additionally, the court addressed the Revenue department's defense regarding the classification of the subject land as agricultural. The court found the defense meritless, noting evidence provided by the petitioner regarding the industrial nature of the property. The court directed the respondents to consider any alienation documents without objections from the 2nd respondent, if lawful.6. In conclusion, the court allowed the writ petition, declared the actions of the 2nd respondent as illegal, and directed the respondents to process any alienation requests from the petitioner without hindrance. The court closed pending petitions and awarded no costs in the matter.