IBC Prevails Over Statutory Dues in Insolvency: NCLT Upholds RP's Possession Order

The appeal by KMC was dismissed, affirming the jurisdiction of NCLT to direct the RP to take possession of the immovable property. The court upheld the primacy of IBC over the KMC Act and other statutes, confirming that statutory dues do not take precedence over secured creditors' claims. The judgment emphasized the overriding effect of IBC in insolvency proceedings, allowing the resolution process to proceed without hindrance from other statutory claims.

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Issues Involved:
1. Jurisdiction of NCLT in directing the Resolution Professional (RP) to take possession of an immovable property under attachment by KMC.
2. Primacy of Insolvency and Bankruptcy Code (IBC) over other statutes, specifically the KMC Act, 1980.
3. Whether the property seized by KMC can be subjected to a Corporate Resolution Process under IBC.
4. Precedence of statutory dues over secured creditors' claims.

Detailed Analysis:

Jurisdiction of NCLT:
The appellants, Kolkata Municipal Corporation (KMC), argued that the NCLT lacked jurisdiction to direct the RP to take possession of the immovable property under attachment by KMC. They contended that the KMC Act, 1980, being a special statute, should take precedence over the IBC. The Single Bench had observed that the writ petition was maintainable due to the NCLT's lack of jurisdiction. However, the court found that the NCLT has exclusive jurisdiction over insolvency matters, including the disposal of assets, as per Section 238 of the IBC. The court cited the case of Anand Rao Korada Resolutional Professional versus Varsha Fabrics Private Ltd. and Ors. to underscore the overriding effect of the IBC over other laws.

Primacy of IBC Over KMC Act:
The appellants relied on the judgment in M/s. Embassy Property Developments Private Ltd. Versus State of Karnataka & Ors. to argue that the IBC proceedings must yield to the KMC Act. However, the court disagreed, emphasizing that Section 238 of the IBC gives it overriding effect over any other inconsistent laws. The court also referenced A Navinchandra Steels Private Ltd. Versus Srei Equipment Finance Ltd. and Others to reinforce that the IBC proceedings should proceed unless an irreversible situation has been created by the attachment under the KMC Act.

Property Seized by KMC and Corporate Resolution Process:
The court addressed whether the property seized by KMC could be included in the Corporate Resolution Process under IBC. The Single Bench had upheld the primacy of the IBC in such processes, allowing the NCLT to direct the RP to take over the immovable asset. The court found no evidence from KMC that the attachment had reached an irreversible stage, thus allowing the NCLT to proceed with the resolution process.

Precedence of Statutory Dues:
The court concluded that KMC's property dues, being statutory in nature, do not take precedence over the claims of secured creditors. This principle was affirmed in Commissioner of Income Tax versus Monet Ispat and Energy Ltd., where it was held that statutory dues do not override the claims of secured creditors under the IBC.

Conclusion:
The appeal by KMC was dismissed, affirming the jurisdiction of the NCLT to direct the RP to take possession of the immovable property. The court upheld the primacy of the IBC over the KMC Act and other statutes, and confirmed that statutory dues do not take precedence over secured creditors' claims. The judgment reinforced the overriding effect of the IBC in insolvency proceedings, ensuring the resolution process can proceed without being hindered by other statutory claims.

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