2021 (12) TMI 1417 - HC - Insolvency and Bankruptcy

High Court rules Tax Appeal infructuous post NCLT's Resolution Plan approval under Insolvency & Bankruptcy Code

Garden Silk Mills Ltd. (PFY Division) Versus The Commissioner Of Central Excise And Service Tax, Surat-I

The High Court concluded that the Tax Appeal became infructuous following the NCLT's approval of the Resolution Plan under the Insolvency and Bankruptcy ... Approval of Resolution Plan - It is the grievance of the applicant that the respondent has not challenged Resolution Plan before the NCLT and despite the best of the opportunities and instead it has decided to approach NCLAT directly by way of an appeal under Section 61 of the Code, which was impermissible - HELD THAT:- There does not appear to be any further challenge before the Apex Court after once the NCLAT has approved the Resolution Plan. In wake of the settled position of the law, once the Resolution Plan is approved and the approval order has been given under Section 31(1) of the Code, which has been also confirmed by the NCLAT, the same would have an overriding effect over all other laws and force including the Central Excise Act, 1944 and therefore, the appeal is not survived. This court notices that the Tax Appeal is admitted for consideration of the substantial questions of law - appeal disposed off. Issues Involved:1. Whether the pending Tax Appeal has become infructuous due to the approval of the Resolution Plan by the NCLT.2. The impact of the NCLT and NCLAT orders on the statutory dues and claims of the respondent.3. The binding nature of the Resolution Plan on all stakeholders, including the respondent.4. The jurisdiction and authority of NCLT and NCLAT in approving the Resolution Plan and its implications on pending legal proceedings.Issue-wise Detailed Analysis:1. Whether the pending Tax Appeal has become infructuous due to the approval of the Resolution Plan by the NCLT:The application was filed by the original respondent on the grounds that the pending Tax Appeal had become infructuous and non-est following the approval of the Resolution Plan by the NCLT on 01.01.2021. The Resolution Plan was approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, for the insolvency resolution of the corporate debtor (Garden Silk Mills Limited). The NCLT's approval of the Resolution Plan rendered the Tax Appeal irrelevant as the claims were settled as per the approved plan.2. The impact of the NCLT and NCLAT orders on the statutory dues and claims of the respondent:The respondent challenged the excise duty demand of Rs.30,19,18,590/- confirmed by the CESTAT. During the CIRP, the RP collated and verified the claims of creditors, including the respondent, and found that the liquidation value was insufficient to meet the dues of secured financial creditors, resulting in a NIL value for other creditors, including operational creditors like the respondent. The NCLT's approval of the Resolution Plan, which included the settlement of statutory dues and claims at NIL value, was upheld by the NCLAT. The NCLAT relied on the Supreme Court's decision in 'Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited,' which held that the approved Resolution Plan is binding on all stakeholders.3. The binding nature of the Resolution Plan on all stakeholders, including the respondent:The NCLT's approval order stated that the Resolution Plan met the requirements of Section 30(2) of the Code and other relevant regulations. The plan, approved by the CoC with 100% voting share, included various reliefs and concessions and was binding on all stakeholders, including the respondent. The Supreme Court's decision in 'Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta' reinforced that once a Resolution Plan is approved, it is binding on all stakeholders, ensuring that the successful resolution applicant starts running the business on a fresh slate.4. The jurisdiction and authority of NCLT and NCLAT in approving the Resolution Plan and its implications on pending legal proceedings:The NCLT's approval order clarified that the Resolution Plan did not automatically waive or abate pending legal proceedings, which remained subject to the jurisdiction of competent authorities. However, the NCLAT upheld the NCLT's approval, emphasizing that the Resolution Plan's approval binds all creditors and stakeholders, including the respondent, and that the plan's provisions for statutory dues and claims were compliant with the Code. The NCLAT's decision was supported by the Supreme Court's ruling that all claims must be submitted and decided by the RP to provide certainty to the resolution applicant.Conclusion:The High Court concluded that the Tax Appeal had become infructuous due to the approval of the Resolution Plan by the NCLT, which was binding on all stakeholders, including the respondent. The application was allowed, and the Tax Appeal was disposed of as having become infructuous. The court noted that the legal issues could be considered in the future if any question against the approval plan was raised by other creditors and succeeded before the Apex Court.