2020 (6) TMI 392 - AT - Insolvency and Bankruptcy

Appellate Tribunal orders refund release to Corporate Debtor, clarifies rules for Secured Creditors

Principal Commissioner of Income Tax Versus C. Ramasubramaniam

The Appellate Tribunal directed the Income-tax Department to release the refund amount to the Corporate Debtor within a specified timeframe, declined to ... CIRP proceedings - Whether the income tax department is a Secured Creditor. - Attachment of Refund - time limitation in terms of sub-section (2) of Section 281B of the Income-tax Act, 1961 - the Adjudicating Authority directed the Income-tax Department to release the refund amount HELD THAT:- We have brought it to the notice of learned counsel for the Appellant that in Form B of Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulation there is no provision made for Operational Creditors to claim that Corporate Debtor has created security interest. On the other hand, in Form C, which is meant for Financial Creditors, there is specific provision for Financial Creditor to state as to whether the security interest is created by Corporate Debtor or not. In view of the aforesaid lacuna, even the Income-tax Department if Secured Creditor, cannot claim to be a Secured Creditor when Form B is filed. How the matter is sorted out is upto the Liquidator to decide in terms of the I&B Code - V Appeal disposed off. Issues:1. Setting aside an order for attachment of refund by the Income-tax Department.2. Determining the status of the Appellant as a Secured Creditor or Operational Creditor.3. Clarifying the procedure for claiming security interest by creditors in the insolvency process.Analysis:1. The Appellate Tribunal addressed the issue of setting aside an order for attachment of refund by the Income-tax Department. The Adjudicating Authority had declined to extend the attachment order on the grounds that the time period had expired and the Corporate Debtor was under liquidation. Consequently, the Tribunal directed the Income-tax Department to release the refund amount to the Corporate Debtor within a specified timeframe.2. Regarding the status of the Appellant as a Secured Creditor or Operational Creditor, the Tribunal noted that while the Appellant claimed to be a Secured Creditor under the Income-tax Act, the provisions of the Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulation did not provide for Operational Creditors to assert security interest. The Tribunal emphasized that the Liquidator would have the authority to determine the Appellant's status in accordance with the I&B Code.3. The Tribunal highlighted the procedural aspect of claiming security interest by creditors in the insolvency process. It emphasized that even if the Income-tax Department was considered a Secured Creditor, it could not claim such status when filing Form B. The Tribunal allowed the Appellant to make a claim before the Liquidator as a Secured Creditor, with the provision to submit additional evidence if the initial Form was incomplete.4. Ultimately, the Tribunal decided not to interfere with the impugned order while granting the Appellant the opportunity to assert their claim as a Secured Creditor before the Liquidator. The Tribunal's decision aimed to address the lacuna in the claim process and ensure that the appropriate forms were filed with necessary evidence to support the claim.5. The appeal was disposed of with the aforementioned observations, providing clarity on the Appellant's status and the procedure for claiming security interest in the insolvency proceedings. Additionally, the Tribunal directed the communication of the order to relevant authorities for necessary corrections or actions, if required, to ensure compliance with the decision.This detailed analysis of the judgment provides a comprehensive understanding of the issues addressed by the Appellate Tribunal and the legal implications of the decision rendered in the case.