2020 (7) TMI 29 - Tri - Insolvency and Bankruptcy

State Tax Officer classified as Operational Creditor, not Secured Creditor in insolvency proceedings

The judgment addressed the restoration of dismissed applications and the classification of the State Tax Officer as a Secured Creditor. The Adjudicating ... Restoration of application - application was dismissed for non-prosecution - Government dues - Operational Creditor - HELD THAT:- It is clear that Government dues fall under the category of 'Operational Creditor' inasmuch as 'a debt' in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, and State Government or any local authority are considered as 'Operational creditor' - To be more precise, these debts occur during the course of operation of the Corporate Debtor. Application disposed off. Issues:1. Restoration of Applications IA 684 of 2019 and IA 685 of 2019.2. Classification of State Tax Officer as a Secured Creditor.3. Interpretation of the term 'Operational Creditor.'Analysis:1. The judgment pertains to an application filed for the restoration of two previous applications, IA 684 of 2019 and IA 685 of 2019, which were dismissed for non-prosecution by the Adjudicating Authority. The current application, IA 82 of 2020, sought the restoration of the dismissed applications along with condonation of the delay in filing the restoration application. The Adjudicating Authority considered the facts and circumstances leading to the dismissal of the earlier applications before making a decision on the restoration plea.2. The main issue addressed in the judgment is the classification of the State Tax Officer as a Secured Creditor. The Adjudicating Authority referred to relevant legal precedents, including the judgments of the Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta. The Authority concluded that State Tax Officer cannot be considered a Secured Creditor based on the settled legal definitions of 'Operational Creditor' and 'Financial Creditor.' The judgment emphasized that government dues, including those payable to the Central Government, State Government, or any local authority, fall under the category of Operational Creditor as they arise during the operation of the Corporate Debtor.3. The judgment provides a detailed analysis of the term 'Operational Creditor' in light of the provisions of the Insolvency & Bankruptcy Code 2016 and the Supreme Court judgments. It clarifies that debts related to the payment of dues arising under any law and payable to the government or local authorities are considered as Operational Creditor dues. The Adjudicating Authority's decision was based on the interpretation of the law and the established legal principles governing the classification of creditors in insolvency proceedings.In conclusion, the judgment disposed of the instant application with the observation that the State Tax Officer cannot be classified as a Secured Creditor and that government dues fall under the category of Operational Creditor as defined by the law and judicial interpretations.