Court sets aside order directing appropriation, directs refund within 3 months. Upholds resolution plan under IBC.

The Court allowed the writ petition, setting aside the impugned order in original dated 22.07.2020 to the extent it directed appropriation of the recovered amount. The respondent was directed to retain 5% of the adjudicated principal amount and refund the balance to the petitioner within three months. The judgment underscored the binding nature of the resolution plan approved by the committee of creditors and sanctioned by the Tribunal under the IBC.

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Issues Involved:
1. Legality of the order in original dated 22.07.2020.
2. Determination of the total liability of the petitioner.
3. Appropriation of the amount already recovered by the respondent.
4. Refund of the excess amount recovered by the respondent.

Issue-wise Detailed Analysis:

1. Legality of the Order in Original Dated 22.07.2020:
The petitioner challenged the order in original dated 22.07.2020 passed by the Commissioner of Central Goods and Services Tax and Central Excise, Mumbai Central, under Article 226 of the Constitution of India. The primary contention was that the order was in violation of the National Company Law Tribunal (NCLT) order dated 30.08.2019, which sanctioned the resolution plan under section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal's order had stipulated that the dues of operational creditors, including service tax liabilities, should be settled at 5% of the principal amount with waiver of interest, penal interest, and penalties. The respondent's order, however, confirmed the total demand of Rs. 7,02,20,725.00, which was inconsistent with the Tribunal's directive.

2. Determination of the Total Liability of the Petitioner:
The Tribunal's order dated 30.08.2019 had kept the claim amount of Rs. 1929.85 lakhs in abeyance, pending adjudication. The resolution plan approved by the committee of creditors (with 90.93% voting share) and sanctioned by the Tribunal provided for settling the dues at 5% of the principal amount adjudicated. The respondent adjudicated the demand covered by three show-cause notices and confirmed the total demand at Rs. 7,02,20,725.00. The Tribunal's order mandated that the liability, if any, that would crystallize upon adjudication, should be settled at 5% of the principal dues adjudicated, with interest, penal interest, and penalties waived.

3. Appropriation of the Amount Already Recovered by the Respondent:
The respondent had recovered Rs. 6,23,82,214.00 from the petitioner by invoking section 87(b)(i) of the Finance Act, 1994, even before the adjudication of the show-cause notices. The petitioner argued that this recovery was illegal and in violation of the Tribunal's order. The Court noted that the respondent's action of appropriating the recovered amount was not justified, as the resolution plan clearly stipulated that only 5% of the principal adjudicated amount was payable, and the rest should be waived. The Court emphasized that the resolution plan approved by the committee of creditors and sanctioned by the Tribunal was binding on all stakeholders, including the respondent.

4. Refund of the Excess Amount Recovered by the Respondent:
The Court held that the respondent could only retain 5% of the principal adjudicated amount, which was Rs. 35,11,036.00 (5% of Rs. 7,02,20,725.00). The balance amount of Rs. 5,88,27,531.45 (Rs. 6,23,82,214.00 - Rs. 35,11,036.00) was to be refunded to the petitioner. The Court directed the respondent to refund the excess amount within three months from the date of receipt of the judgment. The Court also rejected the respondent's argument that the State could retain the recovered amount, stating that it would be unjust enrichment and contrary to the principles of justice.

Conclusion:
The Court allowed the writ petition, setting aside the impugned order in original dated 22.07.2020 to the extent it directed appropriation of the recovered amount. The respondent was directed to retain 5% of the adjudicated principal amount and refund the balance to the petitioner within three months. The judgment underscored the binding nature of the resolution plan approved by the committee of creditors and sanctioned by the Tribunal under the IBC.

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