2021 (1) TMI 897 - Tri - Insolvency and Bankruptcy

Tribunal orders Respondent to refund debited amount to Corporate Debtor within 30 days

The Tribunal directed the Respondent to refund the debited amount to the Corporate Debtor within 30 days, emphasizing the importance of upholding the ... Seeking declaration that the letter issued by Collector of Usmanabad and the withdrawal of ₹ 76,75,000/- done by Respondent as illegal / non-est in law - seeking direction to Respondent (GST Department, Nashik) to forthwith refund the amount of ₹ 76,75000/- along with an interest @18% p.a. to the Bank Account of the Corporate Debtor - HELD THAT:- This bench is of the view that the liability towards Sales Tax due is not towards the Corporate Debtor but it is the due payable by M/s Sheelaatul Sugar Tech Private Limited. Even assuming that the Corporate Debtor is liable to pay that amount, the collection of due by the Respondent during CIRP is prohibited by moratorium under Section 14 of the Code. The Judgments referred by the Respondents is not relating to the issue involved in this Application and will not come to the aid of the Respondent. The submission of the counsel for the Respondent that previously the Corporate Debtors agreed to pay the Sales Tax due of M/s Sheelaatul Sugar Tech Private Limited, from and out of the Sales Tax refund receivable by the Corporate Debtor is unenforceable during CIRP. Hence, the submission of the Counsel for the Respondent that the Corporate Debtor has received refund of ₹ 80,00,000/- from the sales tax department and from the said amount only this recovery is made cannot be accepted. In view of the fact that the amount has been debited when the CIRP is in progress and the same is hit by the provisions of Section 14 of the Code. The Respondent is liable to repay the amount to the Corporate Debtor and accordingly the Respondent is directed to refund the amount of ₹ 76,75,000/- to the Applicant within 30 days of this order - application allowed. Issues involved:Application seeking declaration of a transaction as illegal during Corporate Insolvency Resolution Process (CIRP) and seeking refund of the amount debited during CIRP.Analysis:1. Nature of Application: The Application filed by the Resolution Professional sought to declare a transaction as illegal and non-est in law, involving the debiting of a significant amount during the CIRP period. The Applicant requested the Respondent to refund the amount along with interest, citing violation of Section 14 of the Insolvency and Bankruptcy Code, 2016.2. Contentions of Applicant: The Applicant argued that the debited amount was transferred to the Respondent's account due to the intervention of the Collector of Usmanabad, contravening the provisions of Section 14 of the Code. The Applicant highlighted the communication with statutory authorities about the ongoing CIRP and requested the reversal of the transaction by the Respondent.3. Respondent's Defense: The Respondent contended that the amount was rightfully collected as statutory dues owed by another entity, Sheelatul Sugar Tech Private Limited, for which the Corporate Debtor had undertaken to pay. The Respondent argued that waiving statutory dues would breach relevant statutes and referred to judgments emphasizing equal treatment of operational and financial creditors.4. Judicial Analysis: The Tribunal analyzed the facts and legal provisions, concluding that the liability was not towards the Corporate Debtor but another entity. Even if the Corporate Debtor was liable, collection during CIRP was prohibited by moratorium under Section 14 of the Code. The Tribunal dismissed the Respondent's reliance on previous agreements and judgments, emphasizing the enforceability of moratorium during CIRP.5. Precedents: The Tribunal referred to various judgments highlighting the strict enforcement of moratorium under Section 14 of the Code, prohibiting recovery by creditors and any actions affecting the assets or legal rights of the Corporate Debtor during CIRP.6. Decision: Considering the violation of Section 14 and the circumstances of the case, the Tribunal directed the Respondent to refund the debited amount to the Corporate Debtor within 30 days. The Application was allowed, emphasizing the importance of upholding the moratorium provisions during the CIRP process to protect the interests of all stakeholders.This detailed analysis of the judgment highlights the legal arguments, factual context, and the Tribunal's decision, ensuring a comprehensive understanding of the case and its implications within the framework of insolvency laws.