Tribunal Upholds Lien Invalidity in CIRP Appeal

The Tribunal allowed the appeal, setting aside the order vacating the lien marked on the Corporate Debtor's assets. It held that the lien was invalid as it was marked after the initiation of the Corporate Insolvency Resolution Process and did not have primacy over Section 238 of the Insolvency and Bankruptcy Code, which provides an overriding effect. The Tribunal emphasized the precedence of the IBC over other laws, including state laws creating first charges, and accepted the appeal despite a delay, citing an extension of the limitation period due to the COVID-19 pandemic.

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Issues Involved:
1. Validity of the lien marked by the Deputy Commissioner of Sales Taxes and Excise on the Corporate Debtor's property.
2. Overriding effect of Section 238 of the Insolvency and Bankruptcy Code (IBC) over other laws.
3. Applicability of the Supreme Court's judgments on statutory first charge and its precedence over other claims.
4. Timeliness of the appeal filed by the Appellant.

Issue-wise Detailed Analysis:

1. Validity of the lien marked by the Deputy Commissioner of Sales Taxes and Excise on the Corporate Debtor's property:
The appeal was filed by the Appellant against the order dated 01.10.2020 by the Adjudicating Authority (NCLT, Principal Bench, New Delhi), which vacated the lien marked on the Corporate Debtor's assets. The lien was marked on 13.05.2019 subsequent to the admission of the company petition on 11.12.2018. The Adjudicating Authority held that the lien was invalid as it was marked after the initiation of the Corporate Insolvency Resolution Process (CIRP) and did not have primacy over the overriding effect of Section 238 of the IBC.

2. Overriding effect of Section 238 of the Insolvency and Bankruptcy Code (IBC) over other laws:
The Appellant argued that under Section 26 of the HP VAT Act, 2005, the State Taxes and Excise Authorities have a first charge on the property of the dealer, which should take precedence over other claims. The Appellant cited the Supreme Court's judgment in Central Bank of India vs. State of Kerala, which discussed the overriding impact of central acts like the DRT Act and SARFAESI Act over state laws. However, the Respondent contended that Section 238 of the IBC provides an overriding effect to the provisions of the Code over all other laws, including the HP VAT Act.

3. Applicability of the Supreme Court's judgments on statutory first charge and its precedence over other claims:
The Appellant referred to several Supreme Court judgments, including State Bank of Bikaner and Jaipur vs. National Iron and Steel Rolling Corporation and State Tax Officer (1) vs. Rainbow Papers Limited, to argue that statutory first charges created by state laws should have precedence over other claims. The Supreme Court in the Rainbow Papers case held that Section 48 of the GVAT Act (similar to Section 26 of the HP VAT Act) is not inconsistent with Section 53 of the IBC and that statutory dues owed to the government should be treated as secured debts.

4. Timeliness of the appeal filed by the Appellant:
The Respondent argued that the appeal was filed after more than 150 days from the date of the impugned order, making it time-barred. However, the Appellant filed an application for condonation of delay, citing the Supreme Court's order in Suo-Motu Writ Petition (Civil) No. 03/2020, which extended the period of limitation due to the COVID-19 pandemic. The Tribunal accepted this argument and condoned the delay.

Conclusion:
After considering the arguments and relevant Supreme Court judgments, the Tribunal found that the Adjudicating Authority did not consider the ratio of the latest Supreme Court judgment in the Rainbow Papers case. Therefore, the Tribunal set aside the impugned order dated 01.10.2020 and allowed the appeal, directing the Adjudicating Authority to proceed in accordance with the law.

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