2023 (2) TMI 280 - AT - Insolvency and Bankruptcy

Appellate Tribunal overturns NCLT decision, stresses govt dues as secured debts in Resolution Plans.

The Appellate Tribunal set aside the NCLT's order and remitted the matter back to the Adjudicating Authority for reconsideration, emphasizing the ... Recovery of outstanding dues - Government dues - Validity of attachment orders issued by the Income Tax Department - issuance of attachment notices, after 15 months of the approval of the Resolution Plan - whether this claim of attachment at this stage can be entertained or not. The instant Appeal has been preferred on the grounds that Impugned Order fails to take into account that the Appellants have made the recovery of the outstanding demand for the Assessment Year 2013-14 and Assessment Year 2014-15 vide Form B on 14.11.2017 which is prior in time to the resolution plan being approved on 20.09.2018. HELD THAT:- On 25.10.2018, the Appellants received a draft of Rs. 41,22,407 from the Resolution Professional as a tranche payment. Further, the Appellants received another draft of Rs. 78,90,284 vide letter dated 07.01.2019 as a full and final payment totalling to Rs. 1,20,23,691 which is not even 15% of the outstanding demand. The Respondent was asked to pay the outstanding demand vide letter no. 674 dated 12.03.2019. However, the Respondent wrote to the Appellants for extinguishing all claims against them relating to the period prior to the date of order of the NCLT since as per the approved resolution plan at clause 12.1 no other amount was to be paid to the Operational Creditors. The Appellants filed an application for review of the order passed by the NCLT dated 20.09.2018 with necessary directions to the Resolution Professional for submission of the revised resolution plan incorporating the entire amount alleged to be due to the Appellants. Subsequently, the NCLT vide its order dated 22.10.2019 stated that since the Resolution Professional intimated the Appellants that the demand after finalization of appeal by CIT(A) would be payable by the new promoter, such written intimation of the Resolution Professional is to be read with the new resolution plan and the demand of the Appellants is duly considered and the Appellants have a right to lay its claim before the new promoter of the Respondent Company. The Respondent were examined and rebuttal letter bearing no. ITBA/COM/F/17/2019-20/1024086061(1) dated 21.01.2020 (Annexure A/8) was sent to the Respondent stating that the stay granted by the Appellate Authority had since expired on 13.12.2019 and therefore, the Respondent was requested to pay the outstanding demand for the Assessment Year 2014-15 immediately and intimated within 7 days. Since, there was no compliance of the notice sent by the Appellants a bank attachment in the following banks were carried out; (i) Allahabad Bank, Dibrugarh Branch and (ii) Allahabad Bank, Industrial Finance Bank, Kolkata and further an email dated 28.01.2020 was received from the Allahabad Bank Industrial Finance Bank, Kolkata that accounts have been marked debit freeze. These facts have not been considered by the Adjudicating Authority while passing the impugned order. Admittedly, the judgment passed by the Hon’ble Supreme Court in the case of STATE TAX OFFICER (1) VERSUS RAINBOW PAPERS LIMITED [2022 (9) TMI 317 - SUPREME COURT], the dues of the Appellants are Government dues and they are Secured Creditors - Thus, the impugned order dated 10.02.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Guwahati Bench, Guwahati) is hereby set aside and the matter is remitted back to the Adjudicating Authority (National Company Law Tribunal, Guwahati Bench, Guwahati) with a request to hear the parties (Appellants and Respondent herein) considering the aforesaid facts and also judgment in RAINBOW PAPERS. Appeal disposed off. Issues Involved:1. Setting aside the attachment orders issued by the Income Tax Department.2. Compliance with the approved Resolution Plan.3. The validity of claims made by the Income Tax Department post-approval of the Resolution Plan.4. The treatment of statutory dues under the Insolvency and Bankruptcy Code (IBC).5. The binding nature of the Resolution Plan on all stakeholders.Issue-wise Analysis:1. Setting aside the attachment orders issued by the Income Tax Department:The Adjudicating Authority (NCLT, Guwahati Bench) set aside the attachment orders issued by the Income Tax Department, allowing the company to operate its bank account without obstructions. This decision was based on the fact that the attachment notices were issued 15 months after the approval of the Resolution Plan, making the claims untimely.2. Compliance with the approved Resolution Plan:The Resolution Applicant was directed to strictly implement the approved Resolution Plan without any violations and to file a compliance affidavit detailing the payment of statutory dues, including EPF, Income Tax, and GST.3. The validity of claims made by the Income Tax Department post-approval of the Resolution Plan:The Income Tax Department's claims were filed before the approval of the Resolution Plan. However, the NCLT held that these claims could not be entertained post-approval. The Appellants argued that their claims were acknowledged by the Resolution Professional and should be payable by the new promoter post-approval of the appeal by CIT(A).4. The treatment of statutory dues under the Insolvency and Bankruptcy Code (IBC):The Appellants contended that statutory dues should be prioritized and that failure to pay these dues would cause significant harm to the Revenue Department and public exchequer. The Supreme Court in 'State Tax Officer (1) Vs. Rainbow Papers Limited' emphasized the necessity for a Resolution Plan to meet the requirements of Section 30(2) of the IBC, ensuring the payment of operational creditors' dues.5. The binding nature of the Resolution Plan on all stakeholders:The Respondent argued that once a Resolution Plan is approved, it binds all stakeholders, including government authorities. The Resolution Plan included clauses that discharged all claims against the company for the period prior to the effective date. The Supreme Court's judgment in 'Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.' supported this view, stating that approved Resolution Plans cannot be altered or modified.Conclusion:The Appellate Tribunal set aside the NCLT's order and remitted the matter back to the Adjudicating Authority for reconsideration, taking into account the Supreme Court's judgment in the 'Rainbow Papers Limited' case. The Tribunal emphasized that government dues are secured debts and must be treated accordingly in the Resolution Plan. The case was disposed of with directions for fresh orders to be passed expeditiously.