Tribunal rules on release of goods in CIRP jurisdiction case

The Tribunal held that the Adjudicating Authority has jurisdiction to direct the release of goods attached before the initiation of Corporate Insolvency Resolution Process (CIRP). It ruled in favor of the Resolution Professional (RP) seeking release of attached goods, stating they should be included in the Corporate Debtor's assets for creditor payment. Government dues like excise duty are to be treated as operational debts under the Insolvency and Bankruptcy Code, to be resolved as per the approved resolution plan. The Tribunal allowed the appeal, ordering the release of attached goods for the benefit of creditors and upholding the Adjudicating Authority's jurisdiction.

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Issues Involved:
1. Jurisdiction of the Adjudicating Authority to issue directions to State Authorities regarding actions taken prior to the initiation of Corporate Insolvency Resolution Process (CIRP).
2. Entitlement of the Resolution Professional (RP) to seek release of attached goods of the Corporate Debtor.
3. Status and treatment of government dues and attached assets during CIRP.

Summary:

Jurisdiction of the Adjudicating Authority:
The primary issue was whether the Adjudicating Authority had the jurisdiction to direct the release of goods attached by the State Authorities before the initiation of CIRP. The Tribunal concluded that the Adjudicating Authority erred in rejecting the RP's application on jurisdictional grounds. It held that under Section 60(5)(c) of the Insolvency and Bankruptcy Code (IBC), the Adjudicating Authority has ample jurisdiction to issue necessary directions for the custody and control of the Corporate Debtor's assets.

Entitlement of the RP to Seek Release of Attached Goods:
The RP of the Corporate Debtor, M/s Cengres Tiles Limited, sought the release of vitrified tiles attached by the Assistant Commissioner of CGST & Central Excise for recovering excise dues. The Tribunal noted that the attachment was made before the initiation of CIRP, and the goods were still in the possession of the Corporate Debtor. The RP argued that the tiles should be included in the Corporate Debtor's assets for payment to creditors as per the 'waterfall mechanism' under Section 53 of the IBC. The Tribunal supported this view, referencing its previous judgment in Assistant Commissioner Central Goods and Service Tax vs. Pravin Charan Dwary, which upheld that no recovery measures should be taken during the pendency of CIRP.

Status and Treatment of Government Dues and Attached Assets:
The Tribunal emphasized that government dues, such as excise duty, which are crystallized and pending, should be treated as operational debts and adjudicated within the framework of the IBC. It referred to the Supreme Court's judgment in Embassy Property Developments (P) Ltd. vs. State of Karnataka, which clarified that such dues must be resolved according to the resolution plan approved by the Adjudicating Authority. The Tribunal also cited circulars from the Central Board of Excise and Customs, which instructed that no recovery actions should be taken during the pendency of CIRP and that claims should be filed as operational debts.

Conclusion:
The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order dated 07.02.2023. It directed the Respondent to release the attachment of the vitrified tiles, enabling the RP to include these assets in the Corporate Debtor's estate for the benefit of the creditors. The Tribunal reaffirmed the RP's duty to take control and custody of the Corporate Debtor's assets and upheld the jurisdiction of the Adjudicating Authority to issue necessary directions in this regard.

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