2023 (9) TMI 139 - AT - Insolvency and Bankruptcy

Liquidator's Application Granted to Release Attachment in Company Appeals

Tapadia Polyesters Pvt. Ltd. Versus Sales Tax Officer Professional Tax Officer & Anr. And Manish Kumar Baldeva Liquidator of Linkson International Ltd. Versus Sales Tax Officer Professional Tax Officer & Anr.

The Order dated 10th February, 2023, was set aside in Company Appeal (AT) Ins. No. 362 of 2023 and Company Appeal (AT) Ins. No. 366 of 2023. The ... CIRP - Consequence of the attachment on the assets of the property - Sales Tax Department can be held to be Secured Creditor or not - HELD THAT:- The Respondent Department cannot be treated as secured creditor of the Corporate Debtor - even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate. The Adjudicating Authority committed error in rejecting the I.A. filed by the Liquidator relying on the Judgment of Hon’ble Supreme Court in M/s. Embassy Property Development Pvt. Ltd. [2019 (12) TMI 188 - SUPREME COURT] which judgment has no application in the facts of the present case - It was held in the case that NCLT and NCLAT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasijudicial authorities, which can be corrected only by way of judicial review of administrative action. Hence, the High Court was justified in entertaining the writ petition and we see no reason to interfere with the decision of the High Court. The Order of the Adjudicating Authority in the Appeal cannot be sustained - Appeal allowed. Issues Involved:1. Challenge to the Order dated 10th February, 2023.2. Status of Sales Tax Department as a Secured Creditor.3. Consequence of Attachment Orders on Liquidation Assets.4. Applicability of Section 52 of the Insolvency and Bankruptcy Code (IBC) and Regulation 21A of Liquidation Process Regulations.Summary:1. Challenge to the Order dated 10th February, 2023:Company Appeal (AT) Ins. No. 362 of 2023 was filed by the Liquidator, and Company Appeal (AT) Ins. No. 366 of 2023 was filed by the Auction Purchaser against the same impugned Order dated 10th February, 2023. The Liquidator sought directions for the Sales Tax Officer to release the attachment on properties to continue the auction/private sale of the assets, which was rejected by the Adjudicating Authority.2. Status of Sales Tax Department as a Secured Creditor:Learned Counsel for the Liquidator argued that the Sales Tax Department cannot be held as a Secured Creditor and that the attached properties are part of the Liquidation Assets. The Tribunal's judgment in 'Department of State Tax, Through the Dy. Commissioner of State Tax Vs. Zicom Saas Pvt. Ltd. & Anr' was cited to support this claim.3. Consequence of Attachment Orders on Liquidation Assets:The Sales Tax Department's attachment orders dated 28th May, 2015, continued through the Liquidation Process. The Liquidator's application for release of the attachment was rejected by the Adjudicating Authority. The Supreme Court's judgment in 'M/s Embassy Property Development Pvt. Ltd. Vs. State of Karnataka & Ors.' was referenced, which held that final orders by statutory authorities cannot be questioned under Section 60(5) of the IBC.4. Applicability of Section 52 of the Insolvency and Bankruptcy Code (IBC) and Regulation 21A of Liquidation Process Regulations:The Tribunal noted that even if the Sales Tax Department is assumed to be a secured creditor, it did not exercise its right under Section 52 of the IBC, making the assets part of the Liquidation Estate. The Tribunal also referenced Regulation 21A of the Liquidation Process Regulations, 2016, which supports the Liquidator's position. The Tribunal concluded that the Sales Tax Department cannot be treated as the owner of the assets, and they remain part of the Liquidation Estate.Conclusion:The Adjudicating Authority's reliance on the Supreme Court's judgment in 'M/s. Embassy Property Development Pvt. Ltd.' was deemed erroneous. The Order dated 10th February, 2023, was set aside, and I.A. No. 1300 of 2020 filed by the Liquidator was allowed. The Respondent was directed to release the attachment to proceed with the liquidation. Both Appeals were allowed accordingly.