Tax assessment orders during insolvency proceedings valid despite Section 14 IBC moratorium claims

Kerala HC dismissed a petition challenging tax assessment orders during CIRP proceedings. The petitioner argued the assessment was invalid as the Official Liquidator wasn't heard and claimed Section 14 IBC barred such proceedings. The court held that Section 14 IBC creates moratorium only for tax recovery, not assessment finalization. Since proper notice was given to the petitioner who responded, and hearing was conducted before finalizing the assessment orders, the challenge lacked merit and was dismissed.

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Issues Involved:
1. Challenge to orders under Insolvency and Bankruptcy Code.
2. Opportunity for the petitioner to present case during moratorium period.

Issue 1: Challenge to orders under Insolvency and Bankruptcy Code
The petitioner, a dealer of BMW cars in Kerala, challenged orders Exhibits P-7 to P-10 under the Insolvency and Bankruptcy Code, 2016 (IBC). The Federal Bank of India initiated corporate insolvency resolution process against the petitioner, leading to appointment of an Interim Resolution Professional (IRP). Subsequently, the Committee of Creditors rejected resolution plans, opting for liquidation. The National Company Law Tribunal appointed the IRP as the Liquidator, commencing a moratorium. The Liquidator received claims from the 1st respondent during this period.

Issue 2: Opportunity for the petitioner during moratorium period
The petitioner's counsel argued that orders in Exhibits P-7 to P-10 were issued after the moratorium began, depriving the petitioner of a chance to contest the matter. In response, the respondent's counsel contended that the petitioner was indeed given notice, filed a reply, and was heard through an authorized representative. They argued that finalization of assessment proceedings during the moratorium is permissible under the IBC.

The court examined Section 14 of the IBC, which imposes a moratorium on certain actions upon insolvency commencement. It noted that the moratorium does not bar finalization of assessment and adjudication proceedings. The court found that the petitioner was issued notice, had a representative present during the hearing, and filed a reply to the show cause notice. Consequently, the court dismissed the petition, stating that the Official Liquidator should consider the petitioner's claims in accordance with the law.

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