2023 (2) TMI 1319 - AT - Insolvency and Bankruptcy

Resolution Professional's tax payment assurance ignored in extinguishing Rs. 16 crore Income Tax demands

The NCLAT set aside the NCLT Guwahati order regarding extinguishment of Income Tax demands totaling Rs. 16,20,25,953 for Assessment Years 2013-14 and ... Binding nature of approved resolution plan - treatment of statutory/government dues in a resolution plan - adjudicating authority's duty to satisfy that a resolution plan meets the requirements of Section 30(2) before approving under Section 31 - secured creditor status of government/statutory dues - admission of claims by filing Form B and treatment of such claims in CIRP - remand for fresh considerationAdmission of claims by filing Form B and treatment of such claims in CIRP - binding nature of approved resolution plan - treatment of statutory/government dues in a resolution plan - Impugned order of the Adjudicating Authority dated 10.02.2021 insofar as it held that certain pre effective date claims of the income tax department cannot be entertained was set aside. - HELD THAT: - The Tribunal observed that the Adjudicating Authority failed to consider material facts including that the Income tax Department had filed claims by Form B prior to approval of the resolution plan and contemporaneous communications by the (I)RP regarding payment post finalisation of appeals. The Tribunal further held that the Adjudicating Authority did not take into account the Supreme Court reasoning in State Tax Officer (1) v. Rainbow Papers (supra) on the treatment of government/statutory dues and their status as secured creditors which bears on whether such dues can be ignored by a resolution plan. On these grounds the impugned order was set aside. [Paras 19]Impugned order dated 10.02.2021 set aside.Remand for fresh consideration - adjudicating authority's duty to satisfy that a resolution plan meets the requirements of Section 30(2) before approving under Section 31 - treatment of statutory/government dues in a resolution plan - Matter remitted to the Adjudicating Authority for fresh hearing and decision keeping in view the facts and the Supreme Court authority referred to in the judgment. - HELD THAT: - Having set aside the impugned order, the Tribunal directed that the NCLT, Guwahati Bench should hear the parties afresh, consider the emails/communications of the (I)RP, the admission and treatment of the Department's claims in the CIRP records, and the legal principles enunciated in the Rainbow Papers judgment concerning statutory dues and their treatment in resolution plans. The Tribunal requested that fresh orders be passed expeditiously after such consideration. [Paras 19]Matter remitted to the Adjudicating Authority for fresh consideration and orders.Final Conclusion: The NCLT order dated 10.02.2021 is set aside and the matter is remitted to the NCLT, Guwahati Bench to rehear the parties and pass fresh orders in light of the admitted facts and the Supreme Court authority on treatment of government/statutory dues in resolution plans; the appeal is disposed with no order as to costs. Issues Involved:1. Extinguishment of tax demands for various assessment years.2. Admissibility of tax claims by the Resolution Professional.3. Compliance with the approved Resolution Plan.4. Legal standing of the tax department's claims post-CIRP approval.5. Interpretation of relevant Supreme Court judgments.Issue-wise Detailed Analysis:1. Extinguishment of Tax Demands:The Respondent, Assam Company India Ltd., sought the extinguishment of tax demands for multiple assessment years (1986-1987, 2006-2007, 2010-2011, 2011-2012, 2012-2013, 2013-2014, and 2014-2015) and any other demands prior to September 20, 2018. The Adjudicating Authority ruled that since the Respondents did not file claims for the periods except for 2013-14 and 2014-15 before the Resolution Professional, these claims would not be entertained if filed later.2. Admissibility of Tax Claims:The Appellants (Income Tax Department) argued that their claims for the assessment years 2013-14 and 2014-15 were submitted before the approval of the Resolution Plan and should be considered. The Resolution Professional had earlier communicated that the claims were contingent liabilities and would be payable by the new promoter after the final order from the CIT(A). The NCLT, Guwahati, had initially accepted this position, allowing the Appellants to claim these dues from the new promoter.3. Compliance with the Approved Resolution Plan:The Respondent contended that the approved Resolution Plan, which extinguished all claims prior to the effective date (September 20, 2018), should be binding. The Appellants argued that the Resolution Professional's communication regarding the contingent nature of the tax claims should be considered part of the Resolution Plan, thus making the new promoter liable for these dues.4. Legal Standing of the Tax Department's Claims Post-CIRP Approval:The Appellants argued that the tax dues were government dues and thus should be treated as secured claims. They relied on the Supreme Court judgment in 'State Tax Officer (1) Vs. Rainbow Papers Limited,' which held that statutory dues are secured claims and should be considered in the Resolution Plan. The Respondent, however, cited other judgments to argue that once a Resolution Plan is approved, it becomes binding on all stakeholders, including the government, and cannot be modified to include additional liabilities.5. Interpretation of Relevant Supreme Court Judgments:The Appellants cited the 'Rainbow Papers Limited' judgment to support their claim that statutory dues should be treated as secured claims. The Respondent countered with judgments from 'Essar Steel,' 'Ghanashyam Mishra,' and others to argue that the Resolution Plan, once approved, cannot be altered to include additional liabilities. The Tribunal noted the importance of the 'Rainbow Papers Limited' judgment, which emphasized that statutory dues are secured and must be considered in the Resolution Plan.Conclusion:The Tribunal set aside the NCLT's order dated February 10, 2021, and remitted the matter back to the NCLT, Guwahati Bench, for reconsideration. The NCLT was directed to hear the parties again, considering the facts and the Supreme Court judgment in 'Rainbow Papers Limited,' and to pass fresh orders expeditiously. The Tribunal emphasized that the tax department's claims, being government dues, should be treated as secured creditors.