First-charge excise dues under Section 11E do not create secured-creditor status where the Insolvency and Bankruptcy Code prevails.

Section 11E of the Central Excise Act, 1944 creates a first charge but expressly yields to the Insolvency and Bankruptcy Code, 2016, so excise dues under that provision cannot be elevated to secured-debt status on the basis of Rainbow Papers. The decision distinguishes Rainbow Papers as confined to a different statutory setting where the first charge arose under a VAT/GST provision without the same carve-out for insolvency law. It also states that differential treatment in a resolution plan is not discriminatory where the compared creditors are not similarly situated, and secured and unsecured creditors do not stand on the same footing under insolvency principles.

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Issues: (i) Whether dues under Section 11E of the Central Excise Act, 1944 could be treated as secured debt so as to attract the principle in Rainbow Papers and require the resolution plan to accord the appellant secured-creditor status; (ii) Whether the differential treatment between the appellant and the State GST Department in the approved resolution plan was discriminatory or contrary to the insolvency framework.

Issue (i): Whether dues under Section 11E of the Central Excise Act, 1944 could be treated as secured debt so as to attract the principle in Rainbow Papers and require the resolution plan to accord the appellant secured-creditor status.

Analysis: The statutory dues claimed by the appellant arose under Section 11E, which creates a first charge but expressly carves out the Insolvency and Bankruptcy Code, 2016. The provision was held not to be pari materia with Section 48 of the Gujarat Value Added Tax Act, 2003, which had formed the basis of the decision in Rainbow Papers. That ruling was treated as confined to the statutory framework where a security interest arose by operation of law under the GST/VAT enactment there in question. Since Section 11E itself yields to the IBC, the appellant could not claim secured-creditor status on the strength of Rainbow Papers.

Conclusion: The appellant was not entitled to be treated as a secured creditor on the basis of Section 11E of the Central Excise Act, 1944.

Issue (ii): Whether the differential treatment between the appellant and the State GST Department in the approved resolution plan was discriminatory or contrary to the insolvency framework.

Analysis: The State GST Department's treatment under the plan was linked to a pari materia first-charge provision in the Odisha Value Added Tax Act, 2004, whereas the appellant's claim rested on a materially different statutory provision that expressly subordinates itself to the IBC. The principle of equitable treatment applies to similarly situated creditors, but secured and unsecured creditors do not stand on the same footing. In that setting, the higher allocation to the State GST Department did not establish unlawful discrimination or breach of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The differential allocation in the resolution plan was not discriminatory and did not violate the insolvency law.

Final Conclusion: The appeal failed because the appellant's excise dues could not be elevated to secured status under the insolvency regime, and the resolution plan's treatment of the State GST Department did not create a valid parity claim in the appellant's favour.

Ratio Decidendi: A statutory first-charge provision that expressly yields to the Insolvency and Bankruptcy Code, 2016 does not create secured-creditor status comparable to a different enactment that creates a first charge without such a carve-out.

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