TaxTMI Updates e-Newsletter
May 11,2021

Necessity of recorded reasons to believe before arrest under the CGST regime - requirement of demonstrable need for custodial detention (risk of tampering, influencing witnesses or obstructing investigation) - bail as the normal rule in non-heinous offences under fiscal statutes - compounding of CGST offences and abatement of proceedings on payment - application of custodial safeguards under criminal procedure to arrests in revenue matters

Necessity of recorded reasons to believe before arrest under the CGST regime - requirement of demonstrable need for custodial detention (risk of tampering, influencing witnesses or obstructing investigation) - application of custodial safeguards under criminal procedure to arrests in revenue matters - Lawfulness of the arrest and continued judicial custody of the petitioner under the CGST Act - HELD THAT: - The court applied the principle that exercise of arrest powers in the CGST context requires not only recorded 'reasons to believe' that the specified offences have been committed but also an articulated necessity for arrest (for example, to prevent tampering with evidence or influencing witnesses). Having examined the material and the petitioner's conduct - attendance on multiple summons, cooperation, partial deposits offered and no demonstrable material showing actual tampering or concrete attempts to influence witnesses - the court found that the circumstances did not justify continued custodial detention. The court relied on the jurisprudence emphasising that custodial powers under criminal procedure apply to revenue investigations and that mere allegation of non-cooperation or speculative risk is insufficient to sustain detention.

Arrest and continued judicial custody were not justified on the material before the court.

Bail as the normal rule in non-heinous offences under fiscal statutes - compounding of CGST offences and abatement of proceedings on payment - Appropriate relief and conditions on release of the petitioner - HELD THAT: - Applying the principle that bail, rather than incarceration, is the norm in non-heinous offences and taking into account the revenue-law features (including compounding and abatement on payment), the court directed the release of the petitioner subject to conditions designed to secure attendance and protect the investigation. The conditions include execution of a personal bond, furnishing of sureties within specified timelines, cooperation with the investigation, prohibition on tampering with evidence or influencing witnesses, and deposit of the passport. These measures were treated as adequate safeguards to protect the investigation and revenue interest while respecting the petitioner's liberty.

Petitioner to be released on bail subject to specified bonds, surety, cooperation, non-interference with investigation and deposit of passport.

Final Conclusion: Finding no material justifying continued custody, the High Court directed the petitioner's release on conditions (personal bond, surety to be furnished, cooperation with investigation, non-tampering/non-influence obligations and deposit of passport), issued formal notice to respondents and did not decide the constitutional challenge to the provisions.

Transition of input tax credit under TRAN-1 - eligibility to carry forward Cenvat/ITC on exempted services - show cause notice under Section 73(1) of the CGST Act - reversal v. recovery of carried forward credit - assessment proceedings and factual determination of availment

Show cause notice under Section 73(1) of the CGST Act - reversal v. recovery of carried forward credit - Challenge to the show cause notice was premature and the writ petition will not be entertained to interfere with issuance of the notice. - HELD THAT: - The court observed that the notice impugned questions the veracity of the input tax credit carried forward in TRAN 1 and seeks to initiate proceedings under Section 73(1) of the CGST Act. Although the notice's language refers to 'recovery' of purportedly wrongly transitioned credit, the appropriate interim terminology at the show cause stage would be 'reversal' rather than 'recovery'. Nevertheless, because the notice merely calls upon the petitioner to file a reply and proceedings for assessment and factual determination of availment remain to be conducted by the authorities, the petition is premature. The court declined to quash or interfere with the show cause notice at this stage and refrained from adjudicating the factual question of actual availment of credit. [Paras 5, 6, 7]

Writ petition dismissed insofar as it seeks to quash or restrain the show cause notice; no interference with issuance of the notice.

Transition of input tax credit under TRAN-1 - eligibility to carry forward Cenvat/ITC on exempted services - assessment proceedings and factual determination of availment - Alleged ineligible carry forward of Cenvat/ITC (on services relating to investments, food, accommodation, travel, registry, custodial, trustee, securitization, parking and auction of seized vehicles) requires consideration by the assessing authority and is remitted for adjudication. - HELD THAT: - The court noted the audit verification of Form TRAN 1 which prompted the officer to question availment of Cenvat credit on various services the officer considered linked to exempt receipts or otherwise ineligible. Those classification and eligibility questions are matters of fact and law for the assessing authority to examine in the course of the assessment proceedings under the impugned notice. The petitioner was directed to file objections to the proposed reversal of carried forward credit within four weeks, and the authority was directed to consider the objections, hear the petitioner and pass a reasoned order within four weeks from receipt of the objections, in accordance with law. The court expressly left the merits of the eligibility questions to the authority rather than deciding them in the writ. [Paras 8, 9]

Issue remitted to the assessing authority for consideration; petitioner to file objections within four weeks and authority to hear and pass orders within four weeks from receipt.

Final Conclusion: The writ petition is dismissed as premature; the show cause notice under Section 73(1) CGST Act is not interfered with, the petitioner is directed to file objections within four weeks, and the assessing authority shall consider the objections, hear the petitioner and pass orders within four weeks from receipt, leaving the factual and legal questions regarding eligibility of the carried forward credit to be decided by that authority.

Anticipatory bail - custodial interrogation - protection from arrest with prior notice - obligation to join investigation - restriction on foreign travel without court permission - availability of bailable offence where GST liability deposited

Custodial interrogation - anticipatory bail - Whether custodial interrogation of the applicant was required and whether protection from immediate arrest should be granted. - HELD THAT: - The court found that the applicant had already joined the investigation and his statement had been recorded by the department on 15.12.2020. The investigating officer stated there was at present no requirement to arrest the accused. In view of these facts the court concluded that custodial interrogation was not necessary. Although the court did not record a substantive grant of final anticipatory bail, it exercised its discretion to provide protective directions in the event of arrest given the absence of present custodial necessity and no allegation of tampering with evidence after interim relief was granted.

Custodial interrogation not required at present; protective directions issued rather than immediate arrest.

Protection from arrest with prior notice - obligation to join investigation - restriction on foreign travel without court permission - What protective conditions, if any, should govern the applicant pending further investigation or potential arrest. - HELD THAT: - Having regard to the absence of present necessity for arrest and the applicant's cooperation in joining the investigation, the court directed that in the event of arrest one week's prior notice shall be served upon the applicant. The court further directed that the applicant must join the investigation as and when directed by the investigating officer and shall not leave the country without the permission of the trial court. These conditions are prospective safeguards tied to the investigative status and the court's supervisory jurisdiction.

If arrest is contemplated, one week's prior notice to the applicant; applicant to cooperate with investigation and not leave the country without court permission.

Availability of bailable offence where GST liability deposited - Whether the firms that availed the alleged fraudulent ITC remained non-bailable or had their liability reduced to bailable offence by deposits. - HELD THAT: - The court recorded the submission of the departmental counsel that the firms implicated had deposited substantial amounts (for example M/s Factotum Services Pvt. Ltd. deposited around Rs. 4 crores) and that as a result their GST liability had been reduced into the range of bailable offences. The court noted that those firms had not been arrested and treated this factual position as relevant to the exercise of discretion in granting protective orders for the applicant.

Firms' deposit of amounts has reduced their liability to the range of bailable offences; they have not been arrested, a circumstance considered in granting protective directions to the applicant.

Obligation to deposit GST liability - Whether any GST liability to be deposited by the applicant was shown to the court. - HELD THAT: - The investigating officer informed the court that no liability requiring deposit by the applicant had been shown. The court recorded this absence of any disclosed monetary liability on the applicant as a material fact in its reasoning that neither custodial interrogation nor immediate arrest was necessary at present.

No GST liability needing deposit by the applicant was shown to the court.

Final Conclusion: Application disposed of with protective directions: custodial interrogation not necessary at present; in the event of arrest the applicant shall be given one week's prior notice, shall cooperate and join the investigation when directed, and shall not leave the country without the trial court's permission.

Breach of principles of natural justice - assessment under Section 153C and 143(3) - prima facie case - stay on operation of assessment order - furnishing of statements and material linking third parties

Breach of principles of natural justice - furnishing of statements and material linking third parties - assessment under Section 153C and 143(3) - prima facie case - Whether the impugned assessment suffers from breach of the principles of natural justice requiring further examination - HELD THAT: - The Court found that, at this stage, the petitioner has established a prima facie case of infraction of the principles of natural justice in the assessment passed under Section 153C and 143(3). The petitioner was served only with an extract of the statement of a third party (Prasesh Arya), and the revenue has not furnished material demonstrating a link between the unidentified intermediary (Mathur) and the petitioner to substantiate the addition made for AY 2010-2011. Although the revenue urged that the crucial part of the statement was provided, the absence of material showing the connection by which the payments alleged to have been routed through Mathur reached the petitioner warrants further examination. In view of these deficiencies, the matter cannot be finally adjudicated on the present record and requires filing of a counter-affidavit and further consideration by the Court and the authorities. [Paras 6, 7, 11]

Prima facie breach of natural justice established; matter requires further examination and enquiry, and cannot be finally upheld on the existing record

Final Conclusion: Notice issued; counter-affidavit directed within four weeks and rejoinder permitted; revenue to state whether assessment has been passed qua JBM Group and/or SIPL; meanwhile operation of the assessment order dated 22.04.2021 is stayed until the next listing.

Validity of rejection of DTVSV declaration - Meaning of disputed tax under the Direct Tax Vivad Se Vishwas Act, 2020 - Right to hearing / principles of natural justice in DTVSV proceedings

Validity of rejection of DTVSV declaration - Right to hearing / principles of natural justice in DTVSV proceedings - Rejection of the petitioner's declaration under the DTVSV Act was unlawful and is set aside; the declaration must be processed. - HELD THAT: - The Court found that the declaration filed in Form-1 was rejected on the online portal without giving the petitioner an opportunity to be heard and on reasons that go beyond the scope of the DTVSV Act and Rules. The authority's conclusion that there was 'no disputed tax' because the assessee had reflected the income in his return was held to be misconceived and inconsistent with the object and scheme of the Act. The Court observed that rejecting a declaration on such grounds without affording the declarant a chance to explain his position would defeat the statutory purpose and the reliefs envisaged by the scheme. In consequence, the rejection was quashed and the matter remitted for processing in accordance with the Act and Rules. [Paras 7, 26, 28]

Impugned rejection set aside; declaration to be processed under the DTVSV Act and Rules.

Meaning of disputed tax under the Direct Tax Vivad Se Vishwas Act, 2020 - Scope of 'dispute' under DTVSV Rules - The definition of 'disputed tax' under the DTVSV Act includes the amount of tax payable if an appeal pending on the specified date were decided against the appellant; the Act does not require examination of the merits of the underlying appeal to qualify as 'disputed tax'. - HELD THAT: - The Court examined Section 2(1)(j) (definition of 'disputed tax') and noted that it contemplates the amount of income-tax payable by the appellant if the pending appeal/writ/Special Leave Petition were decided against him. The statutory definition focuses on tax payable and not on the merits or competency of the appeal; consequently, an appeal pending before the appellate forum as on the specified date constitutes a 'dispute' for the purposes of the Act and Rules. The revenue's contention that the petitioner could not invoke the scheme because the income was reflected in his return was rejected as inconsistent with the statutory language and the object of the enactment. The Court further observed that exclusions under Section 9 are specific and do not apply here. [Paras 16, 18, 20, 24, 25]

Pending appeal over the tax consequences qualifies as a 'dispute' and the tax concerned falls within the statutory concept of 'disputed tax' for processing under the DTVSV Act.

Final Conclusion: The writ petition is allowed: the Designated Authority's rejection of the petitioner's DTVSV declaration is quashed and the declaration shall be processed in accordance with the Direct Tax Vivad Se Vishwas Act, 2020 and the Rules, after affording the declarant such opportunity as may be appropriate under the scheme.

Remittance to Assessing Officer - Burden of proof - Onus of proof - Initial burden on person asserting fact - Appellate interference in factual assessment

Remittance to Assessing Officer - Onus of proof - Appellate interference in factual assessment - Lawfulness of the Tribunal's remittance of the issue to the Assessing Officer with a direction shifting the onus to the Revenue when the Assessing Officer had already conducted the relevant enquiry. - HELD THAT: - The Court examined the Tribunal's order which had remitted the matter to the Assessing Officer and directed that the onus be shifted to the Revenue to establish the assessee's role in promoting the company and any relation with promoters or inflating of prices, despite the Assessing Officer having already carried out the exercise. Relying on the Division Bench decision in CIT v. Manish D. Jain and the established principle that appellate interference in factual assessment is restricted, the Court held that the Tribunal's remittance and reallocation of initial burden was not maintainable. The Court concluded that the Tribunal's direction effectively disregarded the Assessing Officer's prior enquiry and substituted an inappropriate burden-shifting exercise, warranting setting aside of the impugned order.

Impugned order of the Tribunal remitting the matter with a direction shifting the onus to the Revenue is set aside and held not sustainable.

Burden of proof - Initial burden on person asserting fact - Whether the Tribunal's finding was perverse for contravening the principle that the person asserting a fact must discharge the initial burden before any burden shifts to the Department. - HELD THAT: - The Court addressed the question whether the Tribunal's conclusion offended the time tested legal principle that the party asserting a fact bears the initial burden of proof and only thereafter can any burden shift to the Department. Observing that the Tribunal's order ran counter to that principle and having regard to the precedent relied upon by the Revenue, the Court found the Tribunal's finding to be untenable. Consequently, the substantial questions of law framed at admission were answered in favour of the Revenue.

Tribunal's finding that shifted the initial burden contrary to settled law was held to be perverse; finding set aside and answered in favour of the Revenue.

Final Conclusion: The Revenue's appeal is allowed; the Tribunal's order is set aside and the substantial questions of law are answered in favour of the Revenue, with no remand ordered by this Court.

Revisionary jurisdiction under section 263 of the Income tax Act - Deduction under section 80IA(4)(iii) - eligibility and initial year test - Binding effect of approval/notification by the Central Government for industrial parks - Power to withdraw approval vested solely in the Central Government - Date of commencement - role of Occupation/Completion Certificate and date of application

Revisionary jurisdiction under section 263 of the Income tax Act - Deduction under section 80IA(4)(iii) - eligibility and initial year test - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 in quashing the assessment for AY 2011-12 - HELD THAT: - The Tribunal examined whether the Pr. CIT correctly exercised powers under section 263 to hold the assessment order erroneous and prejudicial to revenue. It accepted the assessee's contention, supported by earlier coordinate bench decisions in the assessee's own case, that the eligibility for deduction under section 80IA(4)(iii) is to be tested in the initial year of claim (AY 2009 10) and, absent any change in facts or new distinguishing circumstances, cannot be reopened in a later year merely because the revenue may take a different view. The Tribunal further noted that the AO had examined and allowed the claim in the assessment proceedings and that no material was produced to show any alteration of facts after the initial year. On this basis the Tribunal concluded that the AO's order was not shown to be either erroneous or prejudicial to the interests of revenue and that the Pr. CIT's direction to revise the assessment was unsustainable. [Paras 7]

Order passed by the Pr. CIT under section 263 for AY 2011 12 is quashed and the assessment order of the AO is restored.

Deduction under section 80IA(4)(iii) - eligibility and initial year test - Binding effect of approval/notification by the Central Government for industrial parks - Power to withdraw approval vested solely in the Central Government - Date of commencement - role of Occupation/Completion Certificate and date of application - Whether, on merits, the assessee's claim to deduction under section 80IA(4)(iii) for AY 2011 12 could be denied on the ground that prescribed commencement/OC/Fire NOC conditions were not satisfied - HELD THAT: - The Tribunal considered the substance of the assessee's case and precedent. It recorded that the assessee had obtained Central Government approval and CBDT notification, had claimed the deduction first in AY 2009 10, and that coordinate benches had earlier accepted the assessee's entitlement (subject to the approval remaining valid). The Tribunal accepted the legal proposition, reflected in earlier decisions of the Tribunal and High Courts, that once the prescribed authority grants approval and that approval has not been withdrawn by the Central Government, tax authorities cannot re examine compliance with scheme conditions afresh in a later assessment year. The Tribunal also noted the assessee's submissions and authorities holding that where applications for statutory certificates (OC/Fire NOC) were filed before the cut off date the delay in issuance by the concerned authority would not defeat the assessee's entitlement. Finding no material to show that the assessee had changed the position relied on in the initial year or that new distinguishing facts existed, the Tribunal held that the Pr. CIT's factual and legal conclusions disallowing the deduction were not sustainable. [Paras 7]

On the merits, the assessee's entitlement to the deduction as recognised in earlier years stands; the tax authorities cannot re open compliance of scheme conditions for AY 2011 12 where approval remained subsisting and no new adverse facts were shown.

Final Conclusion: The appeal is allowed: the Pr. CIT's revisionary order under section 263 for AY 2011 12 is quashed, the assessing officer's order is restored, and the assessee's claim to deduction under section 80IA(4)(iii) for the assessment year stands as previously accepted by the assessing officer and earlier coordinate decisions.

Burden of proof under Section 123 of the Customs Act - Confiscation and penalty under Sections 111 and 112 of the Customs Act - Maintainability of appeal against baggage under proviso to Section 129A(1)(d) - Vagueness of show cause notice

Maintainability of appeal against baggage under proviso to Section 129A(1)(d) - Imported goods - definition under Section 2(25) - Tribunal has jurisdiction to entertain the appeal as the seized gold could not be characterised as imported goods or baggage imported from outside India. - HELD THAT: - The appellant was travelling on a domestic sector (Jammu to Srinagar) and there is no allegation or evidence that he arrived from abroad. Section 2(25) defines imported goods as those brought into India from outside India; the seized gold was carried between two places within India and therefore did not possess the character of "imported goods." The proviso to Section 129A(1)(d) excluding appeals in respect of baggage imported or exported as baggage does not apply where the goods are not imported from abroad. Consequently the preliminary objection to maintainability raised by the Revenue is rejected and the Tribunal holds it has jurisdiction to decide the appeal. [Paras 5]

The appeal is maintainable before the Tribunal.

Burden of proof under Section 123 of the Customs Act - Proof of reasonable belief that goods are smuggled - Section 123 was not attracted because Revenue failed to establish a reasonable belief that the seized gold was smuggled or of foreign origin; accordingly the reverse burden did not shift to the appellant to prove lawful origin. - HELD THAT: - Section 123 places a burden on the person from whose possession smuggled goods are recovered only where the revenue can show a reasonable belief that the goods are smuggled. The adjudication relied on market enquiries and valuation notes but did not establish that the marking on the biscuit indicated foreign origin, nor was any scientific testing or expert opinion produced to prove the goods were of foreign origin. The appellant did not admit foreign origin and produced evidence that the marked product is available in the Indian market. Revenue therefore failed to discharge the initial requirement of forming and recording a reasonable belief that the goods were smuggled, so Section 123 could not be invoked to shift the burden to the appellant. [Paras 12, 13, 14]

The impugned finding that the appellant failed to discharge the burden under Section 123 is unsustainable.

Confiscation and penalty under Sections 111 and 112 of the Customs Act - Vagueness of show cause notice - The proceedings, including absolute confiscation and imposition of penalty, are bad in law because the show cause notice was vague and the statutory preconditions for confiscation and penalty were not established. - HELD THAT: - The show cause notice did not specify the particular provisions of Section 111 (for confiscation) or the relevant clause(s) of Section 112 (for penalty), rendering it vague. In addition, without establishing that the goods were imported or smuggled (for which no adequate evidence such as testing or admissible proof of foreign origin was placed on record), absolute confiscation and penalty cannot stand. Precedents relied on by the parties were distinguished on facts where admissions of foreign origin were present; those factual predicates are absent here. Given these defects the adjudicatory proceedings are found to be legally unsustainable. [Paras 15, 16]

Absolute confiscation and the penalty are set aside and the impugned proceedings are quashed.

Final Conclusion: The appeal is allowed: the Tribunal finds it has jurisdiction, holds that Revenue failed to establish a reasonable belief of smuggling or foreign origin and that the show cause notice was vague; consequentially the order of absolute confiscation and imposition of penalty is set aside.

Oppression and Mismanagement - family arrangement / memorandum of understanding acted upon - sanction of demerger - binding effect of inter se family arrangement

Family arrangement / memorandum of understanding acted upon - sanction of demerger - binding effect of inter se family arrangement - The MOU dated 18.02.2019 was acted upon by the parties and creates binding inter se rights which were given effect by the sanctioned demerger. - HELD THAT: - The Tribunal found on the basis of the record that the MOU recorded the intended partition and division of assets among the family members and that the parties (other than the petitioner who later challenged the arrangements) acted pursuant to that MOU. The subsequent application for demerger and the Tribunal's sanction of the demerger on 07.03.2019 acknowledge and give effect to the partition reflected in the MOU; the petitioner participated in those proceedings and did not object to sanction. In these circumstances the MOU created rights inter se which have been acted upon and which inform the legitimate reallocation of property and shareholding. [Paras 27, 28, 29]

MOU dated 18.02.2019 was acted upon and, coupled with the sanctioned demerger, creates binding inter se rights between the parties.

Oppression and Mismanagement - binding effect of inter se family arrangement - The petitioner failed to establish acts of oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013. - HELD THAT: - Applying the findings that the family arrangement was implemented and that the demerger was sanctioned, the Tribunal held that the conduct complained of by the petitioner (alleged illegal allotment of shares, exclusion from management, siphoning of funds, illegal resolutions, and non-service of notices) were actions taken pursuant to the family arrangement and the demerger. The petitioner did not demonstrate that these actions amounted to statutory oppression or mismanagement; the record shows legitimate reallocation of rights and the opening of bank accounts and other steps were in furtherance of the partition and demerger scheme rather than unfairly prejudicial conduct requiring relief under Sections 241-242. [Paras 28, 29, 30, 31, 32]

Petitioner's allegations of oppression and mismanagement are not established; petition dismissed.

Final Conclusion: The Tribunal held that the family memorandum was acted upon and the sanctioned demerger gave effect to the parties' partition; the petitioner failed to prove oppression or mismanagement under Sections 241-242 and the petition is dismissed.

Mandatoriness of compliance with Section 8 demand notice - maintainability of an application under Section 9 - date of default principle - limitation and time-bar of recovery claims - non-retrospective effect of amendment increasing minimum default threshold - prescribed modes of service under Rule 5

Mandatoriness of compliance with Section 8 demand notice - prescribed modes of service under Rule 5 - maintainability of an application under Section 9 - Whether the Section 9 application is maintainable in absence of proof of delivery of the Section 8 demand notice to the Corporate Debtor. - HELD THAT: - The Tribunal held that delivery of the demand notice under Section 8 is a sine qua non for filing an application under Section 9. The Operational Creditor produced a demand notice and contended it was sent by private courier and by speed post. Rule 5 recognises only speed post/registered post A.D., hand delivery and electronic email as modes of service. The postal track report relied upon did not establish delivery (it recorded "Out for delivery") and private courier is not a legally recognised mode under the Rules. There is no clear and convincing evidence that the Section 8 notice was delivered before filing. For want of proof of service in a prescribed manner, the Section 9 application is not maintainable. [Paras 11]

Application is not maintainable for lack of proof of service of the Section 8 demand notice.

Date of default principle - limitation and time-bar of recovery claims - maintainability of an application under Section 9 - Whether the debt claimed is time barred having regard to the date of default. - HELD THAT: - The Tribunal observed that the Operational Creditor's own pleadings in the civil suit record the last payment and date of default in January 2013. The date of default does not shift with subsequent proceedings; it remains the date when default occurred. While the Operational Creditor could have sought to exclude the period of limitation by invoking prosecution of the civil suit or an acknowledgement under limitation law, no such contention or evidence was put forward before the Tribunal. Applying the settled position that decree or subsequent events do not alter the original date of default for purposes of limitation for a Section 9 application, the Tribunal found the claim to be time barred. [Paras 13, 14, 15]

The claim is time barred as the date of default is January 2013 and the Section 9 application was filed beyond the period of limitation without adequate grounds for extension.

Non-retrospective effect of amendment increasing minimum default threshold - maintainability of an application under Section 9 - Whether the post-filing amendment increasing the minimum default threshold to Rs. one crore affects maintainability of this application filed earlier. - HELD THAT: - The Tribunal noted that the alleged default occurred in 2013 and the Section 4 amendment raising the minimum default to one crore was notified on 24.03.2020, after the Section 9 application was filed in 2019. Relying on the principle that the amendment cannot be given retrospective effect to defeat vested rights or pending proceedings, the Tribunal rejected the Corporate Debtor's contention that the application was barred for being below the amended threshold. The amendment does not relate back to the date of default or the filing already made. [Paras 8]

The challenge to maintainability based on the subsequent amendment to the minimum default threshold is rejected; the amendment is not retrospective.

Final Conclusion: The Company Petition under Section 9 is dismissed and disposed of: the application was held not maintainable for want of proof of service of the Section 8 demand notice and also found to be time barred; the post-filing amendment raising the minimum default threshold was held not to affect the maintainability of the application.

Financial Debt - Default - Admission under Section 7 of the Insolvency and Bankruptcy Code - Interim Resolution Professional appointment - Moratorium - Public Announcement of the Corporate Insolvency Resolution Process - Duties of Interim Resolution Professional

Financial Debt - Default - Admission under Section 7 of the Insolvency and Bankruptcy Code - Petition under Section 7 admitting that there exists a financial debt and default and accordingly admitting the company petition. - HELD THAT: - The Tribunal found on the material on record, including loan documents, assignment deeds and the corporate debtor's reply, that the petitioner is an assignee of loans originally advanced by DNSB and that the term loan and cash credit accounts were declared NPA. The corporate debtor admitted the liability before the Tribunal and sought time to repay; there was no denial of sums borrowed or of default. The Tribunal applied the statutory test requiring existence of 'debt' and 'default' and held both ingredients were satisfied, noting also that the petition lay within the period of limitation. Consequently the petition under Section 7 was admitted and the Corporate Insolvency Resolution Process was ordered to commence with effect from the date of the order. [Paras 21, 22, 28]

The Section 7 petition is admitted as the requirements of existence of financial debt and default are satisfied and CIRP commences from the date of the order.

Interim Resolution Professional appointment - Appointment of the proposed Interim Resolution Professional submitted by the financial creditor. - HELD THAT: - The Tribunal perused the written consent (Form 2) of the proposed interim resolution professional and noted there was nothing on record to indicate any disciplinary proceedings against him. On that basis the Tribunal appointed the insolvency professional proposed by the financial creditor as the Interim Resolution Professional to conduct the insolvency resolution process. [Paras 23, 24]

Mr. Ritesh R. Mahajan is appointed as Interim Resolution Professional.

Moratorium - Operation of moratorium under Section 14 following admission of the petition. - HELD THAT: - Upon admission of the petition the Tribunal directed that the moratorium as prescribed under the Code shall be operative with effect from the date of the order. The scope of the moratorium as recorded prohibits institution of suits, and transferring or encumbering assets of the corporate debtor, while preserving supply of essential goods or services, and continues until completion of the insolvency resolution process or approval of a resolution plan. [Paras 25]

The moratorium under Section 14 is declared effective from the date of the order and shall remain in force as prescribed by the Code.

Public Announcement of the Corporate Insolvency Resolution Process - Duties of Interim Resolution Professional - Obligation on the Interim Resolution Professional to make the public announcement and perform statutory duties including reporting to the Tribunal. - HELD THAT: - The Tribunal directed that, in accordance with the Code, the Interim Resolution Professional shall immediately carry out the public announcement of the initiation of CIRP. The IRP was also directed to perform the duties assigned under the Code (including duties under Sections 15 and 18 as referenced) and to inform the Tribunal of the progress of the resolution process and compliance with directions within 30 days, with liberty to report earlier if necessary. [Paras 26, 27]

The IRP shall make the public announcement and discharge statutory duties and report progress and compliance to the Tribunal within 30 days (or earlier if necessary).

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted as the existence of financial debt and default is established; CIRP is ordered to commence from the date of the order, the proposed IRP is appointed, the moratorium under the Code is effective, and the IRP is directed to publish the public announcement and discharge statutory duties with periodic reporting to the Tribunal.

Application under Section 9 for initiation of Corporate Insolvency Resolution Process - operational debt - debt and default - pre-existing dispute - notice of dispute - onus on operational creditor to prove absence of dispute - plausibility test for existence of dispute (Mobilox Innovations principle)

Pre-existing dispute - notice of dispute - plausibility test for existence of dispute (Mobilox Innovations principle) - onus on operational creditor to prove absence of dispute - debt and default - Whether the Section 9 application should be admitted when documents disclose a pre-existing dispute and the respondent has not filed a reply. - HELD THAT: - The Tribunal found that the Operational Creditor relied on a Directors Employment Agreement and subsequent minutes recording discussions and admissions regarding sums claimed as unpaid salary. Multiple meetings and settlement discussions between the parties were evident from the materials placed before the Adjudicating Authority. Applying the established test in Mobilox Innovations, the adjudicating authority must reject a Section 9 application if there is a plausible contention of a dispute that requires further investigation and is not a patently feeble or spurious defence. Where the respondent has not filed a reply and the matter proceeds ex parte, the burden on the applicant to establish both "debt" and "default" and the absence of any pre-existing dispute is correspondingly high. On the materials before it, which disclosed ongoing discussions and an apparent pre-existing controversy over the claimed sums, the Tribunal concluded that a plausible dispute existed and that the Operational Creditor had not discharged the onus of proving the absence of such dispute. Consequently the petition could not be admitted to initiate CIRP.

Section 9 application dismissed for disclosure of a pre-existing dispute and failure of the Operational Creditor to establish absence of dispute.

Final Conclusion: The application IBA/1297/2019 under Section 9 for initiation of CIRP against the Corporate Debtor is dismissed for disclosure of a pre-existing dispute; the Operational Creditor's rights to pursue recovery remain intact; no costs.

Financial Debt - Default - Debenture Trust Deed - Event of Default - Debenture Trustee's authority to act without written 51% consent - Admission under Section 7 - Moratorium - Appointment of Interim Resolution Professional

Financial Debt - Default - Debenture Trust Deed - The petition under Section 7 is maintainable as the debt is a financial debt and a default has occurred. - HELD THAT: - The Tribunal found that the Debentures issued under the Debenture Trust Deed constituted a financial debt and that the Corporate Debtor failed to make coupon and redemption payments as per the DTD. The DTD provided for quarterly coupon payments and redemption instalments commencing the fifth quarter. The Corporate Debtor defaulted in coupon payment due 12.11.2019 and thereafter failed to redeem and pay subsequent instalments, admissions and correspondence from the Corporate Debtor recording requests for extension corroborate the existence of liability and non-payment. The Tribunal therefore held that the two preconditions for admission under Section 7-existence of debt and occurrence of default-were satisfied and the petition was within limitation. [Paras 37, 38, 43, 44, 45]

The petition under Section 7 is admitted as the debt is a financial debt and default has occurred.

Event of Default - Debenture Trustee's authority to act without written 51% consent - The filing of the petition did not require separate written consent of 51% debenture-holders where the DTD itself defined events of default and the Trustee followed the consent procedure provided. - HELD THAT: - The Corporate Debtor's contention that 51% debenture-holder written consent was a precondition was rejected. The Tribunal examined Article 11 of the DTD which expressly defines payment default and failure to redeem as Events of Default. Article 11.2.2 provided that certain Events of Default are deemed to have occurred without requiring a cure period by the Trustee. The Debenture Trustee had also circulated a communication seeking consents and had stipulated that non-receipt of objection would be deemed consent. Applying the principle that the adjudicating authority need only look to records of the information utility and other evidence to satisfy itself that a default occurred, the Tribunal held that the Trustee was entitled to proceed and the absence of a separate written 51% approval did not vitiate the petition. [Paras 39, 40, 41, 42]

Requirement of a separate written 51% debenture-holder approval for filing the petition is not a bar; the Trustee acted within the DTD and defaults constituted Events of Default.

Appointment of Interim Resolution Professional - The Interim Resolution Professional proposed by the Financial Creditor is suitable and appointed. - HELD THAT: - The Tribunal perused Form 2 containing the written consent of the proposed IRP and observed no material on record indicating any disciplinary proceedings against him. Accordingly the proposed Insolvency Professional, whose registration number was placed on record, was appointed as Interim Resolution Professional to conduct the CIRP. [Paras 46, 47]

The proposed Insolvency Professional is appointed as Interim Resolution Professional.

Moratorium - Moratorium under the Code is operative from the date of the order. - HELD THAT: - On admission of the petition and commencement of the CIRP the Tribunal directed that the moratorium provisions shall apply with effect from the date of the order, prohibiting institution of suits, transfer or encumbrance of assets of the Corporate Debtor, subject to the statutory exception for supply of essential goods or services. The IRP was directed to make the public announcement and perform duties under the Code. [Paras 48, 49, 50, 51]

Moratorium is declared operative from the date of the order and the IRP shall take steps as required under the Code.

Interim relief application - The interlocutory application for interim relief becomes infructuous upon admission of the main petition. - HELD THAT: - An interlocutory application seeking ad-interim relief to restrain the Corporate Debtor from dealing with assets was pending. Since the main petition under Section 7 was admitted and CIRP commenced, the relief sought in the interlocutory application stood rendered academic and the Tribunal declared that the IA becomes infructuous. [Paras 52, 53]

The interlocutory application for interim relief is rendered infructuous on admission of the petition.

Final Conclusion: The Company Petition under Section 7 is admitted; the Tribunal held that the Debentures constituted a financial debt and a default occurred as per the Debenture Trust Deed, rejected the contention that written 51% debenture-holder consent barred filing, appointed the proposed Interim Resolution Professional, declared the moratorium operative from the date of the order, directed steps for public announcement and administration of the CIRP, and held the pending interlocutory application for interim relief to be infructuous.

Financial debt - financial creditor - Investment-cum-Shareholders Agreement treated as equity investment - use of proceeds and investor safeguards (nominee directors and observer) - default and date of default under IBC

Financial debt - financial creditor - Investment-cum-Shareholders Agreement treated as equity investment - use of proceeds and investor safeguards (nominee directors and observer) - Whether the claim arising out of the Investment cum Shareholders Agreement and the subsequent Settlement Agreement constitutes a 'financial debt' and whether the applicant is a 'financial creditor' under the IBC. - HELD THAT: - The Tribunal examined the Investment cum Shareholders Agreement and the Settlement Agreement and noted multiple investor protective features - use of proceeds obligations, approval and review of Annual Business Plans, board composition with investor nominee directors and an investor observer - which indicate an investment made on commercial/business risk rather than a simple loan. The Agreement and related collateral arrangements were held to be structured as equity/investment arrangements and as mechanisms to safeguard an investor's interest, rather than creating a financial debt payable as a money claim within the meaning of the IBC. On that factual and contractual basis the applicant was not treated as a 'financial creditor' and the claim was not a 'financial debt'. [Paras 9, 10, 12]

The claim does not qualify as a 'financial debt' and the applicant is not a 'financial creditor' under the IBC.

Default and date of default under IBC - financial debt - Whether there was a 'default' and a satisfactorily established date of default under the IBC in respect of the alleged claim. - HELD THAT: - Although the application alleged a specific date of default, the Tribunal found that the alleged outstanding amount arose from the Settlement Agreement and, on the admitted facts, primarily represented amounts repaid and only residual interest claimed. Given the conclusion that the liability did not constitute a 'financial debt', and that the applicant failed to satisfactorily establish the date of default as required under Section 7(5), the Tribunal held that the requisite default for initiation of CIRP under Section 7 was not made out. [Paras 10, 12]

The applicant failed to establish a 'default' with a proper date of default under the IBC.

Final Conclusion: The petition under Section 7 of the IBC was dismissed: the sum claimed arose from investment/settlement arrangements not constituting a 'financial debt', the applicant is not a 'financial creditor', and the requisite default/date of default was not established; no costs.

Sale of corporate debtor as a going concern - liquidator's power under the Liquidation Process Regulations (including Regulation 32) - vesting of assets free from encumbrances - extinguishment of pre-transfer liabilities - exemption from SEBI regulations for acquisition under liquidation - effect of sale on pending proceedings and statutory compliances - rights and obligations of purchaser post-transfer

Sale of corporate debtor as a going concern - vesting of assets free from encumbrances - Permission to effect acquisition by payment/adjustment of sale consideration through subscription to equity, with allotment of new shares, cancellation of existing share capital and delisting consequential thereto. - HELD THAT: - The Tribunal granted permission to the successful bidder to pay the sale consideration by subscribing to equity of the Corporate Debtor and directed that upon payment the Corporate Debtor shall allot shares to the Applicant constituting 100% equity, cancel existing shares held by promoters and public shareholders and delist the Company with immediate effect. The order implements the Liquidator's sale of the Corporate Debtor as a going concern and gives effect to the transfer sequence as prayed by the Applicant, subject to allotment being made in accordance with applicable laws. The Tribunal treated such reliefs as incidental to consummation of a going-concern sale effected under the liquidation process and necessary to enable the purchaser to operate the business post-transfer. [Paras 14]

Permission granted for acquisition by investment into equity; allotment, cancellation of existing shares and delisting effected as set out in the order.

Exemption from SEBI regulations for acquisition under liquidation - Claim for exemption from specified SEBI regulations to give effect to the acquisition was allowed by the Tribunal. - HELD THAT: - The Tribunal exempted the Applicant/Corporate Debtor from compliance with Regulation 158(2) and Regulation 170 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and Regulation 3(3) of the SEBI (Delisting of Equity Shares) Regulations, 2009, insofar as such compliance would otherwise be required to effect the acquisition, cancellation/extinguishment of existing share capital, issuance of new shares and delisting. The exemption was granted as ancillary relief necessary to implement the sale of the Corporate Debtor as a going concern in liquidation. [Paras 14]

Exemptions from the specified SEBI regulations granted to the extent necessary to give effect to the acquisition.

Extinguishment of pre-transfer liabilities - vesting of assets free from encumbrances - effect of sale on pending proceedings and statutory compliances - Rights, title and interest in the Corporate Debtor's assets shall vest in the Applicant free from encumbrances and the Applicant shall not be liable for pre-transfer liabilities; pending proceedings shall not affect assets sold. - HELD THAT: - Relying on the liquidation sale as a going concern and the Liquidator's process, the Tribunal directed that on payment of consideration the Applicant shall obtain all rights, title and interest in the Corporate Debtor's assets free from security interests, encumbrances, claims or liabilities. The Tribunal further provided that the Applicant shall not be responsible for past liabilities of the Corporate Debtor and that proceedings (other than those against erstwhile promoters or former management) shall not have bearing on the assets sold. The sale proceeds are to be distributed by the Liquidator in terms of Section 53 of the Code. These directions operationalise the principle that a going-concern sale in liquidation transfers the business free of antecedent liabilities as between purchaser and the corporate assets sold. [Paras 14]

Assets vest in Applicant free of encumbrances; Applicant not liable for pre-transfer liabilities and pending proceedings do not affect the sold assets.

Rights and obligations of purchaser post-transfer - liquidator's obligations to assist post-acquisition - intellectual property rights and restraints on promoters - Applicant entitled to enforce rights of the Corporate Debtor post-transfer, liquidator to assist, Intellectual Property remains with Corporate Debtor and promoters restrained from using/transferring such IPR. - HELD THAT: - The Tribunal recognised the Applicant's right to recover amounts due to the Corporate Debtor and to review or terminate pre-existing contracts insofar as necessary to run the business. The Liquidator was directed to complete statutory filings and to provide cooperation for smooth completion of acquisition and vesting (including assisting with land/record formalities). The Tribunal ordered that Brands and IPR belonging to the Corporate Debtor remain vested with the Corporate Debtor and restrained existing promoters/guarantors/erstwhile promoters and their associates from conducting business using or transferring such IPR. Renewal of licenses was allowed upon payment of renewal fees where applicable. [Paras 14]

Applicant granted post-transfer operational rights; Liquidator directed to assist; IPR to remain with Corporate Debtor and promoters restrained from use/transfer.

Brought forward losses and tax consequences of acquisition - Tribunal declined to grant sweeping directions to tax and other statutory authorities; matters concerning brought forward losses, tax exemptions and statutory waivers were left to the appropriate authorities for consideration. - HELD THAT: - While the Tribunal recognised that the Corporate Debtor may be entitled to benefits of brought forward losses subject to permissions of the appropriate authority, it did not issue directions to CBDT, Customs, State GST authorities or other statutory bodies to waive taxes, stamp duty or to deem assessments closed. The Applicant was permitted to approach the concerned authorities for reliefs such as treatment under the Income-tax Act and exemptions from stamp duty and other levies; the Tribunal left consideration and grant of such fiscal exemptions to those authorities. [Paras 14, 15]

Requests for tax and statutory authority exemptions not granted by the Tribunal; Applicant permitted to approach the relevant authorities for consideration.

Final Conclusion: The Tribunal allowed the Applicant to complete acquisition of the Corporate Debtor as a going concern by investment into equity, directed allotment of new shares, cancellation of existing share capital and delisting, granted specified exemptions from SEBI regulations for the purpose of implementing the sale, vested assets in the Applicant free of encumbrances and extinguished the Applicant's liability for pre-transfer obligations; matters concerning tax reliefs, stamp duty and waivers were left to the appropriate statutory authorities to consider and the Application was disposed of accordingly.

Arbitration agreement - Section 8 of the Arbitration and Conciliation Act, 1996 - Section 238 of the Insolvency and Bankruptcy Code, 2016 - Debt and default under the IBC - Availability of alternative remedy

Arbitration agreement - Section 8 of the Arbitration and Conciliation Act, 1996 - Section 238 of the Insolvency and Bankruptcy Code, 2016 - Debt and default under the IBC - Availability of alternative remedy - Whether the Tribunal should direct reference to arbitration under Clause 12 and Section 8 of the Arbitration and Conciliation Act, 1996 in the face of a company petition under the IBC filed by the operational creditor. - HELD THAT: - The Tribunal examined whether the existence of an arbitration clause and the corporate debtor's application under Section 8 warranted a reference to arbitration notwithstanding the company petition under the IBC. It applied the statutory primacy conferred by Section 238 of the IBC and the jurisprudence of the NCLAT which requires the Adjudicating Authority to satisfy itself only as to existence of debt and default. The Tribunal held that where the adjudicating authority is satisfied about debt and default, the mere availability of an alternate remedy (such as arbitration) does not disable the operational creditor from invoking the IBC or require automatic reference to arbitration. The Tribunal treated Section 238 as having overriding effect over inconsistent provisions of other laws and followed the view that the presence of an arbitration agreement does not preclude initiation or continuation of proceedings under the IBC when debt and default are established or are prima facie shown. Applying these principles to the material on record, the Tribunal found no substance in the corporate debtor's contention that the dispute must be referred to arbitration and concluded that the interlocutory application under Section 8 was unsustainable. [Paras 19, 20, 21, 22, 23]

IA No.1066/2020 under Section 8 is dismissed; the matter will proceed before the Adjudicating Authority on the company petition under the IBC.

Final Conclusion: The application seeking reference to arbitration under Clause 12 and Section 8 is dismissed on the ground that, having regard to Section 238 of the IBC and the need for the Adjudicating Authority to satisfy itself on existence of debt and default, the availability of arbitration does not bar continuation of the company petition under the IBC.

Operational debt and maintainability under Section 9 - requirement of delivery of demand notice under Section 8 and 10 day reply - pre existing dispute and the Mobilox/Mobilox test under Section 5(6) - adjudicating authority's jurisdiction and summary nature of proceedings - admission of CIRP on parity of procedural obligations - moratorium on admission under Section 14

Operational debt and maintainability under Section 9 - admission of CIRP on parity of procedural obligations - Application under Section 9 of IBC, 2016 by the Resolution Professional/liquidator is maintainable and liable to be admitted. - HELD THAT: - The Tribunal found that the claim exceeded the statutory threshold and was neither time barred nor premature. The Form 5 filing and delivery of the demand notice under Section 8 were in order and any minor typographical inconsistencies in invoice dates did not vitiate maintainability. The Bench emphasised parity: just as delivery of the Section 8 notice by the operational creditor is mandatory for a valid Section 9 filing, the corporate debtor must reply within the statutory 10 day period to avoid admission. On the material before it the Tribunal concluded there was no valid reply within the statutory period and therefore the application met the conditions for admission under Section 9. [Paras 1, 5, 22, 25]

Section 9 application is admitted and CIRP is initiated.

Requirement of delivery of demand notice under Section 8 and 10 day reply - pre existing dispute and the Mobilox/Mobilox test under Section 5(6) - There was no effective notice of dispute/reply by the Corporate Debtor within 10 days and the pleaded pre existing dispute is rejected as spurious. - HELD THAT: - The Tribunal examined the alleged replies and communications relied upon by the corporate debtor and found the proofs of dispatch illegible and delivery unestablished. The Bench applied the established test that a notice of dispute must demonstrate a plausible, bona fide dispute (not spurious, hypothetical or a mere disagreement) existing prior to receipt of the demand notice. Considering the parties were related, the 250 km hand delivery claim, routine commercial correspondence, absence of corresponding action before the bank, and contradiction between alleged grounds (slow progress) and the content of the purported replies (rate variation), the Tribunal held the defence to be made to believe and therefore insufficient to defeat admission under Section 9. [Paras 5, 6, 7]

No valid notice of dispute was received within the statutory period; the contention of a pre existing dispute is rejected.

Adjudicating authority's jurisdiction and summary nature of proceedings - NCLT, acting as Adjudicating Authority under IBC, 2016 has jurisdiction to examine and decide Section 9 applications and such proceedings are summary in nature but not devoid of judicial scrutiny. - HELD THAT: - The Tribunal rejected the corporate debtor's contention that complex issues require a regular civil trial. It explained that the Adjudicating Authority has statutory powers, procedural rules and judicial trappings sufficient to adjudicate commercial disputes in a time bound manner. The Bench surveyed statutory scheme, rules and precedents to conclude that while proceedings are summary and expeditious, they permit necessary appreciation of evidence to determine whether a bona fide dispute exists; matters requiring deeper inquiry are not outside the Tribunal's competence but, where complexities truly demand, the ordinary remedies and forum remain open to parties. [Paras 11, 12, 20]

The Adjudicating Authority has jurisdiction to try and determine the application; summary procedure does not preclude required judicial evaluation.

Moratorium under Section 14 - On admission, moratorium under Section 14 is declared with the attendant prohibitions and consequences. - HELD THAT: - Following admission of the Section 9 application, the Tribunal applied Section 14 to prohibit institution or continuation of suits and proceedings, transfer or disposition of assets, enforcement of security and recovery of property by owners/lessors, until completion of CIRP or further order. The order further directed appointment of an IRP and steps for public announcement and claim filing in accordance with the Code and regulations. [Paras 25]

Moratorium is declared effective from the date of the order and IRP is appointed to conduct CIRP.

Final Conclusion: The Tribunal admitted the Section 9 application filed by the Resolution Professional/liquidator, held that no valid reply or pre existing dispute had been established within the statutory 10 day period, declared moratorium under Section 14, appointed an IRP and directed initiation of the CIRP and related procedural steps.

Approval of Resolution Plan by Committee of Creditors - Distribution matrix and inter se allocation amongst creditors - Fiduciary duties of the Resolution Professional - Fixation of Resolution Professional's fee not part of CoC's commercial wisdom - Validity of success fee payable to the Resolution Professional - Proportionate distribution among employees, operational creditors and unsecured creditors

Approval of Resolution Plan by Committee of Creditors - Distribution matrix and inter se allocation amongst creditors - The challenge to the distribution matrix finalised at the adjourned 20th CoC meeting and the prayer to reject that distribution matrix. - HELD THAT: - The Tribunal found that the Committee of Creditors had unanimously approved the Resolution Plan submitted by the resolution applicant. In view of that approval and the concurrent approval process (including the application for approval of the Resolution Plan), the prayer seeking rejection of the distribution matrix was dismissed. The Bench treated the distribution of consideration as having been finalised in the course of the CoC proceedings and, consequent to approval of the Resolution Plan, there was no basis to accede to the applicant's plea to set aside the distribution matrix. The finding is recorded while disposing of the miscellaneous application in light of the approval granted in MA 3714/2020. [Paras 13, 14]

Prayer to reject the distribution matrix is dismissed.

Fixation of Resolution Professional's fee not part of CoC's commercial wisdom - Validity of success fee payable to the Resolution Professional - Proportionate distribution among employees, operational creditors and unsecured creditors - Whether the success fee of Rs. 3 Crores awarded to the Resolution Professional as part of the CoC approvals is valid and payable. - HELD THAT: - Relying on the principle articulated by the NCLAT that fixation of the Resolution Professional's fee is not a business decision falling within the commercial wisdom of the CoC, the Bench held the success fee to be unreasonable and refused its approval. The Tribunal therefore directed that the amount proposed as success fee be proportionately distributed among employees, operational creditors and unsecured creditors. The Bench recorded that while the CoC had approved the fee, the judicial precedent and the Tribunal's assessment led to disallowance of the success fee and reallocation of that sum to other stakeholders under the Resolution Plan. [Paras 13, 14]

The success fee to the Resolution Professional is not approved; the sum is to be proportionately distributed among employees, operational creditors and unsecured creditors (prayer regarding rejection of success fee deemed allowed).

Final Conclusion: The Tribunal approved the Resolution Plan but dismissed the challenge to the distribution matrix; it refused to approve the Rs. 3 Crore success fee for the Resolution Professional (applying precedent that fixation of RP's fee is not a CoC commercial decision) and directed that the said amount be proportionately distributed among employees, operational creditors and unsecured creditors; accordingly the miscellaneous application is partially allowed and disposed of.

Anticipatory bail under section 438 Cr.P.C. - exceptional nature of pre-arrest bail - interference with investigation and custodial interrogation - section 420 IPC and fraud affecting State exchequer - scheduled offence under the Prevention of Money Laundering Act - necessity of thorough investigation and money trail tracing in economic offences

Anticipatory bail under section 438 Cr.P.C. - exceptional nature of pre-arrest bail - interference with investigation and custodial interrogation - Whether the applicant is entitled to anticipatory bail at the stage of investigation - HELD THAT: - The Court examined the nature and gravity of the allegations, the admitted facts about reservation and allotment of plots under the NPNL scheme, and the evolution of the investigation including supplementary charges. It applied the established principle that pre arrest bail under section 438 Cr.P.C. is an extraordinary relief to be granted sparingly and only in exceptional cases after weighing the nature of accusation, likelihood of tampering or hampering investigation, and the need for interrogation. Given the finding that a well conceived scheme was allegedly executed to circumvent licence conditions, that interrogation is integral to trace the money trail and sources and destinations of profits, and that protection under anticipatory bail would likely frustrate effective interrogation and investigation, the Court concluded that anticipatory bail should be refused. The Court expressly refrained from commenting on the merits of the prosecution while holding that grant of anticipatory bail at this stage would materially hamper investigation. [Paras 47, 48, 49, 50]

Application for anticipatory bail dismissed; applicant not entitled to protection under section 438 Cr.P.C.

Section 420 IPC and fraud affecting State exchequer - scheduled offence under the Prevention of Money Laundering Act - necessity of thorough investigation and money trail tracing in economic offences - Whether the offences alleged attract section 420 IPC and thereby constitute a scheduled offence under the Prevention of Money Laundering Act - HELD THAT: - The Court observed that non payment of development fee in respect of Licence No.58 of 2013 and the scheme of allotment and resale of NPNL plots, as alleged, resulted in financial loss to the State exchequer and frustrated the object of the licence. On this basis the Court held that the offence punishable under section 420 IPC can be validly invoked qua the applicant's acts and, since section 420 IPC is a scheduled offence, the provisions of the Prevention of Money Laundering Act are attracted. The Court rejected the contention that civil allocation of responsibility to the original licensee would preclude criminal liability of the applicant or his company. [Paras 42, 43, 44, 45, 46]

Findings recorded that section 420 IPC is attracted by the alleged conduct and that the offence thus becomes a scheduled offence attracting the Prevention of Money Laundering Act

Final Conclusion: The application for anticipatory bail is dismissed. The Court found that the allegations disclose a scheme causing loss to the State and attracting section 420 IPC; consequently those allegations amount to a scheduled offence under the Prevention of Money Laundering Act, and granting anticipatory bail at this investigative stage would materially impede the investigation.

Writ jurisdiction - appealability of order - alternative remedy - maintainability of writ petition challenging appealable order - service of order / communication of order

Writ jurisdiction - appealability of order - alternative remedy - maintainability of writ petition challenging appealable order - Whether the writ petition challenging the Order in Original dated 20.03.2017 is maintainable in writ jurisdiction. - HELD THAT: - The Court found that the impugned Order in Original dated 20.03.2017 is an appealable order under the Finance Act, 1994 and that an alternative statutory remedy is available to the petitioner. In these circumstances the Court held that the controversy cannot be entertained in writ jurisdiction. The court observed that Annexure 11 records prior communication of the order and, accordingly, declined to adjudicate the challenge to the impugned order by way of writ. The petitioner was left free to pursue the remedy available under the statutory appellate scheme. [Paras 8, 10, 11]

Writ petition dismissed as not maintainable; petitioner may avail the remedy available under law.

Service of order / communication of order - writ jurisdiction - Whether the Court would decide the dispute as to prior communication/service of the Order in Original dated 20.03.2017 in writ proceedings. - HELD THAT: - The Court declined to resolve the factual dispute about whether the Order in Original was earlier communicated, noting that Annexure 11 records delivery to the petitioner's business and residential addresses. The Court held that such a dispute of delivery, if contested by the petitioner, must be demonstrated before the appropriate statutory authority and is not a matter for determination in writ jurisdiction in the present proceedings. [Paras 9]

Court will not adjudicate the service/communication dispute in writ jurisdiction; petitioner to prove non-delivery before the appropriate authority.

Final Conclusion: The writ petition challenging the Order in Original dated 20.03.2017 is dismissed as not maintainable; the petitioner is free to pursue the alternative statutory remedies and to raise any dispute regarding service of the order before the appropriate authority. The Court makes no observation on whether the tax liability was actually discharged.

Cenvet credit - clerical/inadvertent mistake in return - remand for verification of records - penalty for wrongful credit

Cenvet credit - clerical/inadvertent mistake in return - remand for verification of records - penalty for wrongful credit - Whether the adjudicating authority must verify the appellant's cenvet credit records for closing balance as on 31.03.2014 and opening balance on 01.04.2014 and, on that verification, allow the credit if the higher closing balance is found or deny the credit and impose penalty if it is not. - HELD THAT: - The record shows the ST-3 return for the quarter ending 31.03.2014 disclosed a closing cenvet credit balance of Rs. 1,05,705 whereas the opening balance on 01.04.2014 was shown as Rs. 4,71,397. The appellant pleads that the lower closing balance in the March 2014 return was an inadvertent/clerical mistake and that the cenvet credit account in the records actually carried the higher balance. The adjudicating authority issued a show cause notice but did not examine or verify the appellant's cenvet credit account records to ascertain whether the discrepancy arose from a filing mistake or represented an intentional excess claim. Because the determinative fact - whether the higher balance was actually reflected in the appellant's cenvet credit account on 31.03.2014 - was not ascertained, the Tribunal remanded the matter to the adjudicating authority with directions to verify the records within a reasonable time. If verification establishes the higher closing balance on 31.03.2014, the appellant is to be given the benefit of the mistake in the return; if not, the cenvet credit is to be denied and the penalty imposed. [Paras 6, 7, 8]

The matter is remanded to the adjudicating authority to verify the appellant's cenvet credit records for the stated dates and, on that verification, to allow the credit if the higher balance is established or deny the credit and impose penalty if it is not; appeal disposed of by remand.

Final Conclusion: Appeal disposed of by remand: adjudicating authority directed to verify the appellant's cenvet credit records for 31.03.2014 and 01.04.2014 and pass an appropriate order within a reasonable time.

Recovery of refunds granted pursuant to interim court orders - power to recover erroneously refunded amount under Section 11A of the Central Excise Act, 1944 - challenge to a show cause notice by pre emptive writ petition - exercise of discretionary writ jurisdiction where efficacious alternative remedy exists

Challenge to a show cause notice - exercise of discretionary writ jurisdiction - Maintainability of a writ petition challenging a show cause notice issued for recovery of refund paid pursuant to interim court orders. - HELD THAT: - The petition impugns a show cause notice seeking recovery of excess cash refund paid pursuant to interim orders of the High Court; those interim refunds were subject to the final outcome of the lis before the Supreme Court which ultimately decided in favour of the government. The Court observed that recovery of refunds made pursuant to interim directions is permissible where the final judicial outcome disfavors the recipient. Although the petitioner contended that Section 11A permits recovery only of amounts 'erroneously refunded', the Court declined to adjudicate the merits of that contention at the interlocutory stage. The petitioner has not disputed the competence of the issuing authority. In these circumstances the High Court exercised restraint from using its discretionary writ jurisdiction to pre-empt the statutory show cause process and dismissed the petition with liberty to the petitioner to raise all legal pleas and defenses in response to the show cause notice, after which the respondents will take action in accordance with law. [Paras 5, 6, 7, 8, 9]

Writ petition dismissed; petitioner permitted to contest the impugned show cause notice and advance all legal pleas in response.

Final Conclusion: The High Court declined to interfere pre emptively with a statutory show cause notice issued for recovery of refunds paid pursuant to interim orders; the petition was dismissed and the petitioner is left free to contest the notice and raise all legal defenses before the competent authority.

Payment made under protest - filing of appeal as protest - reversal of cenvat credit contested - refund claim not barred by limitation under Section 11B(1) of the Central Excise Act, 1944 - principle of unjust enrichment

Payment made under protest - filing of appeal as protest - reversal of cenvat credit contested - refund claim not barred by limitation under Section 11B(1) of the Central Excise Act, 1944 - Whether contesting the reversal of cenvat credit by the appellant amounts to reversal made under protest so as to render the refund claim not time-barred under Section 11B(1) of the Central Excise Act, 1944. - HELD THAT: - The Tribunal examined whether mere intimation of reversal, in circumstances where the reversal was contested, constitutes payment or reversal made under protest. Relying on earlier Tribunal decisions including Hutchison Max Telecom Pvt. Ltd., Bayshore Glass Trading Pvt. Ltd. and the reasoning in Tamilnadu Ex Servicemen's Corporation Ltd., the Tribunal accepted the proposition that filing an appeal or otherwise contesting the demand/ reversal operates as a protest. The Tribunal noted that the adjudicating authority had recorded that no separate protest letter was filed, but observed that lack of a formal protest communication is not decisive where the assessee has actively challenged the reversal through appellate proceedings. In light of these authorities and the facts that the appellant contested the reversal, the Tribunal concluded that the reversal was made under protest, bringing the claim within the exception to time bar to permit refund adjudication. The Tribunal also referenced that the adjudicating authority should consider the applicability of the principle of unjust enrichment if relevant, but on the present facts held the limitation bar inapplicable. [Paras 7, 8, 9, 11, 12]

Contesting the reversal of cenvat credit by filing challenge/appeal constitutes payment/reversal under protest; the refund claim is not barred by limitation and the impugned order rejecting the refund as time barred is set aside, appeal allowed with consequential relief.

Final Conclusion: The Tribunal held that the appellant's contest of the reversal of cenvat credit amounted to payment/reversal under protest; accordingly the refund claim was not time barred under Section 11B(1) of the Central Excise Act, 1944, the impugned order denying refund as barred by limitation was set aside and the appeal was allowed with consequential relief.

Input tax credit - Reversal of input tax credit - ITC entitlement for inter State sales irrespective of C Form - Retrospective operation of amendment correcting an anomaly - Discriminatory tax treatment pre and post amendment

Input tax credit - Reversal of input tax credit - ITC entitlement for inter State sales irrespective of C Form - Retrospective operation of amendment correcting an anomaly - Whether reversal of input tax credit in respect of inter State sales not covered by C Form for assessment year 2011-12 was justified - HELD THAT: - The Court applied the ratio of the earlier decision in W.P.Nos.15130 of 2015 etc. Batch (Bharath Traders v. Commissioner of Commercial Taxes) which held that the amendment to sub clause (v) of Section 19(2) corrected an anomaly by extending ITC to transactions falling under Section 8(2) of the CST Act and therefore must be given retrospective effect from the inception of the Act. That reasoning treats the grant of ITC as not being a later concession confined to transactions after the amendment date but as a legislative correction of an earlier anomaly; confining the benefit to post amendment periods would create discriminatory taxation between identical transactions before and after the amendment. Applying that principle to the facts of this petition (AY 2011 12), the Court found no justification for the respondent's reversal of the input tax credit on inter State sales not covered by C Form and held the reversal to be erroneous. The Court therefore quashed the impugned order and allowed the writ petition. [Paras 5, 6]

The reversal of input tax credit in respect of inter State sales not covered by C Form for assessment year 2011 12 was erroneous; the impugned order is quashed and the writ petition is allowed.

Final Conclusion: Applying the precedent that the 2015 amendment remedied an anomaly and operates retrospectively, the Court set aside the assessment order insofar as it reversed input tax credit on inter State sales not supported by C Form for AY 2011 12 and allowed the petition.