TaxTMI 
TaxTMI 
2021 (4) TMI 613
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....alia, Adv. Ms. Smriti Shah, Adv. Ms. Nidhi Sahay, Adv. CIVIL APPEAL NO. 1554 OF 2021 [ARISING OUT OF SPECIAL LEAVE PETITION NO.11232 OF 2020] WRIT PETITION (CIVIL) NO.1177 OF 2020 CIVIL APPEAL NOS. 1550-1553OF 2021 [ARISING OUT OF SPECIAL LEAVE PETITION NOS.7147-7150 OF 2020] JUDGMENT B. R. GAVAI, J. 1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of 2020 and 7147-7150 of 2020. 2. The short but important questions, that arise for consideration in this batch of matters, are as under: (i) As to whether any creditor including the Central Government, State Government or any local authority is bound by the Resolution Plan once it is approved by an adjudicating authority under subsection (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code')? (ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature? (iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for reco....
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.... the resolution plan submitted by EARC came to be rejected in the 9th meeting of CoC held on 31.3.2018. 7. CoC thereafter proceeded for negotiations with the H2 Bidder i.e. GMSPL. However, the resolution plan of GMSPL was also found to be unacceptable to CoC and therefore, in its 10th meeting held on 3.4.2018, it decided to annul the existing process and initiate a fresh process for invitation of Resolution Plan only from the applicants, which had earlier submitted their EOI. Accordingly, a communication was sent to the applicants, which had submitted their EOI. In response to the said invitation, three Resolution Plans were received each from GMSPL, EARC and Srei Infrastructure Finance Limited (hereinafter referred to as "SIFL") respectively. These Resolution Plans were considered by CoC in its 11th meeting held on 13.4.2018. After evaluation of the Resolution Plans, CoC ranked GMSPL as the H1 bidder. 8. Further negotiations were held by CoC with GMSPL. After several rounds of negotiations, the Resolution Plan of GMSPL was considered by CoC for its approval. In its 12th meeting held on 21.4.2018, CoC unanimously took a decision to convene a meeting of CoC on 25.4.2018 at 6 P....
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....ribunal, New Delhi (hereinafter referred to as "NCLAT"). Company Appeal (AT) (Insolvency) No. 437/2018 was against the rejection of claims of EARC as Financial Creditor and thereby its noninclusion in CoC. Company Appeal (AT) (Insolvency) No. 444/2018 came to be filed with the grievance, that RP and CoC had erroneously held, that the plan of GMSPL was better than that of EARC. One more Company Appeal being Company Appeal (AT) (Insolvency) No. 500/2018 came to be filed by Sundargarh Mines & Transport Workers Union (hereinafter referred to as "SMTWU") on behalf of the workmen of the Corporate Debtor. One another Company Appeal being Company Appeal (AT) (Insolvency) No.438/2018 came to be filed by one Deepak Singh, an employee of APNRL, claiming dues of his salary. 12. By the impugned judgment and order dated 23.4.2019, NCLAT while holding, that RP was justified in not accepting the claim of EARC and that NCLT had rightly rejected the application filed by EARC, however, observed that the rejection of the claim for the purpose of collating and making it part of the Resolution Plan will not affect the right of EARC to invoke the Bank Guarantee against the Corporate Debtor, in case th....
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..... The appellant is a wholly owned subsidiary of UltraTech Cement Limited and is engaged in the business of manufacturing and marketing of cement and allied products. 17. On 19.12.2015, the Additional Commissioner, Commercial Tax, Ghaziabad passed an order in the appeal preferred by M/s Binani Cement Limited, thereby, allowing the appeal filed by Binani Cement and setting aside the order of imposition of fine of Rs. 24,71,885/. Vide another order dated 22.12.2015, passed in the appeal filed by Binani Cement, the order of imposition of fine of Rs. 59,61,445/also came to be set aside. Vide order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, Division10, Ghaziabad held, that Binani Cement was liable to pay Entry Tax of Rs. 40,47,344/for the Assessment Year 2003-2004. By another order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, Division10, Ghaziabad further held, that Binani Cement was liable to pay Entry Tax of Rs. 43,06,715/for the Assessment Year 2004-2005. 18. Since the said Binani Cement was unable to pay the debt to Bank of Baroda, the Bank of Baroda filed an application being C.A. (IB) No. 359/KB/2017 before NCLT, Kolkata Bench under Section 7 of I&B ....
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....ications addressed by the appellant to the Joint Commissioner, Commercial Tax (Corporate Circle), Ghaziabad dated 26.4.2019, the following endorsements came to be made by the authority on 29.4.2019: " After consideration on application presented by you, it is found that, by Hon'ble NCLT/NCLAT after transfer, neither stay is imposed on tax assessment nor on creation of demand. So the created demand is payable by you. If you are not agree with it, preferring appeal before higher authority, present its copy to us. Disposal is done of application presented by you." 22. The Commercial Tax Department of the State of Rajasthan filed Civil Appeal No. 5889/2019 challenging the Resolution Plan. However, the said appeal came to be dismissed vide order of this Court dated 26.7.2019. The appeals being Civil Appeal Nos. 630634/ 2020 were also preferred by the Commissioner of Central Excise, Goods and Services Tax, Jodhpur challenging the Resolution Plan. The same also came to be dismissed by this Court vide order dated 24.1.2020. 23. The appellant therefore filed a Civil Miscellaneous Writ Petition No. 354/2020 before the High Court of Allahabad challenging the order passed by the....
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....LS LIMITED, BOKARO, JHARKHAND VS. STATE OF JHARKHAND AND OTHERS] 26. The appellant is a Corporate Debtor in respect of which the proceedings under Section 7 were initiated by the SBI. Vide order dated 21.7.2017 of NCLT, the application filed by SBI was admitted and Mr. Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP). In its meeting dated 21.8.2017, CoC approved the appointment of IRP as RP. In response to the invitation for submission of resolution plans, four applicants had submitted their Resolution Plans. CoC had approved the Resolution Plan of Vedanta Limited by 100% voting share. NCLT vide order dated 17.4.2018 approved the Resolution Plan of Vedanta Limited. The appeal being Company Appeal (AT) (Insolvency) No. 175/2018 filed by one Renaissance Steel India Private Limited challenging the order of NCLT came to be dismissed by NCLAT vide order dated 10.8.2018. Challenging the notices issued by the respondent State Authorities and the order of SBI asking it to pay an amount of Rs. 37,41,41,602/on account of tax penalty due under the Jharkhand VAT Act for the period 2011-12 and 201213, the appellant approached the High Court of Jharkhand. The appellant h....
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....enior Counsel further submitted, that the Resolution Plan submitted by GMSPL is for an amount of Rs. 321.19 crore. If additional liability of Rs. 648.89 crore is saddled upon the resolution applicant, the total resolution plan itself would be unworkable. 30. Dr. Singhvi further submitted that NCLT has found the conduct of EARC not to be bona fide. He submitted, that NCLT has categorically found, that the application filed by EARC was a deliberate attempt to stage manage an objection against the approval of Resolution Plan submitted by an entity, other than it. He submitted, that as a matter of fact, NCLT has imposed costs of Rs. 1 lakh on EARC taking into consideration its conduct. 31. Dr. Singhvi relied upon the judgments of this Court in the cases of K. Shashidhar vs. Indian Overseas Bank and Others (2019) 12 SCC 150, Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and others (2020) 11 SCC 467, Karad Urban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors. (2020) 9 SCC 729 and Kalpraj Dharamshi and Another vs. Kotak Investment Advisors Limi....
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....e bound by the same and any statutory dues owed to them by the Corporate Debtor, which were not included in the resolution plan, shall stand extinguished. He submitted, that the 2019 Amendment, which amends Section 31 is clarificatory in nature and only declares and clarifies the position of law, which has already been in existence i.e. the Central Government, any State Government and local authorities are bound by the CIRP. He submitted, that this Court in the cases of State Bank of India vs. V. Ramakrishnan and Another (2018) 17 SCC 394 and B.K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633 has held the amendment to certain provisions of the I&B Code to be clarificatory in nature. The learned Senior Counsel submitted, that upon perusal of the provisions of the I&B Code, it is clear, that once NCLT grants approval to the Resolution Plan, all proceedings pending insofar as the Corporate Debtor is concerned, which are not included in the Resolution Plan shall stand automatically stayed. He submitted, that perusal of the chart pertaining to the dues of the respondents, clearly reveal that all of the said dues are prior to the admissi....
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....y the authorities under the provisions of the relevant Statutes. He submitted, that the assessment orders which were passed in accordance with law were duly approved in appeal by the higher authority and therefore, the High Court was justified in observing that the petition was not maintainable, in view of the availability of alternative remedy of filing a second appeal. 41. The learned Senior Counsel submitted, that the adjudicatory authorities acting under the relevant statutes being not a part of CoC are not bound by the decision of CoC, which is approved by NCLT. He further submitted, that merely continuation of the adjudicatory proceedings cannot be a part of coercive action. 42. Shri V. Shekhar submitted, that 2019 Amendment cannot be said to be clarificatory in nature and as such, the proceedings, which were pending prior to the date of the amendment to Section 31, would not be affected by the 2019 Amendment to Section 31. He therefore prayed for dismissal of the appeal. SUBMISSIONS IN WRIT PETITION (CIVIL) NO. 1177 OF 2020 [M/s Monnet Ispat & Energy Limited and Another v. State of Odisha and Another] 43. Shri Kaul, learned Senior Counsel appearing on behalf of t....
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....ssed by NCLT was binding only on the parties, which have participated in the Resolution process. He submitted, that both the grounds are erroneous inasmuch as, Vedanta Limited is a successful Resolution Applicant. The Resolution process is in respect of the present appellantwrit petitioner, which is the Corporate Debtor and as such, the petition at the behest of the present appellant was very much tenable in law. Insofar as the second ground of the High Court is concerned, he submitted, that if such a view is accepted, it will frustrate the entire object of I&B Code and the revival of the Debtor Companies would be impossible if the successful resolution applicants are sprung with the surprise debts, which are not part of the Resolution Plan. 45. Shri Gurukrishna Kumar, learned Senior Counsel appearing on behalf of the respondent submitted, that the entire process conducted by RP and CoC is fraudulent. He submitted, that in accordance with Section 29 and specifically, clause H of Regulation 36, RP was required to furnish the details of the material litigation and an ongoing investigation or proceedings initiated by Government and Statutory Authorities in the information memorandu....
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....her when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). The World Bank's Ease of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia." [emphasis supplied] 51. This Court thereafter in paragraph 16 reproduced the relevant paragraphs contained in the report of the Bankruptcy Law Reforms Committee Report of 2015. Thereafter, this Court reproduced all the relevant provisions of I&B Code in paragraphs 18 to 26. 52. This Court in the case of Innoventive Industries Ltd. (supra) thereafter elaborately discussed the scheme of the various provisions of the I&B Code in paragraphs 27 to 32, which read thus: "27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning nonpayment of a debt once it becomes due and payable, which includes nonpayment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn t....
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....pt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under subsection (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, withi....
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....ction 21 of the Act. Decisions by this committee are to be taken by a vote of not less than 75% of the voting share of the financial creditors. Under Section 28, a resolution professional, who is none other than an interim resolution professional who is appointed to carry out the resolution process, is then given wide powers to raise finances, create security interests, etc. subject to prior approval of the committee of creditors." [emphasis supplied] 53. After discussing the relevant provisions of I&B Code, this Court observed thus: "33. Under Section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This plan must provide for payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the plan, and implementation and supervi42 sion of the plan. It is only when such plan is approved by a vote of not less than 75% of the voting share of the financial creditors and the adjudicating authority is satisfied that the plan, as approved, meets the statutory requir....
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....e to operate, once the Adjudicating Authority approves the resolution plan. The scheme of I&B Code therefore is, to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the Corporate Debtor as a going concern until a resolution plan is drawn up. Once the resolution plan is approved, the management is handed over under the plan to the successful applicant so that the Corporate Debtor is able to pay back its debts and get back on its feet. 55. This Court recently in the case of Kalpraj Dharamshi and another vs. Kotak Investment Advisors Ltd. and another (supra) has, in detail, considered the provisions of Sections 30 and 31 of I&B Code, the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 and the judgments of this Court in the case K. Sashidhar (supra), Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) and Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and others (supra) and observed thus: "139. It is thus clear, that the Committee was of the view, that for deciding key economic question in the bankruptcy p....
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.... debtor, namely, KS&PIPL and IIL, by a vote of less than seventy five per cent of voting share of the financial creditors; and about the correctness of the view taken by NCLAT that the percentage of voting share of the financial creditors specified in Section 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be which, according to the resolution applicant and the stakeholders supporting the resolution plan, may be relevant?" (emphasis supplied) 142. After considering the judgment of this Court in the case of Arcelormittal India Private Limited v. Satish Kumar Gupta46 and the relevant provisions of the I&B Code, this court further observed in K. Sashidhar (supra) thus: "52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse ....
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.... the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. It has been held, that the opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. It has been held, that the legislature has consciously not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC's 'commercial wisdom' is made nonjusticiable. 144. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after referring to the judgment of this Court in the case of K. Sashidhar (supra) observed thus: "64. Thus, what is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly....
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....nsidered. It will be relevant to refer to paragraph 55 of the judgment in the case of K. Sashidhar (supra), which reads thus: "55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. T....
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....nforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers "by the resolution professional" during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds- be it under Section 30(2) or under Section 61(3) of the I&B Code -are regarding testing the validity of the "approved" resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision." [emphasis supplied] 150. It will therefore be clear, that this Court, in unequivocal terms, held, that the appea....
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.... "30. The appellate authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the adjudicating authority has to be satisfied that the requirement of subsection (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an adjudicating authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel [Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531], the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in the....
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....sfied, that the resolution plan as approved by CoC meets the requirements as referred to in subsection (2) of Section 30, it shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is, revival of the Corporate Debtor and to make it a running concern. 59. The resolution plan submitted by successful resolution applicant is required to contain various provisions, viz., provision for payment of insolvency resolution process costs, provision for payment of debts of operational creditors, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the Corporate Debtor under section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in subsection (1) of section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, which also shall not be less than the amount to....
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....urprise claims should be flung on the successful resolution applicant. The dominant purpose is, that he should start with fresh slate on the basis of the resolution plan approved. 62. This aspect has been aptly explained by this Court in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra). "107. For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/ Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution ....
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....n plan, shall stand extinguished. 68. The only question, which remains is, what happens to such dues if they pertain to a period wherein Section 7 petitions have been admitted prior to 16.8.2019. 69. To answer the said question, we will have to consider, as to whether the said amendment is clarificatory/declaratory in nature or a substantive one. If it is held, that it is declaratory or clarificatory in nature, it will have to be held, that such an amendment is retrospective in nature and exists on the statute book since inception. However, if the answer is otherwise, the amendment will have to be held to be prospective in nature, having force from the date on which the amendment is effected in the statute. 70. It will be relevant to refer to the "Statement of Objects and Reasons" (hereafter referred to as "SOR") of the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, which read thus: "The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a timebound manner for maximisation of value of assets ....
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....mentation of insolvency resolution process in a time bound manner for maximisation of value of assets in order to balance the interests of all stakeholders. However, it was noticed, that in some cases there was extensive litigation causing undue delays resultantly hampering the value maximisation. It was also found necessary to ensure, that all creditors are treated fairly. It was therefore in view of the various difficulties faced and in order to fill the critical gaps in the corporate insolvency framework, it was necessary to amend certain provisions of the I&B Code. Clause (f) of para 3 of the SOR of the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 would amply make it clear, that the legislative intent in amending subsection (1) of Section 31 of I&B Code was to clarify, that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any State Government or any local authority to whom a debt is owed in respect of payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, including tax authorities. 72. In the Rajya Sabha debates, on 29.7.2019, when the Bill for....
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.... she would want all the Hon'ble Members to recognize this message and communicate further that I&B Code gives that comfort to all new bidders. They need not be scared that the taxman will come after them for the faults of the earlier promoters. She further states, that once the resolution plan is accepted, the earlier promoters will be dealt with as individuals for their criminality but not the new bidder who is trying to restore the company. 74. This Court in the case of K.P. Varghese v. Income Tax Officer, Ernakulam and Another (1981) 4 SCC 173 had an occasion to consider the question, as to whether the speech made by the Hon'ble Finance Minister, explaining the reason for the introduction of the Bill could be referred for the purpose of ascertaining the mischief sought to be remedied by the legislation. This Court observed thus: "Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill ca....
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....nment, any State Government or any local authority, including the tax authorities once an approval was granted to the resolution plan by NCLT; on account of there being some ambiguity, the State/Central Government authorities continued with the proceedings in respect of the debts owed to them. In order to remedy the said mischief, the legislature thought it appropriate to clarify the position, that once such a resolution plan was approved by the Adjudicating Authority, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished. 78. In Justice G.P. Singh treatise on "The principles of Statutory Interpretation", 14th Edition, Revised by Justice A.K. Patnaik, former Judge of this Court, it is observed thus: "(i) Declaratory Statutes The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually h....
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....n 141989 were held to be clarificatory and retrospective. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended - Channan Singh v. Jai Kuar (Smt.), AIR 1970 SC 349, p. 349, p. 351 : (1969) 2 SCC 429. The language 'shall be deemed always to have meant' - CIT v. Straw Products, AIR 1966 SC 1113 : 1966 (2) SCR 881 or 'shall be deemed never to have included' - Union of India v. S. Muthyam Reddy, JT 1999 (7) SC 596, p. 597 : 1999 (7) SCC 545 : AIR 1994 SC 3881 is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous - Sakuru v. Tanoji, (1985) 3 SCC 590, p. 594 : AIR 1985 SC 1279. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law - Punjab Traders v....
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.... amendment in second proviso to section 43B of Incometax Act, 1961 by the Finance Act, 2003 was held to be curative and retrospective and it was given retrospective effect from the inception of the section on the reasoning that the proviso was added to remedy unintended consequences and supply an obvious omission so that the section may be given a reasonable interpretation and that in fact the amendment to insert the proviso would not serve its object unless it is construed as retrospective. In Commissioner of Income-Tax, Bombay v. Podar Cement Pvt. Ltd., AIR 1997 SC 2523, p. 2538 : (1997) 5 SCC 482the Supreme Court held that amendments introduced by the Finance Act, 1987 in so far they related to section 27(iii), (iiia) and (iiib) which redefined the expression 'owner of house property', in respect of which there was a sharp divergence of opinion amongst the High Courts, was clarificatory and declaratory in nature and consequently retrospective. Similarly, in Brij Mohan Das Laxman Das v. Commissioner of Income - tax - AIR 1997 SC 1651, p. 1654 : 1997 (1) SCC 352; Affirmed in Suwalal Anandlal Jain v. Commr. Of Incometax, AIR 1997 SC 1279 : (1997) 4 SCC 89 and Commissioner of Income....
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....ed the principal Act), for the word 'after', the word 'upto' shall be substituted." [emphasis supplied] 81. This Court while observing, that the amendment was clarificatory in nature, held thus: "14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 46869). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the l....
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....st retrospective operation is a presumption only, and as such it "may be overcome, not only by express words in the Act but also by circumstances sufficiently strong to displace it" (p. 225). If the dominant intention of the legislature can be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the "inhibition of the rule" is a matter of degree which would "vary secundum materiam" (p. 226). Sometimes, where the sense of the statute demands it or where there has been an obvious mis85 take in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231). 18. In a recent decision of this Court in National Agricultural Coop. Marketing Federation of India Ltd. v. Union of India [(2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used ....
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....w did not provide. 3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.' " 21. In Allied Motors (P) Ltd. v. CIT [(1997) 3 SCC 472] certain unintended consequences flowed from a provision enacted by Parliament. There was an obvious omission. In order to cure the defect, a proviso was sought to be introduced through an amendment. The Court held that literal construction was liable to be avoided if it defeated the manifest object and purpose of the Act. The rule of reasonable interpretation should apply. "A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the ....
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....hat the provisions of subsection (1) of Section 14 shall not apply to a surety in a contract of guarantee for Corporate Debtor. Considering the said issue, this Court observed thus: "30. We now come to the argument that the amendment of 2018, which makes it clear that Section 14(3), is now substituted to read that the provisions of subsection (1) of Section 14 shall not apply to a surety in a contract of guarantee for corporate debtor. The amended section reads as follows: "14. Moratorium.-(1)( 2) * * * (3) The provisions of subsection (1) shall not apply to- (a) such transactions as may be notified by the Central Government in consultation with any financial sector regulator; (b) a surety in a contract of guarantee to a corporate debtor." 31. The Insolvency Law Committee, appointed by the Ministry of Corporate Affairs, by its Report dated 26-3-2018, made certain key recommendations, one of which was: "(iv) to clear the confusion regarding treatment of assets of guarantors of the corporate debtor visàvis the moratorium on the assets of the corporate debtor, it has been recommended to clarify by way of an explanat....
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.... which are intrinsic to a contract of guarantee. 5.9. A contract of guarantee is between the creditor, the principal debtor and the surety, whereunder the creditor has a remedy in relation to his debt against both the principal debtor and the surety (National Project Construction Corpn. Ltd. v. Sadhu and Co. [National Project Construction Corpn. Ltd. v. Sadhu and Co., 1989 SCC OnLine P&H 1069 : AIR 1990 P&H 300] ). The surety here may be a corporate or a natural person and the liability of such person goes as far the liability of the principal debtor. As per Section 128 of the Contract Act, 1872, the liability of the surety is coextensive with that of the principal debtor and the creditor may go against either the principal debtor, or the surety, or both, in no particular sequence (Chokalinga Chettiar v. Dandayuthapani Chettiar [Chokalinga Chettiar v. Dandayuthapani Chettiar, 1928 SCC OnLine Mad 236 : AIR 1928 Mad 1262] ). Though this may be limited by the terms of the contract of guarantee, the general principle of such contracts is that the liability of the principal debtor and the surety is coextensive and is joint and several (Bank of Bihar Ltd. v. Damodar Pra....
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....ion 14. That such clarificatory amendment is retrospective in nature, would be clear from the following judgments" 85. In the case of B.K. Educational Services Private Limited vs. Parag Gupta and Associates (supra), this Court considered the question, as to whether the 2018 amendment which inserted Section 238A to the I&B Code was clarificatory in nature or not. After considering various earlier judgments of this Court, this Court observed thus: "26. In the present case also, it is clear that the amendment of Section 238A would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect timebarred claims would have to be allowed, not being governed by the law of limitation. 27. We may also refer to a recent decision of this Court in SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394] , where this Court, after referring to the selfsame Insolvency Law Committee Report, held that the amendment made to Section 14 of the Code, in which the moratorium prescribed by Section 14 was held not to apply to guarantors, was held to be clarificatory, and therefore, retrospective in nature, the object being....
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....and clarificatory in nature and therefore retrospective in operation. 88. There is another reason, which persuades us to take the said view. Subsection (10) of Section 3 of the I&B Code defines "creditor" thus: "(10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decreeholder;" 89. Subsections (20) and (21) of Section 5 of the I&B Code define "operational creditor" and "operational debt" respectively as such: (20) "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; 90. "Creditor" therefore has been defined to mean 'any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and....
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....ffairs & Ors. 2018 SCC OnLine Cal. 142 has also taken a view, that the claim of operational creditor will also include a claim of a statutory authority on account of money receivable pursuant to an imposition by a statute. We are in agreement with the views taken by these Courts. 94. Therefore, in our considered view, the aforesaid provisions leave no manner of doubt to hold, that the 2019 amendment is declaratory and clarificatory in nature. We also hold, that even if 2019 amendment was not effected, still in light of the view taken by us, the Central Government, any State Government or any local authority would be bound by the resolution plan, once it is approved by the Adjudicating Authority (i.e. NCLT). CONCLUSION 95. In the result, we answer the questions framed by us as under: (i) That once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On th....
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....solution plan, three bidders, namely, GMSPL, EARC and SIFL submitted their resolution plans. In the 11th meeting of CoC held on 13.4.2018, the resolution plan submitted by GMSPL was found to be most competitive and as such, CoC declared it as H1 bidder. After holding several rounds of negotiations, in the 12th meeting of CoC held on 21.4.2018, CoC unanimously decided to convene a meeting of the CoC on 25.4.2018 for voting on the resolution plan proposed by GMSPL. In the meeting of the CoC held on 25.4.2018, CoC being satisfied that the resolution plan submitted by GMSPL meets all the requirements under subsection (2) of Section 30 of I&B Code, placed the same for voting. The said resolution plan of GMSPL was approved by more than 89.23% of voting share of financial creditors of the Corporate Debtor. Accordingly, an application being CA (IB) No.402/KB/2018 came to be filed by RP for grant of approval to the resolution plan submitted by GMSPL before the NCLT. EARC filed application being CA (IB) No.398/KB/2018, challenging the approval granted by CoC to the resolution plan submitted by GMSPL. It also filed CA (IB) No. 470/KB/2018, challenging the decision of RP in not admitting its c....
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....8,89,62,395/. In response to the said email, RP sought a clarification, as to whether the corporate guarantee had been invoked by the applicant. RP had not received any response till 21.2.2018 from EARC. Despite repeated requests made by RP, EARC did not respond to the query made by RP. From the record placed before NCLT, it was clear, that EARC had not invoked the corporate guarantee. NCLT therefore posed a question to itself, as to whether an uninvoked corporate guarantee could be considered as matured claim of the applicant. NCLT found, that once the moratorium was applied under Section 14 of I&B Code, EARC was prevented from invoking the corporate guarantee. NCLT further found, that the OMML's guarantee had not been invoked by EARC till the date of completion of CIRP process and once the moratorium was imposed, it could not invoke the corporate guarantee. NCLT therefore found, that there is no illegality or irregularity in not admitting the claim of EARC. 103. NCLT found, that the entire information was uploaded in the virtual data room to which EARC had access since it was also one of the resolution applicants. NCLT found, that the information with regard to claim of all fi....
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....mpletion of CIRP process. Accordingly, we hold that this application is liable to be dismissed with costs of Rs. 1,00,000/. Awarding cost of Rs. 1,00,000/in the peculiar nature and circumstances of the case in hand is found reasonable." 106. Insofar as application being CA No.509/KB/2018 filed by the District Mining Officer is concerned, NCLT found, that RP had sought clarification from the said applicant with regard to its claim made in Form 'B' since the information supplied therein was found to be inadequate. It was found, that in spite of the said request, the District Mining Officer had failed to place on record any supportive document or affidavit as required under the Regulations. NCLT found no merit in the contentions raised on behalf of the District Mining Officer with regard to the claim on the basis of Section 25 of the Mines and Mineral (Development and Regulation) Amendment Act, 1972. It was found, that in view of the provisions of Section 238 of I&B Code, the provisions of I&B Code have an overriding effect over any other law. 107. It was therefore found, that no error was committed by RP in not admitting the claim of the District Mining Officer since it was not....
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....harkhand is concerned, we hold that the statutory dues shall be payable to the State of Jharkhand in terms of existing law which comes within the meaning of 'operational debt' as defined in Section 5(20) read with Section 5(21) and held in "Pr. Director Company Appeal (AT) (Insolvency) Nos. 437, 438, 444 & 500 of 2018 General of Income Tax (Admn. & TPS) Vs. M/s. Spartek Ceramics India Ltd. & Anr.Company Appeal (AT) (Insolvency) No. 160 of 2017". Except the aforesaid observations, in absence of any appeal filed by the State of Jharkhand, no order is passed." 110. We find, that the aforesaid observations are beyond the scope of the powers available with NCLAT under subsection (3) of Section 61 of I&B Code. We also find, that the said observations run totally contrary to the consistent view taken by this Court in the line of judgments starting from K. Sashidhar (supra) to Kalpraj Dharamshi (supra). 111. NCLAT has categorically found, that no ground as is available under subsection (3) of Section 61 of I&B Code has been made out and has also categorically found, that the resolution plan submitted by GMSPL was a better offer than the other two resolution applicants, inclu....
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....t, deed or document; whether oral or written, express or implied, statutory or otherwise, pursuant to which any such dues, liabilities, obligations, claims, counter claims, demands, actions, penalties, right, title or interest is claimed (other than as specifically mentioned herein) shall stand modified with effect from the Effective Date without any further act or deed, and approval of this Plan by NCLT shall be deemed to be sufficient notice which may be required to be given to any Person for such matter and no further notice shall be required to be given. " 113. It will also be relevant to refer to similar provisions made in the resolution plan submitted by GMSPL, which read as under: "7. Withdrawal of litigations initiated by the Financial Creditors against OMML, issue nodues certificate(s) in favour of OMML and release their respective charges on the securities in full and complete satisfaction of all debts owed to the Financial Creditors by OMML / the respective SPVs as the case may be, including all guarantees which may have been provided to the Financial Creditors, for credit facilities availed by OMML. 8. Extinguishment and waiver of all dues to the In....
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.... updating claim under Section 25(2)(e). He submits, that Civil Appeal challenging the said judgment and order has been dismissed by this Court vide order dated 23.1.2019. 116. He submits, that NCLAT itself in the said case had directed EXIM Bank and Axis Bank to be treated as 'financial creditors' and had further directed them to be given representation on CoC. He submits, that, however, in the present case, NCLAT has taken a contrary view. He therefore submits, that in the alternative this Court should direct RP/CoC to treat EARC as a 'financial creditor' and give it representation on CoC and take a decision in accordance with law. 117. We find, that the said case, on facts, would not be applicable to the case at hand. No doubt, that the appeal filed against the judgment and order of NCLAT dated 14.8.2018 has been dismissed by this Court on 23.1.2019. However, it is a settled law, that dismissal of a Special Leave Petition/Appeal does not amount to affirmation of the view taken in the judgment impugned in the Special Leave Petition/Appeal. It will also be relevant to refer to the order passed by this Court dated 23.1.2019 while dismissing the appeal, which reads thus: "Ci....
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....ancial creditor' and entitled for a participation in CoC, still its share was about 9% and as such, the resolution plan of GMSPL would have been passed by a majority of 80%, which is much above the statutory requirement. 123. We are therefore of the considered view, that the observation made by NCLAT giving liberty to EARC to take recourse to such proceedings as available in law for raising its claims is totally unsustainable. 124. Insofar as, the observation made with regard to claim of the Jharkhand Government is concerned, it is to be noted, that the State of Jharkhand has not even appealed against the order passed by NCLT. Insofar as, the claims of Labour and Workmen are concerned, RP has specifically stated before NCLAT, that whatever claims were received from the workmen were duly considered in the resolution plan. Despite that, observing that a liberty is available to the workmen to raise their claims before a Civil Court or Labour Court, in our view, is totally in conflict with the provisions of I&B Code. The same would equally apply to the observation made in the appeal of Mr. Deepak Singh, claiming to be 'operational creditor'. 125. We are therefore of the consid....
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.... the Respondents from passing any orders including penalty orders, raising any further demands, imposing any liability or taking any coercive steps including continuing with pending assessments / proceedings / litigation / appeals / revisions in respect of period prior to Transfer Date." 127. The High Court found, that the appellant has an alternative efficacious remedy of filing the Second Appeal and as such, deemed it fit to not to entertain the said petition. The basic grievance of the appellant in the writ petition was, that after the resolution application was approved by the Adjudicating Authority and the management of the Corporate Debtor was transferred to the resolution applicant, all the claims stood extinguished and the proceedings in respect thereof could not continue. 128. The main ground raised on behalf of the respondent is, with regard to availability of alternate remedy. The second ground raised is, since the transfer date is prior to 2019 amendment to Section 31 of I&B Code, the said amendment would not be applicable to the debts owed to the State Government or Central Government. 129. As held by this Court in catena of cases including in the cases of Bab....
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....dingly. 134. The present writ petition has been filed by the petitioners under Article 32 of the Constitution. In this case also, the resolution plan in respect of the Corporate Debtor (petitioner - Company) has been approved by the Adjudicating Authority on 24.7.2018. Pursuant thereto, the management of the Corporate Debtor (petitioner - Company) was transferred to the successful resolution applicant i.e. AionJSW. 135. After the completion of CIRP on 5.1.2019, the respondent No.2 issued a reminder to the petitioner to pay an amount of Rs. 4,49,34,917.00 towards the service tax deposited by it towards royalty, DMF and NMET for the period between 1.4.2016 and 30.6.2017. The petitioner replied to the said notice pointing out to the authorities the provisions of I&B Code and stating therein, that the demand made by the respondent were not permissible in view of I&B Code. The petitioners had also requested for refund of an amount of Rs. 5,25,15,880/deposited as advance against supply of iron ore. 136. In this background, the petitioners have approached this Court challenging the demand notice dated 20.7.2018 and 28.4.2020. 137. The present case would also be covered by the ....
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....2013, have been rejected. Both the learned Judges have written separate judgments. 143. In the judgment authored by H.C. Mishra, J, the petitions filed by the appellant were rejected on two grounds, viz., one, that since the management of the appellant was taken over by M/s Vedanta Limited on 4.6.2018, it was only M/s Vedanta Limited, which had locus to file writ petitions. Secondly, it was debatable whether the amount of JVAT shall be covered by the expressions "debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government" so as to bring it within the definition of "operational debt". 144. Insofar as, the judgment authored by Deepak Roshan, J. is concerned, the learned Judge has observed, that since the resolution plan was approved by NCLT on 17.4.2018, 2019 amendment to Section 31(1) of I&B Code would not apply to the said plan. We find, that the finding of the High Court, that the dues owed to the State Government and Central Government would not come within the definition of 'operational debt', is incorrect in law in the light of the view that is taken by us. So also the finding, that ....