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2022 (9) TMI 317
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....-01 of 2019 in C.P. No. (IB) 88/9/NCLT/AHM/2017 filed by the appellants and holding that the Government cannot claim first charge over the property of the Corporate Debtor, as Section 48 of the Gujarat Value Added Tax, 2003, hereinafter referred to as the "GVAT Act", which provides for first charge on the property of a dealer in respect of any amount payable by the dealer on account of tax, interest, penalty etc. under the said GVAT Act, cannot prevail over Section 53 of the IBC. 2. The short question raised by the appellant in this appeal is, whether the provisions of the IBC and, in particular, Section 53 thereof, overrides Section 48 of the GVAT Act which is set out herein below for convenience:- "48. Tax to be first charge on property.- Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case maybe, such person." 3. The respondent, a company within the meaning of the Companies Act, 2013 is engaged in the business of....
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....-Corporate Debtor moved an interlocutory application No.273 of 2018 contending that the Tourism Finance Corporation of India Limited had wrongly been categorised as an unsecured financial creditor. 13. By an order Sr. No.JCCT/Div-4/Mahesana/NCLT/case/ O.W.No.3090 dated 22nd October, 2018, the appellant called upon the RP to confirm the claim of the appellant towards outstanding tax dues. 14. By a letter dated 22nd October, 2018, the Resolution Professional informed the appellant that the entire claim of the appellant had been waived off. The order of the RP was conveyed to the appellant by an email dated 6th November, 2018. 15. On or about 20th December, 2018, the appellant challenged the Resolution Plan by making an application being I.A No. P-01 of 2019 before the Ahmedabad Bench of the NCLT contending that Government dues could not be waived off. The appellant prayed for payment of total dues of Rs.47,35,72,314/- towards VAT/CST on the ground that the Sales Tax Officer was a secured creditor. 16. By an order dated 27th February, 2019 in IA No. 224/271/272/337 of 2018 and P-01 of 2019 in CP No.(IB) 88 of 2017, the Adjudicating Authority being the Ahmedabad Bench of th....
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....tion Professional' at belated stage after approval of the 'Resolution Plan' by the Adjudicating Authority. 36. Learned counsel for the 'Resolution Professional' submitted that the claim of the Appellant- 'State Tax Officer (1)' comes within the meaning of 'Operational Debt' as defined under Section 5(21). The claim of the Appellant also does not fall within the meaning of 'Secured Creditor' as defined under Section 3(30) read with Section 3(31) of the I&B Code. *** 38. In view of Statement of Objects and Reasons of the 'I&B Code' read with Section 53 of the 'I&B Code', the Government cannot claim first charge over the property of the 'Corporate Debtor'. Section 48 cannot prevail over Section 53. Therefore, the Appellant - 'State Tax Officer-(1)' do not come within the meaning of 'Secured Creditor' as defined under Section 3(30) read with Section 3(31) of the I&B Code'. 39. Further, as 'Sales Tax Department' filed its claim at belated stage after the plan had been approved by the 'Committee of Creditors', the 'Resolution Professional' had no jurisdiction to entertain the same and rightly not entertained." 19. Sections 30 and 31 of the IBC are s....
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....(c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. Explanation.-For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as ....
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....or and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this subsection, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pur....
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....ment of security interest; (f) any remaining debts and dues; (g) preference shareholders, if any; and (h) equity shareholders or partners, as the case may be. (2) Any contractual arrangements between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction. Explanation.-For the purpose of this section- (i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and (ii) the term "workmen's dues" shall have the same meaning as assigned to it in Section 326 of the Companies Act, 2013 (18 of 2013)." 21. In exercise of power conferred u....
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.... (2) For representation of creditors in a class ascertained under sub-regulation (1) in the committee, the interim resolution professional shall identify three insolvency professionals who are- (a) not his relatives or related parties; (aa) having their addresses, as registered with the Board,in the State or Union Territory, as the case may be,which has the highest number of creditors in the class as per their addresses in the records of the corporate debtor: Provided that where such State or Union Territory does not have adequate number of insolvency professionals, the insolvency professionals having addresses in a nearby State or Union Territory, as the case may be, shall be considered; (b) eligible to be resolution professional under Regulation 3; and (c) willing to act as authorised representative of creditors in the class. (3) The interim resolution professional shall obtain the consent of each insolvency professional identified under subregulation (2) to act as the authorised representative of creditors in the class in Form AB of the Schedule. 6. Public announcement.-(1) An insolvency professional shall ma....
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....ccounts. (v) copies of relevant extracts of Form GSTR-1 and Form GSTR-3B filed under the provisions of the relevant laws relating to Goods and Services Tax and the copy of e-way bill wherever applicable: Provided that provisions of this sub-clause shall not apply to those creditors who do not require registration and to those goods and services which are not covered under any law relating to Goods and Services Tax. 8. Claims by financial creditors.-(1) A person claiming to be a financial creditor, other than a financial creditor belonging to a class of creditors, shall submit claim with proof to the interim resolution professional in electronic form in Form C of the Schedule: Provided that such person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee. (2) The existence of debt due to the financial creditor may be proved on the basis of- (a) the records available with an information utility, if any; or (b) other relevant documents, including- (i) a financial contract supported by financial statements as evidence of the debt; (ii) a reco....
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.... (iii) an order of a court or tribunal that has adjudicated upon the non-payment of a dues, if any. 9-A. Claims by other creditors.-(1) A person claiming to be a creditor, other than those covered under Regulations 7, 8, 8-A or 9, shall submit its claim with proof to the interim resolution professional or resolution professional in person, by post or by electronic means in Form F of the Schedule. (2) The existence of the claim of the creditor referred to in sub-section (1) may be proved on the basis of- (a) the records available in an information utility, if any, or (b) other relevant documents sufficient to establish the claim, including any or all of the following- (i) documentary evidence demanding satisfaction of the claim; (ii) bank statements of the creditor showing non-satisfaction of claim; (iii) an order of court or tribunal that has adjudicated upon non-satisfaction of claim, if any. 10. Substantiation of claims.-The interim resolution professional or the resolution professional, as the case may be, may call for such other evidence or clarification as he deems fit from a creditor for substantia....
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....d (e) presented at the first meeting of the committee. 14. Determination of amount of claim.-(1) Where the amount claimed by a creditor is not precise due to any contingency or other reason, the interim resolution professional or the resolution professional, as the case may be, shall make the best estimate of the amount of the claim based on the information available with him. (2) The interim resolution professional or the resolution professional, as the case may be, shall revise the amounts of claims admitted, including the estimates of claims made under sub-regulation (1), as soon as may be practicable, when he comes across additional information warranting such revision." 22. Prior to amendment by Notification No.IBBI/2018-19/GN/REG013 dated 3rd July 2018, with effect from 4th July, 2018, Sub-Regulation (1) of Regulation 12 read with Sub-Regulation (2) provided that a creditor shall submit proof of claim on or before the last date mentioned in the public announcement. Sub-Regulation (2) was amended with effect from 4th July, 2018 and now reads "a creditor shall submit claim with proof on or before the last date mentioned in the public announcement".....
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....Solicitor General of India and Ms. Aastha Mehta, learned Advocate, referred to Sections 3(30) and 3(31) of the IBC, set out herein below :- "Section 3(30) and 3(31) of the Code read : "3(30) "secured creditor" means a creditor in favour of whom security interest is created; 3(31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;" 28. The learned Solicitor General of India submitted that a reading of Sections 3(30) and 3(31) of the IBC makes it clear that the finding of the NCLAT that the State is not a secured creditor is erroneous and contrary to the clear definition of secured creditor under the IBC. 29. As argued by the learned Solicitor General, the term "Secured Creditor" as defined under the IBC is comprehensive and wide enough to cover a....
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....dates the RP to ensure that the Resolution Plan conforms to the parameters/requirements laid down in the said provision. It was the duty of the Resolution Professional to examine, ensure and verify that the resolution plan conformed to the parameters/requirements laid down under Section 30(2) of the IBC. Further, Section 29 of the IBC casts a statutory duty and/or obligation on the Resolution Professional to prepare the information memo after following the procedure laid down in the Court. 37. The learned ASG pointed out that under Section 29 of the IBC, the Resolution Professional is required to prepare the Information Memorandum. The Information Memorandum is mandatorily required to contain the details as mentioned in Regulation 36(2) of the Regulations, 2016. 38. The learned ASG referred to Regulation 36(2) of the Regulations, 2016 which is set out herein below :- "36. Information memorandum (2) The information memorandum shall contain the following details of the corporate debtor - (a) ..... (b) the latest annual financial statements; (c) audited financial statements of the corporate debtor for the last two financial years and ....
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....clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (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. 66. The resolution plan submitted by the 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 sub-section (1) of Section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial cred....
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....gued by the learned Solicitor General, there can be no question of acceptance of a Resolution Plan that is not in conformity with the statutory provisions of Section 31(2) of the IBC. Section 30(2) (b) of the IBC, casts an obligation on the Resolution Professional to examine each resolution plan received by him and to confirm that such resolution plan provides for the payment of dues of operational creditors, as specified by the Board, 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 operational creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in Sub-section 2 of Section 53, whichever was higher, and provided for the payment of debts of financial creditors, who did not vote in favour of the resolution plan, in such manner as might be specified by the Board. 46. Under Section 31 of the IBC, a resolution plan as approved by the Committee of Creditors under Sub-Section (4) of Section 30 might be approved by the Adjudicating Authority only if the Adjudicating Author....
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..... On the other hand, Sub-section (2) of Section 31, which enables the Adjudicating Authority to reject a Resolution Plan which does not conform to the requirements referred to in sub-section (1) of Section 31, uses the expression "may". 50. Ordinarily, the use of the word "shall" connotes a mandate/binding direction, while use of the expression "may" connotes discretion. If statute says, a person may do a thing, he may also not do that thing. Even if Section 31(2) is construed to confer discretionary power on the Adjudicating Authority to reject a Resolution Plan, it has to be kept in mind that discretionary power cannot be exercised arbitrarily, whimsically or without proper application of mind to the facts and circumstances which require discretion to be exercised one way or the other. 51. If the established facts and circumstances require discretion to be exercised in a particular way, discretion has to be exercised in that way. If a Resolution Plan is ex facie not in conformity with law and/or the provisions of IBC and/or the Rules and Regulations framed thereunder, the Resolution would have to be rejected. It is also a well settled principle of interpretation that the ex....