TaxTMI 
TaxTMI 
2022 (9) TMI 908
X X X X Extracts X X X X
X X X X Extracts X X X X
....ior Counsel for the Appellant submitted that the Appellant is aggrieved by the common order dated 28.05.2021 limited to I.A. No. 85 of 2021 in C.P. (IB) No.51/BB/2018. 3. The Learned Senior Counsel submitted that the Corporate Debtor has approached the 1st Respondent i.e. State of Karnataka on 28.12.2011 availing concessions under the special incentives and concession scheme. The Respondent on 05.06.2012 sanctioned the proposal by granting several incentives and concessions. On 23.06.2013 the 1st Respondent issued a loan eligibility certificate to the unit for a sum of Rs.226.87 crores to the Corporate Debtor as interest free loan subject to the terms and conditions contained in the loan eligibility certificate dated 26.06.2013. The incentives and concessions granted to the Corporate Debtor was entered into an agreement dated 05.08.2013 between the Respondent No.1 and the Corporate Debtor. The Respondent No.1 released interest free loan to the Corporate Debtor against the submission of bank guarantee as security from 2014-2017. The Union Bank of India issued bank guarantee on 19.06.2014 for an amount of Rs.2,75,00,000/- which was due to expire on 18.06.2019. 4. It is submitte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lecting in the financial statements of the Corporate Debtor. The Resolution Professional cannot automatically admit a claim, however, the claimant is required to file a claim form as prescribed under the CIRP Regulations and cannot be dispensed with in any manner. 7. Learned Senior Counsel further submitted that the finding of the Adjudicating Authority dispensing with the mandatory requirement of filing a claim because the debt was clearly disclosed in audited financial statements of the Corporate Debtor, is legally untenable. Such a finding should be rejected in toto as the same is against the basic tenets of the code and would lay down a completely wrong precedent leading to failure of the Code in near future. The Learned Senior Counsel emphasises the duties prescribed to be performed by the RP under Section 18 and 21 of the I& B Code, 2016 8. In view of the reasons as stated above the Learned Senior Counsel prayed this Bench to allow the Appeal by setting aside the impugned order passed in I.A. No. 85 of 2021. Respondent's Submissions: 9. The 1st Respondent filed its reply and denied the averments made by the Appellant. It is stated in the reply that the Learned Adj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndent herein (RP of the Corporate Debtor) before the Adjudicating Authority seeking a direction from the Adjudicating Authority to the 2nd Respondent to admit the claim of the 1st Respondent filed vide Form-C and sought a direction to include such claim in the CoC and pass any other orders. 14. The Adjudicating Authority after evaluating the matrix of the case passed the following direction: "V. 1. (1) I.A. No.85 of 2021 CP (IB) No.51/BB/2018 is disposed of with the directions that the claim filed by the applicant, the State of Karnataka, Department of Industries and Commerce as a Financial Creditor in Form-C shall be put up by the RP to the CoC for its consideration/acceptance, in the light of our findings and decision in the forgoing paragraphs. Reconstitution of the CoC will also be considered by the RP. 15. From the aforesaid directions, the Adjudicating Authority declared as under: viz. (a) 1st Respondent i.e. State of Karnataka Department of Industries and Commerce as a Financial Creditor, (b) The claim of the 1st Respondent shall be put up by the RP to the CoC for its consideration/acceptance. 16. The basis arriving such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Section 30 & 31 for approval of Resolution Plan. 20. It is seen that the 1st Respondent filed writ petition being No. 14851 of 2020 before the Hon'ble High Court of Karnataka seeking directions for reconstitution of CoC and consider its claim and also sought interim stay of CIR process pending before the Adjudicating Authority. The Hon'ble High Court granted ad-interim stay on 22.12.2020 and thereby the CIRP proceedings have been stayed. The Hon'ble High Court on 04.03.2021 disposed of the writ petition directing the 1st Respondent to move before the NCLT for its claim. Accordingly, the I.A. No.85 of 2021 came to be filed before the Adjudicating Authority seeking reliefs as prayed therein. 21. The Adjudicating Authority while deciding the aforesaid I.A. No.85 of 2021 framed issues whether the 1st Respondents claim would amount to a financial debt and whether such claim can be considered even if not submitted within the period stipulated under Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations 2016. 22. In regard to the aforesaid issues the Adjudicating Authority para 9 and para 12(8) of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rest free and towards unpaid Value Added Tax for a period of 10 years which is a benefit issued by the Respondent as a promotion policy of the State Government. From the perusal of proceeding of Government of Karnataka dated 05.06.2012 annexed at A4 page 165-168 and the relevant page 167, the Government of Karnataka pleased to sanction following special incentives and concessions to the Corporate Debtor for their investment proposal as under: 1. 75% of the eligible gross VAT as soft loan for 10 years from the date of commencement of commercial production to be repay in 10 annual equal instalments starting from the eleventh year, not acceding 50% of the investment made by the unit. 2. 95% of the CST generated by inter-state sales of the end products to be reimbursed in the initial 5 years. 3. Exemption from payment of electricity duty in the initial 5 years from the date of commencement of commercial production on the power supply received from ESCOMs or power utilized from captive generation. 4. Eligible gross VAT should be worked out based on the following principles. i. For sales made by the industrial unit meant for final consumers wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is reiterated that the trigger for initiation of the Corporate Debtor Insolvency Resolution Process by a Financial Creditor under Section 7 of the IBC is the occurrence of a default by the Corporate Debtor. 'Default' means non-payment of debt in whole or part when the debt has become due and payable and debt means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debt. The definition of 'debt' is also expansive and the same includes inter alia financial debt. The definition of 'Financial Debt' in Section 5(8) of IBC does not expressly exclude an interest free loan. 'Financial Debt' would have to be construed to include interest free loans advanced to finance the business operations of a corporate body." 27. In view of the judgment of the Hon'ble Supreme Court (supra) even if the money borrowed does not carry any interest and include interest free loan advanced to finance the business operations of a corporate body, would amount to financial debt within the meaning of Section 5(8) of the Code. Therefore, the stand of the Appellant that there is no interest component for the claim made by the 1st Respondent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eral of Income Tax (Admn. & TPS) Vs. M/s Synergies Dooray Automotive Ltd. & Ors. para 29 & 30 thus read as under: "29. 'Operational Debt' in normal course means a debt arising during the operation of the Company ('Corporate Debtor'). The 'goods' and 'services' including employment are required to keep the Company ('Corporate Debtor') operational as a going concern. If the Company ('Corporate Debtor') is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the 'Income Tax', 'Value Added Tax' and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including 'Income Tax', 'Value Added Tax' etc. come within the meaning of 'Operational Debt'. 30. For the said very reason, we also hold that 'Income Tax Department of the Central Government' and the 'Sales Tax Department(s) of the State Government' and 'local authority', who are entitled for dues arising out of the existing law are 'Operational Credit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is an admitted fact that the last date for submissions of claims was 04.12.2019, however, the Appellant has filed his claim on 12.12.2020 i.e delay of 374 days. The Appellant in any case cannot get the advantage of the Judgment of Hon'ble Supreme Court in Suo Moto Writ Petition (c) No. 03/2020 as prescribed period has already been expired on 04.12.2019 for submitting the claim. In the impugned order, it is mentioned that the CIRP is at the stage of about to end. Ld. Adjudicating Authority has also mentioned that if the Appellant's claims is directed to consider at belated stage it will not only be unfair to the other creditors who could not file their claim with the RP because of the delay but would also dilute the purpose of publication of Form-A. CIRP is a time bound process and if the Adjudicating Authority sets the clock back, it would certainly go against main objective of the Code." 35. Further, this Tribunal in the matter of Deputy Commissioner of GST & Central Excise Vs. Mr. Vijay Kumar V. Iyer in Company Appeal (AT) (Ins) No. 604 of 2021 para 10 & 12 held as under: "10. We have gone through the Appeals and although it is stated that collectively Hundred Crore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Vs. ICICI Bank & Anr. Reported in (2018) 1 SCC 407 paras 12, 16 & 31 held that "it can be seen that time is time of essence in seeing whether the corporate body can be put back on its feet, so as to stave off liquidation". 38. Therefore, this Tribunal find that the claim of the 1st Respondent herein is belated and cannot be considered and the finding of the Adjudicating Authority in directing the RP to place the claim in Form-C before CoC per se illegal and unsustainable accordingly, the point is answered against the 1st Respondent. 39. The next point for consideration is whether the RP has power to admit the claims suo-motu? 40. The code prescribes the duties to be performed by the 'Interim Resolution Professional' and the 'Resolution Professional', as per Section 18 and Section 25 of the I & B Code, 2016. The IBBI (Insolvency Resolution Process for Corporate persons) Regulations 2016, prescribes the procedure to be adopted/followed. As per Chapter IV Regulation 7 of the Regulations, the 'Claims' by the 'Operational Creditor' to be submitted with proof to the 'Interim Resolution Professional' in Form-B and as per Regulation 8 of the Regulations, the 'Financial Creditors' ....