TaxTMI 
TaxTMI 
2022 (9) TMI 1066
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....ideration and acceptance and to consider the reconstitution of the 'CoC'. Brief Facts: Appellant's Submissions: 2. The Learned Senior 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 CP No. 51 of 2018. 3. It is submitted that the CIR Process was initiated against M/s Associate Décor Limited, the Corporate Debtor vide order dated 26.10.2018 by the 'Adjudicating Authority' (NCLT, Bengaluru Bench). In compliance of the I & B Code and Regulations, the 'RP' initiated the process namely issuance of Form-G inviting Expression of Interest etc. The admission order dated 26.11.2018 published on the websites of the Corporate Debtor and also on IBBI's website. While so, the promoters of the Corporate Debtor approached the Hon'ble Supreme Court in Associate Holding Private Limited Vs. Union of India filed WP (C) No. 1391 of 2018 (tagged along with Dharini Sugars and Chemicals Ltd. Vs. Union of India). The Hon'ble Supreme Court passed a status quo order in the said writ petition on 30.11.2018. 4. It is submitted that as per Form-A the claims were to be submitted on or before 10.12.2018....
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....019 and 28.11.2019 extended the last date for submissions of plans from 30.11.2019 to 07.12.2019 based on request by Prospective Resolution Applicants. In the 15th 'CoC' held on 07.12.2019 two Plans have been received from (i) Archidply Industries (ii) Mohammed Enterprises (Tanzania) Ltd. (METL). The 'CoC' discussed the said plans and further negotiated. Both the Resolution Plans scored on the evaluation matrix with Archidply receiving a total score of 57.20 and 'METL' received 72.64. After extensive deliberations and negotiation in previous meeting, the 'CoC' decided to e-vote from 13.02.2020 to 15.02.2020 on 'METLs' final resolution plan and the 'CoC' approved the plan of 'METL' and the Appellant was directed to file an application before the 'Adjudicating Authority' for its approval. 8. It is submitted that at the belated stage the Assistant Commissioner of Commercial Taxes, Bangalore filed I.A. No. 134 of 2020 on 05.03.2020 seeking setting aside the Appellants order rejecting the claim of the commercial taxes of Rs. 54,46,13,819/-. While matter stood thus, the Respondent filed W.P. No. 14815 of 2020 before the Hon'ble High Court of Karnataka seeking to declare that the const....
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.... 'CoC'. 11. It is submitted that the 'Adjudicating Authority' failed to appreciate, that the Respondent does not have a claim, leave alone a valid claim as on date in as much as the payments, which are in the nature of deferred tax liability under the scheme and payments are to be made from 2024. Further the Appellant cannot admit the claims filed after unanimous approval of the Resolution Plan by the CoC. The 'Adjudicating Authority' failed to apply the judgment of the Hon'ble Supreme Court in Essar Steel India Limited Committee of Creditors Vs. Satish Kumar Gupta (2020) 8 SCC 531 wherein the Hon'ble Supreme Court categorically held at para 107, that a Successful Resolution Applicant cannot be faced with undecided claims after the resolution plan submitted by that applicant is approved by the 'CoC'. 12. In view of the reasons as stated above the Learned Senior Counsel prayed this Bench to allow the Appeal and set aside the 'impugned order' passed in I.A. No. 85 of 2021 in C.P. No. 51 of 2018. Respondent's Submissions: 13. The Respondent filed its reply vide diary No. 819 and stated that the 'Adjudicating Authority' determined two issues in the above I.A. viz. (a) wheth....
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....r passed by the 'Adjudicating Authority' ('impugned order'). 18. The Respondent herein filed an application being I.A. No.85 of 2021 by arraying the Appellant herein before the 'Adjudicating Authority' seeking a direction from the 'Adjudicating Authority' to the Appellant to admit the claim of the Respondent herein filed vide 'Form-C' and sought a direction to include such claim in the 'CoC' and pass any other orders. 19. The Adjudicating Authority after evaluating the facts 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'. 20. From the aforesaid directions, it is clear that the 'Adjudicating Authority' declared as under; (a) Respondent i.e. State of Karnataka Department of Industries and Commerce as a 'Financial Cr....
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....was approved by all the members of CoC. It is seen that the CIRP period expired on 16.03.2020 and the Appellant filed an application being I.A. No.161 of 2021 before the 'Adjudicating Authority' under Section 30 & 31 for approval 25. It is seen that the 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 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. 26. The 'Adjudicating Authority' while deciding the aforesaid I.A. No.85 of 2021 framed issues whether the Respondent 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 ....
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.... and there is no actual disbursement of money. The said fact was not denied by the Respondent herein. The loan was interest free and towards unpaid 'Value Added Tax' (in short 'VAT') 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 gros....
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....cludes any amount raised under any other transaction, having the commercial effect of borrowing. Para 31. At the cost of repetition, 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." 32. 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 ....
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....the Code as held by this Tribunal in Pr. Director General 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 ar....
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....in Company Appeal (AT) (Ins) No. 756 of 2021 para 5, held as under: "5. It 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." 40. 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 ....
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....me bound manner as contemplated under the 'Code'. The Hon'ble Supreme Court in the landmark judgment of M/s Innoventive Industries Ltd. Vs. ICICI Bank & Anr. Reported in (2018) 1 SCC 407 at 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". 43. Therefore, this 'Tribunal' finds that the 'Claim' of the Respondent is belated and cannot be considered and the finding of the 'Adjudicating Authority' in directing the 'Appellant / RP' to place the 'Claim' of the Respondent in 'Form-C' before 'CoC' per se illegal and unsustainable. Accordingly, the point is answered against the Respondent. 44. The next point for consideration is whether the Resolution Professional has power to admit the Claims suo-motu? 45. The I & B Code, 2016, prescribes the duties to be performed by the 'Interim Resolution Professional' and 'Resolution Professional' as per Section 18 and Section 25 of the Code. The IBBI CIRP Regulations prescribed the procedure to be adopted followed. As per Chapter IV Regulation 7 the claims by 'Operational Creditor' to be submitted with proof to the 'IRP' in....