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2022 (10) TMI 697
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.... Mr. Nahush Jain, Advocate For the respondent in IA No.535/2021 & 317/2021 : 1. Mr. Rajesh Katoch, Senior Advocate For the applicant/Ex-Liquidator in IA No.893/2020 : Mr. Harimohana N, Advocate For the applicant in IA No.18/2021 : Mr. Deepankur Sharma, Advocate For the applicant in IA No.574/2021 : Mr. Rakshit Gupta, Advocate For the Respondent/Liquidator : 1. Mr. Atul V Sood, Advocate in IA No.893/2020, and 2. Mr. Nahush Jain, Advocate Respondent No.1 in IA No.18/2021 and 574/2021 Respondent No.2/Ex-Liquidator in IA No.18/2021 : Mr. Vaibhav Sharma, Advocate ORDER Per : Subrata Kumar Dash, Member (Technical) IA No.317/2021 & IA No.535/2021 IA No.317/2021 & IA No.535/2021 are being taken up together, being interrelated and interconnected. 2. These applications are filed under Section 60(5)(c) of the IBC, 2016 by Ravinder Kumar Goel, Liquidator of M/s Supreme Tex Mart Limited (herein referred as "Applicant") against Deputy Commissioner of Income Tax, Punjab (herein referred as "Respondent"). 3. In the IA No. 317/2021, the applicant/liquidator has prayed for declaring the actions of the respondent as Contrary to the Code and inter alia prayed for stayi....
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....btor and cannot claim any amount outside the waterfall mechanism as prescribed under Section 53 of the Code. 7. The respondent has filed its reply filed by Diary No.00680/1 dated 02.07.2021 (in IA No.317/2021) and by Diary No.01284/1 dated 25.11.2021 (in IA No.535/2021) wherein it has stated that the assessment proceedings and penalty proceedings are initiated by the Income Tax Department under Income Tax Act, 1961, and have to be completed within a statutory time limit provided under the provisions of the Income Tax Act, 1961. It is averred that Section 33(5) of the Code does not probate assessment proceeding/penalty under Income Tax Act, 1961 and the assessment do not fall under the scope of the term "other legal proceedings" as mentioned in Section 33(5) of the Code. The Assessing Officer has determined the quantum of tax and penalty against the Corporate Debtor, and after determining the same, the ITD will be an "Operational Creditor", and the same will be filed for recovery of dues in accordance with the provisions of IBC 2016. It is stated that a revised claim for total outstanding demand amounting to Rs. 32,72,05,065/- was lodged by the respondent before the liquidator by....
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.... was ordered to be liquidated by order dated 08.08.2018 and the Income Tax Department passed the assessment order on 13.05.2020 and issued a show cause notice on 29.09.2021. It is also seen that the respondent has filed the claim, and it was admitted to the tune of Rs. 7,36,59,888/-. The issue for our consideration is whether the Income Tax Department's action of initiating proceedings under the Income Tax Act and raising demands after the initiation of liquidation is in conformity with the provisions of IBC, 2016. 12. In the present case, the assessment proceeding for assessment year 2018-19 and the penalty proceedings in assessment year 2018-19 and 2019-20 have been initiated after the order for liquidation. In this context, the provisions of Section 33(5) of the IBC, 2016 are relevant and are quoted below for the sake of clarity: "*Section 33. : Initiation of liquidation. xx xx xx (5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corp....
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....enues received by the Government of a State, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled 'the Consolidated Fund of the State'. It may be noted that this Article beings with the phrase 'Subject to the provisions of Article 267 and to the provisions of this Chapter with respect to the assignment of the whole or part of the net proceeds of certain taxes and duties to States, all revenues received by the Government of India shall form the Consolidated Fund of India'. It is therefore clear that tax dues, being an input to the Consolidated Fund of India and of the States, clearly come within the ambit of Section 53(1)(e) of the Code. If the Legislature, in its wisdom, assigned the fifth position in the order of priority to such dues, it is not for this Court to delve into or belittle the rationale underlying the same." (emphasis supplied) 14. The issue of priority of the provisions of IBC over the provisions of Income Tax Act, 1961 has been settled through the provisions of the Section 247 and Schedule-3 whic....
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.... for 1 year and 84 days i.e. from 08.08.2018 to 31.10.2019. The IBBI has issued show cause notice to the applicant, which was disposed of by order dated 21.04.2020 wherein the applicant has been directed to deposit an amount of Rs.31,09,000/- in the liquidation estate of the corporate debtor and the liquidator is given liberty to claim liquidator's fee in accordance with the provisions of IBBI (Liquidation Process) Regulations, 2016. 18. It is submitted that the liquidator was occupied in the liquidation process of the corporate debtor during his tenure and performed various functions of corporate debtor such as public announcement, verification of claims, valuation of assets, convening the meetings of stakeholders, filing of progress report, issuance of public notices for e-auction, realization of GST refunds along with other measures taken to protect and preserve the assets of the corporate debtor. The liquidator has performed all duties and obligation to effectively implement and execute the liquidation process. 19. It is submitted that the applicant is entitled to the remuneration as a liquidator for the period i.e. from 08.08.2018 to 31.10.2019. It is also mentioned that....
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....nder Regulation 4 of the Liquidation Regulation. At the time of the passing of the liquidation order dated 08.08.2018, the corporate debtor was directed to be sold as a going concern. The company was being managed by the applicant as a going concern at the time of CIRP and also during the liquidation process of the Corporate Debtor. The applicant states that as per Regulation 4(3) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, no specific structure has been provided by the regulator with respect to fees of the liquidator in case the Corporate Debtor is liquidated as a going concern. It is further mentioned that the applicant is willing to refund the amount of Rs.31.09 Lakhs. 22. We have heard the learned counsel for the applicant and learned counsel for the respondent/Liquidator and perused the record carefully. 23. In the present case, the Liquidation of the corporate debtor was initiated on 08.08.2018. The erstwhile liquidator has claimed remuneration for the period from 08.08.2018 to 31.10.2019. The CoC in the 9th meeting has not decided on the fees of the liquidator. In this context, it is noted that the Applicant - erstwhile liqu....
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....on 2 (1) of IBBI (Liquidation Process) Regulation, 2016 (Prior to amendment) is as follows:- "Regulation 2 sub-regulation (1) (ea) defines 'liquidation cost' under Clause (16) of Section 5 means: "liquidation cost" means any cost incurred by the liquidator during the period of liquidation subject to such regulations, as may be specified by the Board; (a) Fee payable to the liquidator under Regulation 4 (b)-----------------" In this context, we refer to the clarification provided to Regulation 4 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, which is as follows:- "Clarification: Regulation 4 of these regulations, as it stood before the commencement of the Insolvency and Bankruptcy Board of India(Liquidation Process)(Amendement) Regulations, 2019 shall continue to be applicable in relation to the liquidation processes already commenced before the coming into force of the said amendment Regulations." Regulation 4 of IBBI (Liquidation Process) Regulation, 2016, Prior to the amendment and applicable to this case, is extracted hereunder: "4. Liquidator's fee.- (1) The fee payable....
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....en in the table provided under sub-regulation (3) of Regulation 4 itself. The parties are in concord that at the time of passing resolution under Section 33(2) of the IBC, 2016 seeking for liquidation of the Corporate Debtor, the Liquidator's fee being part of the Liquidation cost in terms of Section 5(16) read with Regulation 2(ea) and Regulation 4(2) had not been fixed by the CoC and in the circumstances, sub-regulation (3) of Regulation 4 of IBBI (Liquidation Process) Regulations comes into play............" (Emphasis Supplied). 26. In view of the above discussion, we do not agree with the proposition of the applicant that there is no criteria for determining the liquidator's fee and hold that Regulation 4(3) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, provides for the fees of the liquidator on the basis of realisation net of other liquidation costs or on the basis of the amount distributed to stakeholders. No case has been made out by the Ex-Liquidator in the present case regarding any realization or distribution beyond the sale of one asset i.e. Toyota Car, and released an amount of Rs.2,60,000/-. In view of the fact that very hig....
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....eriod consumed while completing the assignment. It is further stated that the payments for the services provided during the CIRP period and liquidation period shall be included in the CIRP cost, and the same would have priority before any other debt and would be paid entirely in all likelihood. 31. The respondent No.1/Liquidator has filed its reply by Diary No.00806/01 dated 12.03.2021, wherein it has been admitted that the Ex-liquidator had appointed the applicant to provide professional services and there was no written contract between the parties. The respondent interacted with the applicant only after he was appointed as liquidator. It is stated that after taking over the charge of the corporate debtor, the respondent pointed out that certain work assigned to the applicant was still pending and requested himto complete the same at the earliest. It is stated that even the communications between respondent No.2 and the applicant show that the work done by the applicant is either irregular or pending. The respondent has sent e-mails dated 02.01.2020 and 15.01.2020 asking the applicant to complete the pending work. As the applicant could not perform their part of duty and there....
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....ed to reconcile the various bank accounts as many entries of debtors are wrongly posted in the account of other parties or lying outstanding in the suspense account. Moreover, the sales within the units of the Corporate Debtor are shown as sales in the books of accounts instead of internal transfers. Apart from that the reconciliation of TDS has not been provided by the Auditor. It is also mentioned in the same e-mail that the applicant failed to complete the work assigned to them and the respondent had to engage some other professional to complete the pending work of the applicant. 34. In the present case, no written contract with the applicant-auditor for the performance of the work has been placed on record during the present proceedings. The financial creditor i.e. State Bank of India has also filed an application praying for directions to conduct the audit of the CIRP cost incurred by the erstwhile Liquidator which are stated to be abnormally high. Needless to say, such type of allegations would not have arisen if the Auditor had done his job diligently. We also take cognizance of the fact that the present Liquidator had to engage another professional and incur more expense....
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....or the year ending on 31.03.2018. The Corporate Debtor was having stock and receivables to the extent of Rs.63 Crores at the start of insolvency which was reduced to Rs.31 Crores. CA No.584 of 2018 was filed by the applicant for the removal of the erstwhile liquidator. Finally, the erstwhile liquidator/Resolution Professional was relieved from its duties by order dated 01.11.2019 in CA No.941/2019 on the grounds of his ill health and the CA No. 584/2018 was rendered infructuous vide order dated 22.11.2019. 39. It is further submitted that the erstwhile liquidator had shown Rs.22,64,87,510/- as CIRP cost though the same had not been approved by the CoC The present liquidator had also communicated to the applicant that the Books Of Accounts prior to 01.04.2018 were not handed over on the grounds that the software on which the record was maintained had crashed. The liquidator examined the statements of accounts maintained in the books of accounts of corporate debtors and those of the creditors and debtors and found that there were discrepancies in the amounts and the entries. The actions initiated by the liquidator to authenticate the parties-wise amount for CIRP cost is mentioned ....