TaxTMI 
TaxTMI 
2024 (10) TMI 684
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....(IB)/137 of 2018. By the impugned order, the Adjudicating Authority has approved the resolution plan submitted by the Successful Resolution Applicant ('SRA' in short) in respect of Corporate Debtor - M/s Diamond Power Infrastructure Ltd as placed before it's consideration by the Resolution Professional - Respondent No. 1. Aggrieved by this order, the present appeal has been preferred by the Assistant Commissioner of Income Tax - Appellant for not having taken into cognizance of the claims filed by it in respect of the outstanding income tax demands raised on the Corporate Debtor while approving the resolution plan. 2.The chronological sequence of events of the present case which are necessary to be noticed for consideration of the matter by us is as hereunder: On 24.08.2018, the Corporate Debtor - M/s Diamond Power Infrastructure Ltd - Respondent No.3 was admitted into Corporate Insolvency Resolution Process ('CIRP' in short) vide order dated 24.08.2018. Subsequently, the Respondent No. 1 was appointed as the Resolution Professional ('RP' in short). The RP constituted the Committee of Creditor ('CoC' in short). On 25.10.2018, Notices under relevant provisions of the Income T....
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....ted for A.Y. 2013- 14 to 2019-20 within the time-frame permitted under the provisions of the Income Tax Act, 1961 and followed up by service of Demand Notice on the Corporate Debtor Company on 29.06.2022, 30.06.2022 and 01.07.2022. It is contended by the Learned Counsel for the Appellant that prior to service of Demand Notice, the Adjudicating Authority had been apprised of the outstanding tax demand on the Corporate Debtor Company by way of a letter dated 02.03.2022 as communicated by the Standing Counsel on 28.03.2022. However, the Adjudicating Authority without taking into consideration the letter dated 02.03.2022 allowed the application filed by the RP approving the resolution plan submitted by the SRA on 20.06.2022. 4.It was vehemently contended that the Adjudicating Authority committed an error in approving the resolution plan prior to finalisation of the assessment proceedings being conducted by the Appellant and without considering their claims. It was also submitted that Regulation 12 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016,('CIRP Regulation' in short) which deals with the time period for submission of claim following public ann....
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.... open for the Appellant to seek the admittance of such a delayed claim after the resolution plan stood approved. It was also submitted that the CoC of the Corporate Debtor having approved the resolution plan with requisite majority, the Adjudicating Authority cannot be asked to sit in appeal over the commercial wisdom of the CoC. It was pointed out that this precept has been propounded from time to time by the Hon'ble Supreme Court in a catena of judgments. 8.The Learned Counsel for Respondent No.2-SRA while rebutting the arguments of the Appellant also reiterated that during the entire tenure of the CIRP proceedings, the Appellant had not preferred their claim in specific terms before the RP. The Appellant had merely informed the RP that the Income-Tax demand on the Respondent No.3 is likely to be heavy in nature without quantifying the claim. It was also submitted that the Resolution Plan was approved by the Adjudicating Authority on 20.06.2022 while the Income- Tax assessment orders were passed thereafter on 29.6.2022, 30.6.2022 and 01.07.2022. Clearly, therefore, the assessment orders were passed after the Resolution Plan was approved by the Adjudicating Authority. Allowing su....
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....ent of Income Tax. O/o. The Dy. Commissioner of Income Tax, Central Circle-3, Vadodara ... 3. TOTAL AMOUNT OF CLAIM, INCLUDING ANY INTEREST, AS AT VOLUNTARY LIQUIDATION PROCESS COMMENCEMENT DATE AND DETAILS OF NATURE OF CLAIM As per annexure-A 4. DETAILS OF ANY DISPUTE AS WELL AS THE RECORD OF PENDENCY OF SUIT OR ARBITRATION PROCEEDINGS 1. Company petition no. 19/2016 for winding up of the company filed before hon'ble High Court of Gujarat by Agrawal Metal Works Pvt. Ltd. 2. IA 672 of 2019 in CP(IB)137 of 2018 before the Hon'ble NCLT. 3. IA No. 196 of 2019 in Company Petition (IB) No.137/7/NCLT/AHM/2018 filed by Bhuvan Madan. 4. Company petition (IB) No.137/NCLT/AHM/2018 It is stated that assessment proceedings are pending in this case from AY 2013-14 to 2019-20 and a heavy demand is likely to be raised in these cases. On primary analysis of the material available on records, certain discrepancies have been noticed which may lead to crystallization of huge demand in the case of the corporate debtor in the instant case in AY as enumerated below: a. Incorrect Valuation of plants and machineries b.....
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....t to file their claim on time. On this count, in the absence of the Appellant having filed firm and determinate claims on time, we do not find any reason to hold the conduct of the RP to be faulty or questionable. 14.It is however the case of the Appellant that not only had it apprised the RP by filing Form B of its claims but that the Adjudicating Authority in its orders dated 27.05.2020 had permitted them to carry out assessment proceedings. Yet the Adjudicating Authority while passing the impugned order did not await the outcome of the assessment proceedings which was completed within the time frame permitted under the provisions of the Income Tax Act, 1961. Thus, by not considering the claim of the Appellant, the Adjudicating Authority had caused grave injustice to the Appellant. 15.When we examine the material on record, it is undisputed that the Appellant had approached the Adjudicating Authority seeking permission to carry out assessment proceedings of the Corporate Debtor Company despite the moratorium under Section 14 of the IBC which came to be allowed on 27.05.2020. For ease of reference, we may notice the relevant paragraphs of the order of the Adjudicating Authority ....
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....rporate Debtor Company after the CoC and the Adjudicating Authority had already approved the resolution plan on 20.06.2022. 18.This brings us to the next question as to whether such belated claim can be admitted after the approval of the resolution plan. It is the case of the Appellant that the Adjudicating Authority had committed an error in approving the resolution plan prior to finalisation of the assessment proceedings being conducted by the Appellant and without considering their claims at a time when the RP had been kept apprised of the likelihood of heavy income tax demand on the Corporate Debtor Company. Moreover since the resolution plan ignored the statutory demands payable to the Government, it did not meet the requirements of Section 30(2) of the IBC and hence the resolution plan cannot be binding on the State. 19.Before we analyse the issue at hand, it will be constructive to find out how the Adjudicating Authority in the impugned order has viewed the resolution plan. The relevant excerpts of the impugned order is as reproduced hereunder: "8. The resolution plan submitted by M/s GSEC Ltd. was discussed and deliberated by the COC in their 19th, 20th, 21st, and....
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...., has brought out the 2019 amendment so as to cure the said mischief....." 17.In view of the above, all past claims would stand extinguished. However, as far as various statutory rights vested with the Corporate Debtor in form of various licenses, leases, and others alike matter, we make it clear that the successful resolution applicant has to approach the concerned statutory authority for those concessions and those authorities will consider the same as per their established procedure." 20.It is therefore clear that the Adjudicating Authority has concluded that once the Resolution Plan was duly approved by the CoC, the claim filed with the RP stands frozen. Since Appellant had failed to file its claim with the RP before the Resolution Plan was approved by the CoC, their claim stands extinguished. The Appellant having failed to file its claim on time before the RP, it cannot be allowed to saddle the SRA with the liability of its claim which was never filed on time. In support of their stance that belated claims cannot be now called for inclusion in the Resolution Plan, Adjudicating Authority has adverted attention to the judgment passed by Hon'ble Supreme Court Ghanshyam Mishra ....
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....es not come to the aid of the Appellant in the present case. 23.Having noticed the statutory framework and the purpose and objective of the IBC, we are of the considered view that the approval of a resolution plan is statutorily recognized as a closure to all claims that persons or entities may have against a corporate Debtor. There is a concomitant need to impart finality to the resolution process by protecting a successful resolution applicant from unnecessary litigation arising out of undecided claims. No proceeding can be initiated or continued in respect of a claim which is not part of the resolution plan or was not preferred at the relevant time. No fresh claims can be lodged or enforced against the SRA after the approval of a resolution plan for when any sudden and fresh claim pops out in respect of the Corporate Debtor, the very calculations on the basis of which the SRA has submitted its plans, would go haywire and the plan would be unworkable. The SRA cannot be left open to defend or oppose claims which have not been factored in the resolution plan. More significantly, in the facts of the present case, taking into cognisance the belated claims of the Appellant would amou....
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....containing various details of the Corporate Debtor so that the resolution applicant submitting a plan is aware of the assets and liabilities of the Corporate Debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the Corporate Debtor towards them are required to be contained in the information memorandum. 61.All these details are required to be contained in the information memorandum so that the resolution applicant is aware, as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the Corporate Debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stak....
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.... 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 the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; (ii)2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; (iii)Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued." 26.This clean slate principle has been affirmed in subsequent judgements too. In ....