TaxTMI 
TaxTMI 
2025 (7) TMI 224
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....Industries Ltd. Was initiated vide order dated 11.05.2018 passed in an Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") by the Oriental Bank of Commerce. (ii) On publication made by Insolvency Resolution Professional, claim was filed by the Appellant in Form-B as an Operational Creditor for an amount of Rs.24,26,89,882/-. The Appellant's claim comprised of various statutory dues under the Central Excise Act, 1944 and the Finance Act, 1994 (as a service tax). The Resolution Professional ("RP") admitted the claim filed by the Appellant. (iii) Resolution Plan submitted by Respondent No.3 - Kalinga Allied Industries India Pvt. Ltd., was approved by the Committee of Creditors ("CoC") on 12.11.2019. Resolution Plan provided for allocation of only 2.71% of the total dues of the Appellant. The Appellant filed objection on 05.12.2019 to the Resolution Plan approved by the CoC, alleging discriminatory treatment. (iv) On 06.09.2022, the Hon'ble Supreme Court delivered judgment in State Tax Officer v. Rainbow Papers Ltd - (2023) 9 SCC 545 ("Rainbow Papers") holding that statutory dues owed under Guja....
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....that Review Petition (Civil) No.1620 of 2023 questioning the judgment of the Hon'ble Supreme Court in Rainbow Papers has also been rejected by the Hon'ble Supreme Court, setting at rest all doubts regarding secured creditors status of Government dues. The Appellant's dues are Government dues, hence, the Appellant was entitled to be treated as secured creditor and was entitled to be paid same percentage of amount, which have been paid to the secured creditors as well as the State GST Department. It is submitted that Resolution Plan is patently discriminatory and violative of Section 30, sub-section (2)(b) of the IBC, as it provides for 29.61% payment to State GST Department while the Appellant has been made payment of only 2.71%, when both the State GST Department and the Appellant dues fall in the same class under Section 53 of the IBC. The discriminatory treatment violates the fundamental principle of equitable treatment of similarly situated creditors as laid down by the Hon'ble Supreme Court Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531. It is submitted that NCLT has relied on judgment of NCLAT Chennai Bench in Asst. Commissioner of Cent....
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....lied on another judgment of Hon'ble Supreme Court in Sundaresh Bhatt Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs - (2023) 1 SCC 472. The Hon'ble Supreme Court in Sundaresh Bhatt has held that in cases of any conflict, the IBC overrides the Customs Act. In Sundaresh Bhatt, Section 142A of the Customs Act came for consideration, which is pari materia to Section 11E of the Customs Act. 6. Learned Counsel for the RP also supports the submissions of learned Counsel for the Respondent No.3 and submits that the Appellant cannot claim any benefit of the judgment of Rainbow Papers. 7. We have considered the submissions of learned Counsel for the parties and have perused the records. 8. In IA No.2537 of 2024, the prayers made by the Appellant have been noticed by the Adjudicating Authority in the impugned order in paragraph 2 of the order, which are as follows: "a) Allow the present application; b) Direct the Respondent to place the present Resolution Plan before the CoC for necessary modification in terms of S.30(2) of the Code; c) Pass any other Order(s) / Direction(s) as this Hon'ble Adjudicating Authority may deem fit....
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.... owed to any Government or Governmental Authority or for that matter, any other dues." 11. The Hon'ble Supreme Court further held that Section 48 of the Gujarat VAT Act is not contrary to or inconsistent with Section 53 of the IBC. In paragraphs 56 to 59, following was held: "56. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of IBC. Under Section 53(1)(b)(ii), the debts owed to a secured creditor, which would include the State under the GVAT Act, are to rank equally with other specified debts including debts on account of workman's dues for a period of 24 months preceding the liquidation commencement date. 57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) IBC defines "secured creditor" to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of "secured creditor" in IBC does not exclude any Government or Governmental Authority. 58. We are constrained to hold that the appellate authority (NCLAT) and the adjudicating authority erred in law in rejecting the application/app....
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....shall, save as otherwise provided in Section 529A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993) the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2016, be the first charge on the property of the assessee or the person, as the case may be." 13. Section 11E of the Central Excise Act provides that any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under the Act shall be the first charge on the property of the assessee or the person. However, the said provision contains a saving clause, i.e. "save as otherwise provided in Section 529A of the Companies Act, 1956; the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993; the Securitisation and Reconstruction of financial Assets; and the Enforcement of Security Interest Act, 2002; and the Insolvency and Bankruptcy Code, 2016". Thus, the legislative scheme in Section 11E recognizes the first charge on the assets of assessee, except in respect of the enactments mentioned therein, o....
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....e same class and that cannot be applied in case of secured and unsecured creditors. In paragraph 88 of the judgment, the Hon'ble Supreme Court laid down following : "88. By reading para 77 of Swiss Ribbons Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 dehors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Para 76 clearly refers to the Uncitral Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in para 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, para 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in para 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under t....
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....fails. 18. Reliance has been placed by Respondent on the judgment of the Hon'ble Supreme Court in Sundaresh Bhatt (supra). In the above case, the Hon'ble Supreme Court has noticed the provisions of Section 142A of the Customs Act, which provision has been quoted in paragraph 32 of the judgment, which is as follows : "32. In order to complete the discussion on the Customs Act, it may be necessary to take note of Section 142-A extracted below : "142-A. Liability under Act to be first charge.- Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under this Act, shall, save as otherwise provided in Section 529-A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993), and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2016 (31 of 2016) be the first charge on the property of the assessee or the person, as the case may be." 19. Section 142-A of the Cust....