TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1085
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....ereinafter called the Act) and the intended prosecution that was sought to be launched against the petitioner. 2. Heard the respective learned counsel appearing on either side. 3. The case of the petitioner is as follows : (i) The petitioner company is incorporated in the year 2007 under the Companies Act, 1956. It underwent corporate insolvency resolution process (CIRP) and liquidation process under the Insolvency and Bankruptcy Code, 2016 (for short, the IBC) and came to be taken over as a going concern by one M/s.Agniti Industrial Parks Private Limited (for brevity, the new management) during the liquidation process under Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter called the Regulations). (ii) The petitioner company was originally engaged in the business of manufacturing wind turbine generators and had availed several financial facilities from banks and financial institutions. It underwent rough weather and pursuant to that, it defaulted in repayment obligations. Further, one of its operational creditors filed a petition before the National Company Law Tribunal (NCLT), Chennai for initiating CIRP agai....
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....g the third respondent to drop the proceedings in view of the clarifications provided by the petitioner company. (vii) Once again, the third respondent, through letter dated 20.10.2023, issued a notice to conduct inspection of the books of accounts and other records of the petitioner company and directed the petitioner company to keep a list of documents ready for inspection. On receipt of the same, the petitioner company, through letter dated 21.11.2023, submitted a detailed explanation along with supportive documents. The petitioner company apprised the third respondent regarding the liquidation proceedings against it under the IBC and as to how the new management had taken over the petitioner company post liquidation under Regulation 32A of the Regulations. (viii) Ultimately, the impugned show cause notices dated 11.11.2024 came to be issued by the first respondent. Aggrieved by that, all the above writ petitions have been filed before this Court. 4. Respondents 1 to 3 filed a counter affidavit in each writ petition wherein they took the following stand : (i) The petitioner company has violated certain provisions of the Act and therefore, the notices have been issued call....
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....erfered by this Court and the first respondent has the power and jurisdiction to issue such notices and after receiving the reply, a decision would be taken regarding launching of prosecution. Hence, interference with this process at a preliminary stage is not warranted. Accordingly, respondents 1 to 3 sought for dismissal of these writ petitions. 5. This Court has carefully considered the submissions of the learned counsel on either side and perused the materials available on record and more particularly the impugned show cause notices. 6. In order to understand the scope of the alleged violations stated to have been committed by the petitioner company, the proposed prosecution sought to be launched against the petitioner company and the stand taken by the petitioner company in their defence are captured and tabulated herein below for ease of understanding : S. No WP. No Violations Proposed prosecution to be launched Defence 1 37101 of 2024 Loan taken by the petitioner from the Holding Company: The company violated Para 6G(j) of Schedule III of the Act by classifying Rs. 1,60,22,263 as "other payables" under current liabilities without specifying the nature of these paya....
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....tly authorize this deletion, and it was only based on the management's estimate. Hence, this was considered an incorrect disclosure and a violation of Schedule III and Section 129 of the Companies Act, which require accurate and properly authorized financial reporting. The Petitioner and Respondent 4 and 5 defaulted by not providing proper disclosure with respect to the asset of the Petitioner which was deleted from the books since it did not form part of the Sale Deed dated 14.10.2020 and the same was not available with the Petitioner Company. Prosecution: Section 129(7) of the Act. The deletion of assets amounting to nearly Rs. 127 crores in terms of NCLT order. This is in view of the fact that the assets were never transferred to the management and the same is evident through sale deed dated 14.10.2020 vide order dated 08.02.2021 passed by the NCLT approving the same. Hence, there is no question of petitioner deleting the assets which was never transferred. 5 37102 of 2024 Loan taken by the Petitioner from the Holding Company: Violated the Section 166 of the Act by taking a loan to a sum of Rs. 1,59,17,642/- from its Holding Company M/s. Agniti Industrial Parks Pvt Ltd a 10....
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....y a learned Single Judge of this Court in the case of M/s.Agniti Industrial Parks Private Limited Vs. Superintendent of CGST & Central Excise, Thiruvallur-I Range [W.P.No.11097 of 2021 dated 11.12.2023]. In that case, the issue pertained to the Revenue attempting to enforce the claims against a successful auction purchaser for the service tax dues from the company, which was under liquidation. Fortunately, it was the very same new management namely M/s.Agniti Industrial Parks Private Limited, which bought the petitioner company, had to defend itself by way of filing a writ petition. This Court negated the claim made by the Revenue mainly on the ground that the liquidation operated as a civil death of the company and also operated as a clean slate and snapped the link between the antecedent creditors and successful auction purchaser, that therefore, the taxes that were due and payable could not be recovered from the new management and that the amounts that were due and payable to the Revenue, which did not happen subsequent to the purchase of the going concern, could not be burdened on the new management. Accordingly, the impugned demand notice itself was set aside. 10. This Court ....
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.... petitioner company as a going concern to the new management. Thus, in the eye of law, the liquidation process operates as a civil death of the petitioner company and it was resurrected only with respect to its corporate identity when it was sold as a going concern to the new management. 15. At this juncture, this Court has to take into consideration the approval order dated 08.2.2021 passed by the NCLT, Division Bench-I, Chennai in I.A.No.852 of 2020 wherein the relevant portions read thus: "17. It is evident in relation to the reliefs as prayed for in 5.1 that the Corporate Debtor stands relieved from all the liabilities arising prior to the deed of sale. It is expressly provided in clause'8' of the Deed of Sale and in the circumstances no separate order is called for. 18. Further in relation to the filings which are required to be done on the part of Liquidator, the Liquidator in compliance with the provisions of IBC, 2016 r/w Attendant Regulation Rules as framed by the IBBI or any circular issued therein shall provide all cooperation to the extent warranted on the part of the Liquidator in terms of the Deed of Sale as executed between the parties. 19. In relation to pray....
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....the Board of Directors stood suspended and similarly upon liquidation of the said Corporate Debtor under Section 34(2) of IBC, 2016 where under all the powers of the Board of Directors shall cease to have effect and be vested with the Liquidator. In the circumstances, we do not find any separate direction is required to be given in this regard, as by operation of law, the Directors shall cease to hold any office in relation to the Corporate Debtor sold as a going concern during the Liquidation process. 24. In relation to paragraph No.5.7 as already pointed out, the Liquidator is necessarily to act as required and to see to it that the successful auction purchaser of the Company under liquidation is given a smooth transition in terms of the Deed of sale as executed between the parties. In this regard, it is required to be noted here that the Ministry of Corporate Affairs by their General Circular No.04/2020, F.No.01/02/2019-CL-V dated 17.02.2020 has given a clarification in relation to the Filing of the necessary forms before the Registrar of Companies by the Insolvency Professional or the Liquidator, as the case may be. The Applicant and the Liquidator is required to be aware of ....
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....n a liquidation process and it was ultimately held that the Regulations framed under the authority conferred by the IBC itself cannot be construed to override the provisions of the IBC itself and that therefore, no interpretation contrary to Section 53 of the IBC can be attributed to the expression 'going concern sale' as contemplated under Regulation 32 of the Regulations. 22. If criminal prosecutions are going to be permitted for those events, which took place prior to the approval granted by the NCLT, Chennai and after those consequences, which fell out of such purchase of the going concern, it will go against the very object of providing protection to the new management, which takes over charge after the purchase of the corporate debtor. 23. In the case in hand, there is yet another fact, which has to be taken into consideration by this Court. It is seen that the petitioner company started receiving notices right from August 2022 onwards and at least, on three occasions, similar notices were sent and the petitioner company gave separate detailed reply for the same. In spite of giving such a reply, the impugned show cause notices came to be issued by the first responde....