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The amount of VAT must have already been realised by the petitioner Company from the customers. In that view of the matter, it is debatable whether the amount of VAT shall be covered by the expressions "debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government",[(Sec. 5(21)] so as to bring it within the definition of "operational debt", as defined in the Code. This Tax liability can very well be treated as the amount of tax already realised by the petitioner Company from its customers, on behalf of the State Government, and not the direct debt of the petitioner Company towards the State Government, in which case the tax liabilities of the petitioner Company, for realising which the impugned garnishee order has been issued, may not come within the definition of "operational debt", as defined in the Code.
HC held that having considered the submissions of the learned counsel for the parties, I find that the respondent does not dispute the position that in case the petitioner had, at any time, on or before 31.03.020, made the payment qua the instalments, which had fallen due on 31.12.2019, the respondent could not have declared the petitioner’s aforesaid accounts as NPA. In the light of this position, in my view, irrespective of the question, as to whether, the moratorium as envisaged by the RBI’s circular dated 27.03.2020 would be applicable to the petitioner qua the instalments, which question can be determined only after completion of pleadings and considering the stand of the RBI, the fact remains that in view of the lockdown in the country as also the undisputed position that the petitioner still had time to make the payment of the due instalments till 31.03.2020, before which date on account of the lockdown and directive issued by the State Government, it has been prevented from demanding the due fees from the students of its various institutes. I also find myself in agreement with the observation of the Coordinate Bench in Anant Raj Limited (supra) that the intention of the RBI while issuing the regulatory package was to maintain status quo with regard to the classification of accounts of the borrowers as they existed on
Hon’ble High Court held that it is clear from the express language of the provision of section 32A of the Code that a Corporate Debtor would not be liable for any offence committed prior to commencement of the CIRP and the corporate debtor would not be prosecuted if a resolution plan has been approved by the Adjudicating Authority. In the present case, there is no dispute that a resolution plan has been approved by the Adjudicating Authority (NCLT) and in the circumstances, there is much merit in the contention that the petitioner cannot be prosecuted and is liable to be discharged. The petition is, accordingly, allowed and the impugned order dated 16.08.2019 and the impugned summons dated 21.08.2019, are set aside. The impugned compliant (CC No. 770/2019) against the petitioner, is also set aside. Further the High Court clarified that this order will not affect the prosecution of the erstwhile promoters or any of the officers who may be directly responsible for committing the offences in relation to the affairs of the petitioner company.
The Hon’ble High Court has clarified lots of questions including right to apply for insolvency does not arise out of a contract between the parties; Resolution plan is neither nor a compromise or composition nor voluntary compromise with the corporate debtor; Section 14 of the Code of 2016 does not apply to a personal guarantor; The existing contracts between the surety, principal debtor and the creditor remains unaffected during the moratorium under Section 14; Principal debtor has gone into liquidation would not have any effect on the liability of the guarantor; Pre insolvency right of the creditor does not undergo any metamorphosis on the principle; When, the creditor is dealing with the principal debtor in terms of the Code of 2016, the consent of the surety is not required; The sanctioned Resolution Plan cannot be construed to be a variation of the terms of the contract between the principal debtor and the creditor and held that the issue is answered in the negative and liability of the personal guarantor is not extinguished upon approval of the resolution plan. In view of the answer to the issue being in the negative, no relief can be granted to the writ petitioner.
Hon'ble Rajasthan High Court held that it cannot be gainsaid that the controversy at hand hours around the simple issue as to whether the resolution plan approved by the COC is binding on the department or not. In this regard, it is trite to note that as per the amended Section 31 of the IBC, the Central Govt., State Govt. or any other local authority to whom, a debt in respect of payment of dues arising under any law for the time being in force are owed, have been brought under the umbrella of the resolution plan approved by the adjudicating officer which has been made binding on such governments and local authorities. The purpose of the IBC is salutary as it has been enacted to ensure that an industry under distress does not fade into oblivion and can be revived by virtue of the resolution plan. Once the offer of the resolution applicant is accepted and the resolution plan is approved by the appropriate authority, the same is binding on all concerned to whom the industry concern may be having statutory dues. No right of audience is given in the resolution proceedings to the operational creditors viz. the Central Govt. or the State Govt. as the case may be.
It is undisputed that the Arbitral Award delivered on 07.07.2008 was in existence for nine years prior to initiation of the proceedings under the IBC against the petitioner in 2017. The challenge to the Award was of 31.10.2008 which additionally made the “debt” (to borrow a term from the IBC) uncertain and subject to the adjudication of the Section 34 proceedings. The question of the respondent approaching the NCLT for filing a claim in 2017 at the time of initiation of the insolvency proceedings, could not, therefore, arise. Both K. Kishan and Mobliox make it clear an earlier dispute or notice of a suit or an arbitration must be given precedence to the insolvency proceedings. Although the facts of the present case are different from Kishan since in that case it was the award-holder who had sought to resort to the corporate insolvency process and the award debtor had sought to rely on the arbitration pending between the parties, the caution sounded by the Supreme Court in that decision finds an echo in the present case. Here it is the award-holder who seeks to go on with Section 34 application while the award debtor (petitioner before this court) takes the plea of the proceedings before the NCLT. Further in K. Kishan, both the parties before the Supreme Court were before the NCLT and the NCLAT. In this case, the award-holder/respondent is admittedly not before the NCLT. The contentions of the petitioner/award debtor assume significance since the petitioner seeks to take refuge in the insolvency proceeding where the applicants/operational creditors are third parties who are in no way connected with the arbitration between the petitioner and the respondent. Whatever be the factual differences between the present case and K. Kishan, the intention of the Supreme Court was that corporate insolvency resolution proceedings cannot be used to defeat a claim or a dispute which existed prior to the initiation of the insolvency proceedings. The insolvency proceedings have admittedly been admitted on 18th September, 2007 which is long after the reference and the appointment of the Arbitrator on 2nd May, 2006.