The time gap between the Attachment by Sales Tax Department and initiation of CIRP is two years, the assets shall not form part of the Liquidation estate and the treatment accorded to the Sales Tax Department will be that of secured creditor under Section 53(1)(e)(ii) of the IBC – Mr. Manish Kumar Baldeva Liquidator Vs. Sales Tax Officer – NCLT Mumbai Bench
The Adjudicating Authority held that the Hon’ble Apex Court in State Tax Officer vs Rainbow Papers Limited (2022) ibclaw.in 107 SC has held that the State through Sales Tax Department is deemed to be a secured creditor as security interest is created by way of attachment of property by the Respondent. It is undisputed that the properties of the Corporate Debtor were attached by the Sales Tax Department i.e. Respondent herein vide its Attachment Orders 28.05.2015. As on the date of the said Attachment Order there was no restriction on attachment. CIRP was initiated against the Corporate Debtor on 06.10.2017, the time gap between the Attachment Order and initiation of CIRP is two years. Hence, the Order of Attachment had attained finality as the same was not challenged by Corporate Debtor or by the IRP at the relevant time, before the Appropriate Authority. Therefore, the assets shall not form part of the Liquidation estate and the treatment accorded to the Sales Tax Department i.e. the Respondent herein will be that of secured creditor under Section 53 (1)(e)(ii) of the Code.