N.Kumar Liquidator of AKR Holdings Pvt. Ltd. Vs. Indian Overseas Bank and Anr. – NCLT Chennai Bench
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NCLT Kochi Bench referred the decision of Hon’ble NCLAT in Om Prakash Agrawal Liquidator Vs. Chief Commissioner of Income Tax (TDS) (2021) ibclaw.in 54 NCLAT and held that:
(i) There is no such provision in the IT Act, IBC or IBBI (Liquidation Process) Regulation, 2016 that the Liquidator of the Company in Liquidation under the IBC is required to file Income Tax Return.
(ii) For filing of the return, the financial statements are required to be annexed but the IBC and IBBI (Liquidation Process) Regulation, 2016 does not assign a duty on the Liquidator to prepare financial statements.
(iii) Direct the 1st Respondent to make a payment of Rs. 9,01,18,242.45/- to the bank account of the Applicant/Liquidator within 30 days from the date of receipt of this order.
In this important judgment on treatment of claim/demand and penalty raised by EPFO, NCLT Bengaluru Bench held that:
(i) The demand/claim raised prior to the moratorium will not form part of liquidation estate and should be paid in priority; secondly, the claim/demand and penalty raised during moratorium period is not allowable under the provisions of the IBC; and the penal damages claimed under Section14B of EPF & MP Act, 1952 which is prior to the moratorium period will be treated under Section 53 of IBC, 2016.
(ii) The dues of workmen or employees from the provident fund do not come within the meaning of ‘liquidation estate’ for the purpose of distribution of assets under Section 53 of the Code. Accordingly, it is to be paid in priority over other dues.
(iii) The damages levied by EPFO under Section 14B of the EPF & MP Act 1952 which are dues of Government and will be paid in order of priority under Section 53 of IBC, 2016.
NCLAT held that once a property was part of the liquidation state of the Corporate Debtor under liquidation, the provisions of IBC were applicable regarding the assets which were in the ownership of the Corporate Debtor and Section-238 of the IBC prohibited the applicability of any other law which was inconsistent with the IBC. The residuary jurisdiction is relevant during the CIRP when the insolvency resolution of the corporate debtor is taking place, whereas in the present case the liquidation of the corporate debtor is being considered and the liquidator has taken recourse to its powers under section 33(5) to get control and custody of the asset of the corporate debtor.
The Adjudicating Authority held that the IBC creates a specific bar with respect to proceedings that may be initiated under the PMLA by virtue of the provisions contained in Section 32A. Moreover, Section 32A cannot possibly be read as being applicable prior to a Resolution Plan being approved or a liquidation measure being enforced. Further, it can therefore be construed that the objective and intention of the Code is providing a free hand to the creditors if the properties of the Corporate Debtor are attached then it will jeopardize the Liquidation Process.
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Shri R. Aravindakshan Nair, Liquidator – NCLT Kochi Bench Read Post »
Hon’ble Supreme Court observed that only two points arise for consideration in these appeals. Firstly, whether the respondent No.2 – Liquidator was justified in discontinuing the Second Swiss Challenge Process for the sale of a part of the assets of the Corporate Debtor wherein the appellant – R.K. Industries was declared as an Anchor Bidder and opting for a Private Sale Process through direct negotiations in respect of the composite assets of the Corporate Debtor? If so, was the NCLAT justified in directing the respondent No.2 – Liquidator to restart the entire process of Private Sale after issuing an open notice to prospective buyers instead of confining the process to those parties who had participated in the process earlier?
In the instant application, there are two Respondents having charge over two different sets of assets of the Corporate Debtor. The respondent No. 1 failed to realise the security interest within 180 days. However, due to an order of attachment having been issued by the Government of Andhra Pradesh on the said assets, a writ petition being W.P. has been instituted by the Respondent No. 1, on 17.11.2021, before the Hon’ble High Court of Andhra Pradesh. In light of the said writ petition being sub judice, no action can be taken by the Adjudicating Authority in this regard till the disposal of the said writ petition. On the other hand, Respondent No. 2, in spite of having been given ample opportunity to file a reply- affidavit, has failed to do so. However, the communication that took place between the Liquidator and Respondent No. 2 on 28.06.2021 indicates that Respondent No. 2 sold one of the four properties of the Corporate Debtor but failed to sell the rest even after six months from commencement of liquidation. As such, the rest of the assets under the charge of the Respondent No. 2 should become a part of the liquidation estate.
There are two going concern sales defined under Regulation 32 of IBBI (Liquidation Process) Regulations, 2016. The first one pertains to Sale of “Corporate Debtor as a going concern” under Regulation 32(e) and sale of “Business of Corporate Debtor as a going concern” under Regulation 32(f).
AA held that it is the settled position of law that the provident fund, the pension fund and the gratuity fund, do not come within the purview of liquidation estate for the purpose of distribution of assets under Section 53 of the Code. Based on this, the only inference which can be drawn is that Pension Fund, Gratuity Fund and Provident Fund can’t be utilised, attached or distributed by the liquidator, to satisfy the claims. Section 36(2) of the Code 2016 provides that the Liquidator shall hold the Liquidation Estate in fiduciary for the benefit of all the Creditors. The Liquidator has no domain to deal with any property of the Corporate Debtor, which is not the part of the Liquidation Estate. It is clear that in terms of sub-Section (4)(a)(iii) of Section 36 all sums due to any workman or employees from the Provident Fund, Pension Fund and the Gratuity Fund, do not form part of the liquidation estate/liquidation assets of the Corporate Debtor.