Special issues- Judgments follow

Appellant’s claim under Maharashtra Value Added Tax, 2002 and GST cannot be accepted as Secured Creditor and as per Section 30(2) of the IBC – Department of State Tax, Through The Deputy Commissioner of State Tax Vs. Pranav Constructions Systems Pvt. Ltd. & Anr. – NCLAT New Delhi

Hon’ble NCLAT referring judgment in Department of State Tax v. Zicom Saas Pvt. Ltd. & Anr. (2023) ibclaw.in 109 NCLAT, holds that Appellant’s claim cannot be accepted as Secured Creditor and as per Section 30(2) of the Code, the Appellant was entitled only for amount not less than the amount to be received by the Appellant in event of liquidation. Present is not a case where it is claimed that amount is less than the liquidation value.

Appellant’s claim under Maharashtra Value Added Tax, 2002 and GST cannot be accepted as Secured Creditor and as per Section 30(2) of the IBC – Department of State Tax, Through The Deputy Commissioner of State Tax Vs. Pranav Constructions Systems Pvt. Ltd. & Anr. – NCLAT New Delhi Read Post »

Simply because there is debt and default, CIRP cannot be initiated, when Corporate Debtor is a going concern – Edelweiss Asset Reconstruction Company Ltd. Vs. Takshashila Heights India Pvt. Ltd. – NCLT Ahmedabad Bench

Hon’ble NCLT Ahmedabad Bench held that Corporate Debtor is a going concern. Acts of applicant shows intent of only recovery of money through this process which is not at all object of the IBC, 2016. It appears that application is premature. Observations in Vidarbha Industries Power Ltd. v.. Axis Bank Ltd. (2022) ibclaw.in 91 SC also supports non-initiation of CIRP in case of going concern Corporate Debtor. Thus, the Hon’ble Tribunal has not satisfied that on the facts of the present case mentioned above, CIRP should be initiated against the Corporate Debtor.

Simply because there is debt and default, CIRP cannot be initiated, when Corporate Debtor is a going concern – Edelweiss Asset Reconstruction Company Ltd. Vs. Takshashila Heights India Pvt. Ltd. – NCLT Ahmedabad Bench Read Post »

IBC being overrides both the Coal Mines (Special Provisions) Act, 2015 (CMSPA) and the Mines and Minerals (Development and Regulation) Act, 1957 | Payment of pre-CIRP dues to creditors cannot be made by Resolution Professional outside the resolution framework – Avil Menezes RP of Topworth Urja & Metals Ltd. Vs. Ministry of Coal and Ors. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) Our legal system includes the principle of public trust as a part of the Indian jurisprudence and the Hon’ble Supreme Court has held in a catena of judgements that the Constitution postulates the principle of public trust especially in Part IV.
(ii) IBC being a later enactment, it would override both the Coal Mines (Special Provisions) Act, 2015 (CMSPA) and the Mines and Minerals (Development and Regulation) Act, 1957.
(iii) As per the provisions of the IBC, any Government and/or statutory Authority is also required to file its claims for any dues pending to be paid to such authority.
(iv) The reasoning of Rainbow Papers will be applicable only in such cases where the statutory provision creating first charge in favour of the relevant government or statutory authority is pari materia with the provision of Section 48 of the GVAT Act.

IBC being overrides both the Coal Mines (Special Provisions) Act, 2015 (CMSPA) and the Mines and Minerals (Development and Regulation) Act, 1957 | Payment of pre-CIRP dues to creditors cannot be made by Resolution Professional outside the resolution framework – Avil Menezes RP of Topworth Urja & Metals Ltd. Vs. Ministry of Coal and Ors. – NCLAT New Delhi Read Post »

Provisions of Income Tax Act do not create any charge or security interest | Resolution Professional (RP) is empowered to seek additional evidence to analyse claims | CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period| Posting the status of claims on Corporate Debtor’s website & IBBI portal amounts to deemed knowledge and constructive notice – Commissioner of Income Tax (TDS-1), Mumbai Vs. Mr. Sundaresh Bhat RP of JBF Petrochemical Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT clarifies various issues related:

A. Powers of Resolution Professional in verification of claim.
B. CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period.
C. Putting up status of claims of the creditors on the websites of Corporate Debtor as well as the IBBI portal is amounted to deemed knowledge and constructive notice on the creditors with respect to rejection of its claim.
D. Whether such undecided claims can be entertained once the Resolution Plan is approved by the CoC and the Adjudicating Authority.
E. The provisions of Income Tax Act do not create any charge or security interest.

Provisions of Income Tax Act do not create any charge or security interest | Resolution Professional (RP) is empowered to seek additional evidence to analyse claims | CIRP Regulation does not provide any discretion to RP for admitting a claim after the extended period| Posting the status of claims on Corporate Debtor’s website & IBBI portal amounts to deemed knowledge and constructive notice – Commissioner of Income Tax (TDS-1), Mumbai Vs. Mr. Sundaresh Bhat RP of JBF Petrochemical Ltd. – NCLAT New Delhi Read Post »

Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (MPVAT Act) is not pari materia with Section 48 of Gujarat Value Added Tax Act, 2003 (GVAT Act) and Commercial Tax Dept. cannot be treated as secured creditors on the basis of the decision in Rainbow Papers – Commercial Tax Department Vs. Mrs. Teena Saraswat Pandey and Anr. – NCLAT New Delhi

In this judgment, Hon’ble NCLAT referring judgment in State Tax Officer (1) Vs. Rainbow Papers Ltd., (2022) ibclaw.in 107 SC and Department of State Tax Vs. Zicom Saas Pvt. Ltd. & Anr. (2023) ibclaw.in 109 NCLAT held that although it has also been held by the Hon’ble Supreme Court in the case of Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. & Ors. (2023) ibclaw.in 81 SC that the decision in the case of Rainbow Papers (Supra) is a decision of the Court in the facts of the said case but without going into this aspect of the matter, argument of the Appellant would not cut any ice that Section 48 of the GVAT Act and Section 33 of the MPVAT Act are pari materia, therefore, the ratio laid down by the in Rainbow Papers (Supra) has to be applied rather the provisions of Section 37 of the MVAT Act and Section 33 of the MPVAT Act appears to be pari materia about which a decision has been taken by this court in the case of Zicom Saas (Supra) that both the provisions are not pari materia with Section 48 of the GVAT Act, therefore, no benefit can be given to the Appellant on the basis of the decision of the Rainbow Papers (Supra).

Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (MPVAT Act) is not pari materia with Section 48 of Gujarat Value Added Tax Act, 2003 (GVAT Act) and Commercial Tax Dept. cannot be treated as secured creditors on the basis of the decision in Rainbow Papers – Commercial Tax Department Vs. Mrs. Teena Saraswat Pandey and Anr. – NCLAT New Delhi Read Post »

Whether reassessment action under Section 148 of the Income Tax Act, 1961 can be initiated notwithstanding the Resolution Plan having been approved by the NCLT – Asian Colour Coated Ispat Ltd. Vs. Assistant Commissioner of Income Tax and Anr. – Delhi High Court

Hon’ble Delhi High Court (Division Bench) referring judgments in M Tech Developers (2024) ibclaw.in 289 HC, Sree Metaliks (2023) ibclaw.in 59 HC and Rishi Ganga Power Corporation (2023) ibclaw.in 1176 HC has quashed the impugned notice under Section 148 of the Income Tax Act, 1961 for A.Y. 2014-15.

Hon’ble High Court also clarified applicability of State Tax Officer v. Rainbow Papers Ltd. (2022) ibclaw.in 107 SC and Greater Noida Industrial Development Authority v. Prabhjit Singh Soni and Anr. (2024) ibclaw.in 53 SC on the facts of the case.

Whether reassessment action under Section 148 of the Income Tax Act, 1961 can be initiated notwithstanding the Resolution Plan having been approved by the NCLT – Asian Colour Coated Ispat Ltd. Vs. Assistant Commissioner of Income Tax and Anr. – Delhi High Court Read Post »

There is nothing in the IBC to negate that position of CGST Act being treated as Secured Debt | Operational/Dissenting Financial Creditors cannot be paid NIL value merely the Liquidation Value is NIL for them – Sandip Kumar Kejriwal RP of Indian Mining Works Pvt. Ltd. – NCLT Kolkata Bench

Hon’ble NCLT Kolkata Bench held that:
(i) The legislative intent to provide the word “not less than” in the first line of Section 30(2)(b) of the I&B Code is contemplating a mandatory allocation to the operational creditors and the dissenting financial creditors and the allocation would be the amount provided in the resolution plan or liquidation value whichever is higher.
(ii) The Adjudicating Authority has been established to function as a mere rubber stamp affixing authority to allow all the commercial decisions of the CoC, wherein the irregularities or illegalities committed by the CoC, or the insinuating circumstances are galore.
(iii) A resolution plan that is violative or non-compliant to the provisions of Section 30(2) read with Section 31(1) can be rejected under Section 30(2) of the I&B Code, though the plan has been approved by the CoC under its commercial wisdom.
(iv) The plan also has not allocated any sum to the CGST Department (Government of India) when they are actual creditors in terms of Section 82 of the CGST Act.

There is nothing in the IBC to negate that position of CGST Act being treated as Secured Debt | Operational/Dissenting Financial Creditors cannot be paid NIL value merely the Liquidation Value is NIL for them – Sandip Kumar Kejriwal RP of Indian Mining Works Pvt. Ltd. – NCLT Kolkata Bench Read Post »

Claim for refund of a Security Deposit which is linked to a contractual obligation contingent upon executing a leave and license agreement does not constitute an Operational Debt under the IBC – Carestream Health India Pvt. Ltd. Vs. Seaview Mercantile LLP – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) The Appellant’s claim for the refund of a security deposit under the LOI does not pertain to the provision of goods or services but rather to a contractual obligation contingent upon executing a leave and license agreement.
(ii) The security deposit here is linked to a conditional contractual arrangement and not to the actual provision of any goods or services. Therefore, the claim does not constitute an operational debt under the IBC.
(iii) In the present case, the security deposit was not an advance licence fee but deposit for ensuring that the Appellant entered into a license agreement.
(iv) The scope of “operational debt” under the IBC does not encompass situations like security deposits unrelated to any immediate service rendered.

Claim for refund of a Security Deposit which is linked to a contractual obligation contingent upon executing a leave and license agreement does not constitute an Operational Debt under the IBC – Carestream Health India Pvt. Ltd. Vs. Seaview Mercantile LLP – NCLAT New Delhi Read Post »

Can claims of Tax Assessment Orders passed during moratorium under Section 14 & 33(5) of IBC be considered as Unsecured Operational Debt whereas claims under the same statute related prior to admission of CIRP are being treated as Secured Creditor? – Commissioner of State Tax Department Vs. Ramchandra Dallaram Chaudhary Liquidator of Anil Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT held that:

(i) Claim related to Gujarat Sales Tax Act, 1969 are treated as unsecured since The Gujarat Sales Tax Act, 1969 does not contain any part-materia stipulation akin to Section 48 of the Gujarat Value Added Tax Act, 2003.
(ii) The assessment orders passed after the imposition of Moratorium under Section 14 of the Code tantamount to violation of Section 14 of the Code.
(iii) Assessment orders passed after passing of liquidation order under VAT Act violates the moratorium under provision of 33(5) of the Code.
(iv) The Claims of Assessment Orders passed during the moratorium under Section 14 & 33(5) of the Code, have been rightly considered and admitted as Unsecured Operational Debt.
(v) Time period of 330 days prescribed in the Code is indicative and directory in nature and not mandatory.
(vi) The Tax Department during the moratorium period could determine the tax, interest, fine or any penalty which is due, however, it could not be enforced for recovery or levy of interest on the tax due during the period of Moratorium.

Can claims of Tax Assessment Orders passed during moratorium under Section 14 & 33(5) of IBC be considered as Unsecured Operational Debt whereas claims under the same statute related prior to admission of CIRP are being treated as Secured Creditor? – Commissioner of State Tax Department Vs. Ramchandra Dallaram Chaudhary Liquidator of Anil Ltd. – NCLAT New Delhi Read Post »

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