Commercial Tax Department vs Naveen Kumar Sood

IN THE MATTER OF: Commercial Tax Department ...Appellant

Versus

Naveen Kumar Sood & Anr. ...Respondents

Present: For Appellant : Mr. Shashwat Parihar, Mr. Shashwat Anand, Mr. Mrinal Elker Mazumdar, Mr. Rishabh Kumar and Mr. Deepanshu Badiwal, Advocates

For Respondent : Mr. Abhinav Agrawal, Advocate for R-1. Mr. Himanshu Satija and Ms. Ridhi Ranjan, Advocates for R-2.

ORDER

(Hybrid Mode)

20.12.2024 This is an Appeal filed by the Commercial Tax Department,

MP Govt through Assistant Commissioner which is praying for setting aside

the order dated 13.10.2023 passed by NCLT, Indore Bench. Vide order dated

13.10.2023 the Adjudicating Authority had approved the resolution plan in

which the claim of the Appellant being the Commercial Tax Department has

been categorised in the form of unsecured creditor and the Appellant claims

that it is in contravention of Section 30 & 31 of the Insolvency and Bankruptcy

Code, 2016.

2. Mr. Deepak Chandak proprietor of M/s Harshal Enterprise preferred an

Application under section 9 of the Insolvency and Bankruptcy Code 2016 (IBC')

for initiating the Corporate Insolvency Resolution Process (CIRP) against M/s

Ujaas Energy Limited (Corporate Debtor) being Company Petition CP (IB) 9 of

2020. The Hon'ble National Company Law Tribunal, Indore vide Order dated 17.09.2020 ('Order') initiated the CIRP and appointed M. Navin Khandelwal as

the Interim Resolution Professional ('IRP') and a moratorium was declared in

terms of Section 14 of IBC. Apropos to the Order and public announcement

inviting claims from the Creditor, the Committee of Creditor ("COC') was

constituted, and CoC meetings were conducted from time to time. The

Adjudicating Authority vide order dated 28.01.2021 approved the replacement

of the IRP and appointed Mr. Naveen Kumar Sood as Resolution Professional

(RP) in place of Mr. Navin Khandelwal. It is contended the RP never provided

notice of meeting to the Commercial Tax Department ('Department'. Also

claimed that the RP failed to provide the department with an opportunity to

deliberate on the issue and discuss their opinion on resolution plan, which

proposes no payment in lieu of the statutory dues. Furthermore, the

information memorandum prepared by the RP also categorized the dues of

Department as an Operational Debt and failed to categorize the debt of the

Department towards the company as Secured Debt and failed to identify the

Department as a Secured Creditor.

3. Subsequently, the NCLT by Order dated 13.10.2022 failed to consider

this and approved the plan contravening of Section 31 of IBC. It is submitted

that Section 31 of Madhya Pradesh Value Added Tax provides that any liability

to be paid to the Government would be given priority in the matter of effecting

recovery by placing a first charge on property of the defaulting entity. It is

submitted that the recent judgement in Sales Tax Officer Vs Rainbow paper

limited, Civil Appeal No: 2568 of 2020, the Hon'ble Supreme Court has

held that the definition of Secured Creditor in the IBC does not exclude any Company Appeal (AT) (Ins.) No. 280 of 2024 2 of 5 Government or Governmental Authority. The Hon'ble Supreme Court held that

"Secured Creditor" as defined under the IBC is comprehensive and wide enough

to cover all types of security interests namely, the right, title, interest or a claim

to property created in favour of, or provided for a secured creditor by a

transaction, which secures payment or performance of an obligation and

includes mortgage, charge, hypothecation, assignment and encumbrance or

any other agreement or arrangement securing payment or performance of any

obligation of any person. Further, it is claimed that the Hon'ble Apex Court

held that Resolution Plan which ignores Statutory Dues Payable to State

Government/Legal Authority is liable to be rejected. It is submitted that Section

33 of the Madhya Pradesh Value Added Tax Act, 2006 clearly mentions that

Tax has to be the first charge and Section 53 of the IBC, 2016 does not override

Section 33 of the MPVAT Act, 2006. It is submitted that the Claim was

submitted by the Appellant to the Resolution Professional and was duly

received by the Resolution Professional on 20.11.2020 and the claim was also

discussed before the Committee of Creditors, however the claim was classified

to be an unsecured debt and the Department of Commercial Tax as Unsecured

Creditor and hence the Department was never called for voting in the CoC. In

view of the aforementioned facts and circumstances and decision of the Hon'ble

Supreme Court of India it is prayed the Resolution Plan be rejected as it has

ignored the Statutory Dues that was payable to the State Government and

Legal Authority viz Commercial Tax Department.

4. A similar matter has been taken by the coordinate bench of this Tribunal

in similarly placed facts in the matter relating to commercial tax department of Company Appeal (AT) (Ins.) No. 280 of 2024 3 of 5 Madhya Pradesh Value Added Tax Act, 2002 (MP VAT Tax). The facts are similar

and are noted in paragraph 9 & 10 which are as follows:

"....

9. The present appeal has been filed by Commercial Tax Department, Government of Madhya Pradesh against the order dated 25.08.2022 having the grievance that the Appellant was treated as an unsecured creditor, the claim of the appellant was termed as unsecured debt and was not considered as secured debt under Section 30 of the Code.

10. The Appellant has solely relied upon a decision of the Hon'ble Supreme Court rendered in the case of State Tax Officer (1) Vs. Rainbow Papers Limited, Civil Appeal No. 1661 of 2020 to contend that the statutory demand of the Appellant of Rs. 12,61,57,345/-, filed vide Form B dated 29.07.2021, should have been considered as a secured debt."

5. After analysing the provisions of MP VAT Tax and comparing with the

Gujarat Vat Tax, the coordinate bench has come to a conclusion as follows:

"....

21. Although it has also been held by the Hon'ble Supreme Court in the case of Paschimanchal Vidyut Vitran Nigam Limited (Supra) 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, we are of the considered opinion that 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 Hon'ble Supreme Court in the case of 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).

22. In view of the aforesaid discussion, we find no merit in the present appeal and hence, the same is hereby dismissed."

6. We find that the facts of the case in hand are exactly similar to the case

which was been taken up by a larger coordinate bench of this Tribunal and

which has rejected the claim that the debt has to be considered as secured debt

under Section 30 of the Code. It is brought to the notice of this bench that an

appeal is pending on this issue before Hon'ble Apex Court which is not Company Appeal (AT) (Ins.) No. 280 of 2024 4 of 5 numbered and this should be kept pending till it is taken up and decided by

the Hon'ble Apex Court.

7. This was vehemently opposed by the Respondent who produced an order

of Hon'ble Apex Court in Civil Appeal (Diary) No. 47176 of 2023 dated

22.01.2024 in which the Hon'ble Apex Court has noted as follows:

"We do not approve of such kind of aspersions being cast on the CESTAT or any other Tribunal/Court. Merely because the matter is pending before this Court as long as there is no direction not to hear similar cases before other Tribunals/courts passed by this Court, the pendency of a matter before this Court would not come in the way of other Tribunals/Courts deciding similar case."

8. We do not find any prohibition in hearing the matter in hand as there is

no direction not to hear similar cases before the other Tribunals/Courts.

9. As discussed earlier there is no merit in the Appeal and needs to be

dismissed and is ordered accordingly.

[Justice Yogesh Khanna] Member (Judicial)

[Arun Baroka] Member (Technical) pks/md

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