Department Of Sales Tax vs Mr. Rajat Mukherjee (Resolution ...

Department of Sales Tax Through Deputy Commissioner of Sales Tax MUM-VAT-E-623, LTU-2, Cabin No.7, B Wing, 4th Floor Old Building, GST Bhavan, Mazgaon, Mumbai - 400 010. ...Appellant

Versus

Rajat Mukharjee Resolution Professional for AVK Automall Pvt. Ltd. Principal place of business: 91 Springboard Business Hub; 74/II, "C" Cross Road, Opp. Gate No.2, Seepz Andheri (East) Mumbai - 400 093. ...Respondent No.1

2. M/s AVK Automall Pvt. Ltd. 5/6, Poonam Heights, S.V. Road, Goregaon West, Mumbai 400 062

Oberoi Spring Co-operative Society, B-3505, Near Monginis Cake Shop, Oshiwara, Andheri (West), Mumbai - 400 053. ...Respondent No.2

For Appellant: Mr. Amar Mishra and Mr. Tejas, Advocates. For Respondents: Mr. Malhar Zatakia, Mr. Rajat Mukherjee and Mr. Rahul Punjabi, Advocates for R-1. Mr. Kunal Kanungo, Mr. Atishay Jain and Ms. Tanushree Soganu, Advocates for R-2.

ORDER

(Virtual Mode)

25.08.2021: This Appeal has been filed by the Appellant - Department of Sales

Tax against impugned order dated 5th March, 2021 passed by the Adjudicating

Authority (National Company Law Tribunal), Mumbai Bench, Court-III in M.A. No. 2

2710 of 2019 in C.P. No. 2924/IB/2018 in the matter of Corporate Debtor - 'M/s

AVK Automall Pvt. Ltd.'. By the said impugned order the Adjudicating Authority

accepted the Resolution Plan which had been submitted by M/s Leadadroit

Services Pvt. Ltd. which had been approved by a voting share of 94.60%. The

Learned Counsel for the Appellant submits that the Appellant had filed claims for

the Sales Tax dues of Rs.14,70,50,763/-, however in the Resolution Plan approved,

from the above Sales Tax dues hardly an amount of Rs.14,50,000 has been allotted

to Operational Creditors - Government Authorities which comes to hardly 1% of

the dues for which the Appellant had filed claim with the Resolution Professional.

The Learned Counsel for the Resolution Professional, Shri Malhar Zatakia, submits

that the Corporate Insolvency Resolution Process (CIRP) was duly conducted and

the Resolution Plan has been approved in which the Appellant - Operational

Creditor has received dues which Committee of Creditors (CoC) approved in its

commercial wisdom.

2. Learned Counsel for the Appellant is submitting that its quite surprising that

the Appellant - Operational Creditor has been given a 99% haircut and the Learned

Counsel is expressing doubts in the manner in which CIRP was conducted.

3. Going through the Appeal and hearing the submissions, it may be

appropriate to refer to para 9 of the impugned order where there is discussion

regarding upfront payment being made and the distribution in the Resolution Plan.

The same is as under:

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"9. The Resolution Plan proposes an upfront payment of INR 39.20 Lacs to creditors (including CIRP costs), in the following manner:

Particulars Amount Source of funds and Detailed payable Rights with respect description to fund infusion of proposal Treatment of CIRP Cost and Operational Creditors (other than Financial Creditor) CIRP Costs 16 Lacs 1. Infusion through Refer point 5 or any Leadadroit Services and 7 of lower Private Limited Resolution amount through SPV in the Plan form of subsidiary company by way of release of its liquid funds/ investments against which corporate debtor will issue Equity Shares of the Corporate Debtor.

Employees NIL 1. Infusion through Refer point 5 and Workmen Leadadroit Services and 7 of Private Limited through Resolution SPV in the form of Plan subsidiary company by way of release of its liquid funds/ investments against which corporate debtor will issue Equity Shares of the Corporate Debtor. Operational 14.50 1. Infusion through Refer point 5 creditors, Lacs Leadadroit Services and 7 of excluding Private Limited through Resolution employees SPV in the form of Plan and workmen subsidiary company by (this include way of release of its various liquid funds/ statutory investments against authorities which corporate debtor like Income will issue Equity

Company Appeal (AT) (Insolvency) No. 615 of 2021 4

Tax, VAT and Shares of the Corporate Service Tax) Debtor.

Treatment of Financial Creditors Upfront cash 8.70 Infusion through Refer point 5 payment to Lacs Leadadroit Services and 7 of financial Private Limited through Resolution creditors SPV in the form of Plan (within 90 subsidiary company by days) way of release of its liquid funds/ investments against which corporate debtor will issue equity shares capital will be issued by the corporate debtor and all the financial creditors shall extinguish the charge created on all the assets of the corporate debtor including all the corporate guarantees issued by any person including the promoters of corporate debtor or by any other person to secure the financial debt. *refer point 5.11.8.

Treatment of other stakeholders Related Party NIL Not Applicable Refer point 5 dues and 7 of Resolution Plan Equity NIL Not Applicable Refer point 5 shareholders and 7 of Resolution Plan Total 39.20 - -

Resolution Lacs Plan Amount

Company Appeal (AT) (Insolvency) No. 615 of 2021 5

4. Having heard Learned Counsel for the Appellant reference may be made to

the judgment of Hon'ble Supreme Court in the matter of 'Ghanshyam Mishra and

Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited. & Ors.', Civil

Appeal No. 8129/2019 dated 13th April, 2021, where Hon'ble Supreme Court in

Para 95 of the judgment observed as under:

"95. In the result, we answer the questions framed by us as under:

(i) That once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

(ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;

(iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued."

5. Keeping in view the judgment of the Hon'ble Supreme Court, as we find that

Committee of Creditors in the present matter has taken a discussion with regard

to distribution of the dues in the Resolution Plan including dues of statutory

authorities, we do not find that this is a matter where interference in the impugned

Company Appeal (AT) (Insolvency) No. 615 of 2021 6

order accepting a Resolution Plan is called for. The dues of the Appellant are

admittedly operational dues and the Resolution Plan has dealt with the dues. This

being so, keeping in view the orders of the Hon'ble Supreme Court and the law on

the issue, we decline to entertain the Appeal.

6. The Appeal is disposed of at the stage of admission as we decline to admit

the same. No orders as to costs.

[Justice A.I.S. Cheema] The Officiating Chairperson

[Dr. Alok Srivastava] Member (Technical) Archana/gc.

Company Appeal (AT) (Insolvency) No. 615 of 2021