In the matter of Monnet Power Company Ltd.

IN THE NATIONAL COMPANY LAW TRIBUNAL CUTTACK BENCH IA (IBl No. 2ltlcBlzo2s IN TP No. tT lCTB|ZO2L CP (IBl No. 1696lMBlZOt7 [An Application under section 60 (5) of the Insoluencg and Bankruptcg Code, 2016, read wittt Rule 1L of the National Comp,any Law Triburrrt Rules,2016l In the matter of: JOINT COMMISSIONER OF COMMERCIAL TAXES & GST (Previously it was Deputy commissioner of commercial raxes) C.T. & GST Circle, Near Rotary Public School, Angul, Odisha-759122. """APPlicant versus NAVNEET KUMAR GUPTA Reg. Number: IBBI/IPA-00 1 /Ip-p00OOL I 2O|6-2OLZ I LOOO} Email ID: navneet@minervaresolutions.com, Le.Mpcl@in.gt.com Address: At/PO: Unit No. 2, Block D1, Golf Link DDA, Sector 238, Pocket 8, Dwarka, New Delhi, National Capital Territory of Delhi, t|OOZZ Liquidator of Monnet Power Company Limited Respondent Order Pronounced on: O2.OS.2O2S Coram: DEEP CHANDRA JOSHI, MEMBER (JUDICIAL) BANWARI LAL MEENA, MEMBER (TECHNICAT) Appearance: Applicant: For Anand Das, Advocate Seshadeba Das, Advocate For Respondent: Saswat K. Acharya, Advocate ,-sd (a NCLT, CUTTACK BENCH IA (IB) Ito. zlt/cBl2023 IN TP No. lT{CTB|2O2L cP (IB| No. l696lutB/2o17 ORDER 1. This is an Application filed under Section 60(5) of the Insolvency and Bankruptcy code, 2016 ("code") read with Rule 11 of the National company Law Tribunal Rules, 2016 by the Joint commissioner of commercial Taxes & GST, (Previously it was Deputy commissioner of commercial Taxes) c.T. & GST circle, Angul odisha ("Applicant,) seeking a direction against the Liquidator of Monnet power company Limited ("Respondent") to treat its claim as a 'secured creditor, and update the list of creditors accordingly and to direct the Respondent to release the claim amount of the Applicant as a Secured Creditor.

2. The brief facts of the case as stated in the Application are as follows: (i) Monnet Power company Limited, the corporate Debtor, was carrying on its business activities within the state of Odisha and registered within the Applicant's jurisdiction under various taxing statutes. Pursuant to the order dated 23.1o.2o19 passed by the National company Law Tribunal, Mumbai Bench, the liquidation process of the Corporate Debtor was initiated under the provisions of the code, and the Respondent was appointed as the Liquidator of the Corporate Debtor. (ii) The Respondent made a public announcement on 29.71.2079, and accordingly, the Applicant submitted its claim in Form-c with the Respondent for the craim amount of Rs, 80,10,13,103/-" As per the Applicant, such claims include unpaid tax dues arising out of various taxing statutes such as orissa value Added rax Act, 2oo4, orissa Entry Tax Act, 1999 & Central Sales Tax (Orissa) Rules, I9SZ. (iii) The Respondent, upon receiving the claims fired by the Applicant, admitted the claim amount of Rs. g0,10,13,103/_, placed it under the head of "Operational Creditor (Government Dues)".

Thereafter, the Applicant vide letter dated 30.0s.2023 g Page

NCLT, CUTTACX BENCH IA (IB) No. ztt/cBl2023 r,"ii,L"i JJI i:,i',23?+ intimated the Respondent to give the status " o, f the claim so submitted, as the claim of the Applicant was admitted in full by the Respondent. The Respondent vide email dated o1.06.2023 replied to the Applicant wherein the Respondent stated that pursuant to the auction of the corporate Debtor, Jindal steel and Power Limited has taken over the assets of the corporate Debtor by sale and the liquidated amount shall be distributed amongst the stakeholders of the corporate Debtor in accordance with the waterfall mechanism as provided under section 53 of the code. (iv) The Applicant has submitted that section 55 of the orissa value Added Tax Act, 2004, and Section 1 1 of the orissa Entry Tax Act, 1999 have provisions for recovery of tax dues and creation of a charge as required under the code to be treated as a Secured creditor. Further, under Rule 22 of the central Sales Tax (orissa) Rules, 1957 the provisions of the orissa value Added Tax Act, 2004 and the rules made thereunder shall mutatis mutarudis apply in respect of all procedural and other matters incidental to the carrying out of the purposes of the Act for which no provision is made in the aforesaid Rules. It is further submitted that a charge is said to be created as and when an assessment order is passed under the law, (") The Applicant has relied upon the following judgments: (a) state Tax officer vs. Rainbow papers Ltd, l2o2g) 9 scc s4s; (bf Sanjay Kumar Agarwal vs. state Tax officer & Anr. l2o24l 2 scc 362 and {cf Shree Radhekrushna Ginning & pressing Prrt. Ltd. Through Director Yash pareshbhai Khachar vs. state of Gujarat, Gujarat High court in special civil Application No. 54L3 of 2022, to submit that in the present case, the corporate Debtor has failed to discharge its liabilities under the orissa value Added rax Act, 2oo4 & orissa Entry Tax Act, lggg. Accordingly, a statutory charge has been created by operation of (rr -=tJ /t\ , r-<i 3lPage

NCLT, CUTTACK BENCH IA (IB) No. 2Lr/cBlzoZg rP No. l?/crB/2ojT law, and as such, the Applicant is to be tr.rt!1"?:"j"ff::ffi:'J Creditor and its claims are to be distributed as it would have been to a Secured Creditor per Section 53 of the Code, 3. The Respondent has fited its reply wherein it has vehemently opposed the claim of the Applicant on the following grounds: (i) Pursuant to the public announcement by the Liquidator, the Applicant had filed their claim in Form-c for an amount of Rs. 80,10,13,103/-. This amount included unpaid tax dues arising out of various tax statutes such as the Orissa Value Added Tax Act, 2oo4, orissa Entry Tax, rggg, and central sales Tax (orissa) Rules, lgs7. The claim of the Applicant was admitted as it was considered as an operational Debt, and the same was reflected in the List of Operational Creditors as Government Dues published by the Respondent. (ii) Thereafter, the Respondent sold all the assets of the Corporate Debtor to Jindal Steel and Power Limited at the 9th e-auction. The amount realized from the sale was then distributed as per the provisions of Section 53 of the Code. (iii) The Respondent submitted that the contention of the Applicant that it should be treated at par with Secured Creditor is baseless and illogical. This is because Section 53 of the Code stipulates the priority in which the amount shall be paid. (i") The Respondent further submitted that the Applicant,s reliance on the Hon'ble supreme court judgment in Rainbow Papers Ltd (supra)"wherein the Hon'ble Supreme court stated that the debts owed to a secured creditor, which would include the state under the Gujarat value Added rax Act, 2oo3 are to rank equally with other specified debts including debts on account of workmen's dues for a period of 24 months preceding the liquidation commencement date are not applicabre tn the s4 E-1 l 4rpage

NCLT, CUTTACK BENCH IA (IB) No" 2rL/cBlza2s rP No. r7lcrB/2ojT present factual scenario. This is because, i" R.d;['#;;';:lrJfl'; (supra), the Hon'ble supreme court of India considered the dues of the state in the context of the Resolution Plan and not the Liquidation stage. (u) It is further submitted that the Hon'bre Supreme court of India in Principal commissioner of Income Tax vs. Monnet Ispat and Energy Limited,2oL8 scc onLine sc 3,46s, clearly ruled that income tax dues being in the nature of the crown debts, do not take precedence over the Secured Creditors. Further, the Hon'ble supreme court of India in paschimanchal vidyut vitran Nigam Limited vs. Raman Ispat private Limited & ors., 2o23 scc online sc 842, has ruled that the careful design of Section 53 of the Code locates the amounts payable to Secured creditors and workmen at second place after the costs and expenses of the liquidation proceedings. However, the dues payable to the Government are placed much below those of Secured Creditors and even unsecured and operational creditors, (vi) The Respondent submitted that Rainbow papers (supraf was in the context of Resolution plan and not Liquidation, because Section 53 has been specifically enacted for the distribution of amount during the Liquidation stage and hence, the contention of the Applicant to treat their dues at par with Secured Creditor does not sustain as it violates Section 53 of the code and various judgment passed by the Hon'ble Supreme Court of India. 4. we have heard the learned counsel appearing for the Applicant and the Respondent and have perused the materials available on record' The issue involved in the present case is whether the Applicant can be treated as a 'secured Creditor' as per the provisions of the Corle. Q, Ca

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NCL?, CUTTACK BENCH IA (IB) No. 2lrlcBl2023, ,rr"rrrr.iT no. cP (IB) No. L696/MB/2OlX 5. Section 3(30) and Section 3(31) of the Code define the term "Secured Creditor" and "Security Interest", which are set out herein below: " 3(3O) "secttred creditor" means a creditor in fauour of whom securitA interest is created; 3(31) "securitg interest" means right, title or interest or a claim to property, created in fauour of, or prouided for a secured creditor bA a transactiort which secures payment or performa.nce of an obligation and includes mortgage, charge, hypothecation, assignment and ertcumbrance or arta other agreement or crrangement securirlg paament or performance of any obligation. of ana person: Prouided that security interest shall not include a performance guararutee;" 6. Though the judgment rendered by the Hon'ble Supreme court of India in Rainbow Papers Ltd (supra) was rendered in the context of approval of resolution plan and not in the context of Liquidation, however, it provides valuable insight for determining whether a particular creditor can be considered as a "secured Creditor" or not. As held by the Hon'ble supreme court of India in Rainbow papers Ltd (supra). term "Secured creditor" as defined under the code 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. It has further held that the definition of Secured Creditor under the Code does not exclude any Q6-,c-6qent or Authority. C.J Government gl 6lPage

NCLT, CUTTACK BENCH IA (IB) No, 2tt/cB/2ozs rP No. l7lcrB/2ojT. 7 The next aspect that is to be looked into is *h"ffi:? til':':Hfi[ raised by the Applicant under the orissa value Added Tax Act, 2oo4, orissa Entry Tax Act, lggg & central Sales Tax (orissa) Rules, lgsT contains any provisions that provide for the creation of a charge on the property of a person in respect of any amount payable by that person on account of tax, interest, penalty, etc. The relevant provisions under the abovementioned statutes, which, as per the Applicant, provide for the creation of a charge, are reproduced below:

55. Tqx to be flrst charge on propeftg, -Notwithstanding angthing to the contrary contained. in any law for the time being in force, ana amount of tax, including interest or penaltg or both, if ana' pqaable bg a dealer or ana other person und.er this Act shail be a first charge on the propertg of the d.ealer or such person, e.s the case mag be.

77. Pagment and recouery of ang tqx.- (1) The tax und.er this Act shall be paid in such manner, in such instalments, if ang, and. ulithin such time, as maA be prescribed.. (2) If default is made in making payment in accord.ance with sub_ section (1)- (i) the tuhole of the amount outstand-irlg on the d.ate of defautt shatt become immediately due and. shall be a charge on the property of the Dealer or ana other person or persorts liabte to pay tax und.er this Act; and (ii) the Dealer or ana other person or persons liable to pay the tax under this Act shall paa a penalty equal to two and hatf per cent of such amourut for each month subsequent to the first three mon.ths aforesaid.. q as 7lPage

,X",',3i;Y.1tr;1,",1Ht IN TP No. 17lcTB/2o2r E xpt an atio n- F o r the pu rp o.ses o/ ct au s e (iil the";t;7li;f"i ' ":i,]i)i for a part of a month shall be proportionatelg d.etermined.. (3) Notuithstanding angthing contained. in sub-section (2), the commissioner moa subject to such cond"itions as maa be prescribed. remit the uhole or ana part of tlte penalty payable in respect of aruy period by any Dealer or person or class of persons. ft) Any tax assessed, or ang other amount due urtd.er this Act from a Dealer or ana other persorl or person may uithout prejudice to any other mode of collectiort be recouered. as arL arrear of public demand or in accordance with the prouislons contairled. in the schedule to the Sales Tax Act: Prouided that where a Dealer or ana other person who has appealed or applied for reuision of any ord.er mad.e und.er this Act arud has complied utith an order mad.e by the appellate or the reuising authoritg in regard to tlte payment of tax or other amount, no proceedings for recouery under this sub-section shall be mad.e or continued until the disposal of such appeal or application for reuision.

22. Appllcqtion of the /orfssa value Added Tax, 2oo4l, and. the niles mqde thereunder to certqln matters.- The proulslons of the [orissa value Added Tax Act, 2004] and. the rules made thereunder shall mutatis mutqndis appta in respect of att procedural and. other matters incidentat to the carrging out of the purposes of tLrc Act for which no prouision is mad.e in these rules or in the central sales Tax (Registration and. TDrnouer) Rules, 1957." 8' It is pertinent to note that Section 55 of the Orissa Value Added Tax Act, 2oo4, ts pari materia with section 4g of the Gujarat value Added Tax Act, 2003, which was the subject matter of discussinn in ths e{ 8lPage

NCLT, CUTTACK BENCH IA (IB| No. 2lllcBlzOzS * r,il',}"i iJl i:,i',2311 Rainbow Papers Ltd (supra|. In that case, the Hon'ble Supreme Court held that a charge created under a statute would create a security interest in favour of the statutory authority, making such statutory authority a charge holder and thereby a Secured Creditor. It further held that Section 48 of the Gujarat Value Added Tax Act, 2003, is not inconsistent with Section 53 or any other provisions of the Code, The Hon'ble Supreme Court held that the debt arising out of or in connection with the Gujarat Value Added Tax Act, 2003 Act will be secured debt and will fall under section s3(lxb)(ii) of the Code, which provides for priority of dues to secured creditors. 9. The Applicant has relied upon the judgment of the Hon'ble. Supreme Court of India in Sanjay Kumar Aganval vs. State Tax Officer & Anr, l2o24l 2 SCC 3,62, wherein review petitions against Rainbow Papers Ltd (supra| were dismissed by the Hon'ble Supreme Court of India on 31 October 2023. Therefore, the dismissal of the review petitions in relation to the Rainbow Papers Ltd (supra) will mean that the decision of the Ralnbow Papers Ltd (supraf will continue to be binding in such cases where the statutory provision creating first charge in favour of the relevant government or statutory authority is pari materiawith the provision of Section 48 of the Gujarat Value Added Tax Act, 2003, 10. The next aspect which is to be considered is whether the provisions of the Orissa Value Added Tax Act, 2004, Orissa Entry Tax Act, 1999 & Central Sales Tax (Orissa) Rules, 1957 provide for an exception concerning the applicability of the Code, like an exception provided under Section l42A of the Customs Act, 1962 and Section 82 of the Maharashtra GST Act,2OI7. 1 1. This aspect has to be looked into as the Learned National Company Law Appellate Tribunal, New Delhi, in Department of State Tax v. Ashish Chhawchharia Resolution Professional For Jet Airways (India! Ltd. & Anr., Company Appeal (ATf (Ins-olven_cyf No. Cq 9lPage

NCLT, CUTTACK BENCH IA (IB) No. 2ltlcBl2A23 rP No. l7lcrB/2ojT 7e2 or zozl placing reliance on sundaresh Bhatt, L#.j'ijXt;f:ffiil[ shipyard vs" central Board of Indirect raxes and customs, 2Cl22 scc online sc 11o1, has held that provisions of Section g2 of the Maharashtra GST Act, 2olz, contains an exception with regard to the code and therefore, on the strength of dues under Maharashtra GST Acl, 2077, no charge can be claimed on the assets of the corporate Debtor. However, no such specific exclusion has been engrafted under the orissa value Added Tax Act, 2oo4, orissa trntry Tax Act, 1999 & Central sales Tax (orissa) Rules, lgs7 for the applicability of the provisions of the Code. 12" In the present case, as per the Form-c submitted by the Applicant, it is observed that the total claim of the Applicant, i.e., Rs. 80,10,13,1o3/- (Rupees Eighty crore Ten Lakhs Thirteen Thousand one Hundred Three onlyf against the corporate Debtor arises out of 51 Assessment orders under the orissa Entry Act, 1999, and orissa value Added Tax Act, 2oo4 from the year 2oto to 2ol7. rt is also noted that section 11 of the orissa trntry Act, 1999, provides for the creation of a charge in favour of the State Tax Department on the property of the defaulter for any outstanding amounts payable under the Orissa Entry Tax Act, 1999. 13. Therefore, in view of the statutory charge in terms of section 55 of the orissa value Added Tax Act, 2oo4, Section 1 1 of the orissa Entry Tax Act, 1999, and Rule 22 of the central Sales Tax (orissa) Rules, 1957 and applying the ratio laid down by the Hon,ble Supreme court of India Rainbow Papers Ltd (supra), the claim of the Applicant, squarely falls within the definition of "security Interest" under Section 3(31) of the code and the Applicant is to be treated as a,secured Creditor" under Section 3(30) of the Code. 74. The Respondent, relying upon the paschimanchal vidyut vitran Nigam Limited (supra), has contended that the ratio laid down in Rainbow Papers Ltd (supraf wourd not be applicable in the..pr€sent Or -9, .>al 10 lPage

NCLT, CUTTACK BENCH IA (IBf No. 2ttlcBl2o23 IN *u"T',.]:i.',;iii,i"z3?+ case, as the Hon'ble supreme Court of India considered Rainbow Papers Ltd (supra) from the aspect of approval of the resolution plan whereas in the present case, the Corporate Debtor is at the stage of liquidation. we are unable to accede to this submission of the Respondent, as we are of the opinion that if a particular creditor falls under the definition of a "securod Creditor", then such position shall remain the same irrespective of the fact that whether the Corporate Debtor is undergoing the CIRP or liquidation. 15. The Respondent has relied upon the ratio principal commissioner of Income Tax vs. Monnet Ispat and Energy Limited, 2ol8 scc onLlne sc 3465, wherein it was held by the Hon'b1e Supreme Court of India that income tax dues being in the nature of the crown debts, do not take precedence over the Secured Creditors. However, the ratio of this judgment is not applicable to the factual matrix of the present case because this judgment was rendered in the context of the Income Tax Act, Lg6L, which does not have a provision for the creation of a first charge. L6. In view of the above, we are inclined to allow the present Application and pass the following directions: (i) The Liquidator is directed to treat, Joint Commissioner of commercial Taxes & Gsr, Near Rotary public schoor, Angul, Odisha-759122 as a 'secured Creditor'of the Corporate Debtor. (ii) Accordingly, the Liquidator shall update the list of creditors by incorporating Joint commissioner of commercial raxes & GST, Near Rotary Public School, Angul, Odisha-71gt22 as a 'Secured Creditor'of the Corporate Debtor. 17. with the aforesaid directions, IA (IB) No. 2LtlcBl2o2o is ALLOWED q and DISPOSED OF. q BANWAM LAL MEENA DEEP CHANDRA JOSHI MEMBER (TECHNTCAL) MEMBER (JUDICIALI

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