Mr. Parag Sheth Liquidator Of Origin ... vs Union Bank Of India Representative Of ...

Comp. App. (AT) (Ins) No. 1395 of 2024 IN THE MATTER OF: Parag Sheth ...Appellant

Versus

Union of India & Ors. ...Respondent

Present: For Appellant : Ms. Natasha Dhruman Shah, Adv. For Respondent : Mr. Karan Valecha, Vishal Singhal, Adv. for R2

ORDER

(Virtual Mode)

Per: Justice Rakesh Kumar Jain (Oral)

02.09.2025: This appeal is filed by the Liquidator of M/s Origin

Formulation Pvt. Ltd. (CD), aggrieved against the order dated 09.05. 2024,

passed by the NCLT, Ahmedabad (in short 'the Tribunal') by which an

application filed by the Appellant bearing I.A No. 541 of 2022 in CP (IB) No.

566/Ahm/2019 under Section 54 of the Insolvency and Bankruptcy Code,

2016 (in short 'Code') with a prayer to dissolve the CD, has been rejected.

2. Brief facts of this case are that M/s Prutha Enterprises (FC) filed an

application under Section 7 of the Code against the CD which was admitted

on 17.09.2019 and the Appellant was appointed as the Interim Resolution

Professional (IRP).

3. Shorn of unnecessary details, since the resolution could not take place,

therefore, liquidation order was passed by the Tribunal on 28.09.2020.

4. The Appellant after the liquidation, distributed the proceeds in the

following manner:-

5. The Appellant then filed an application I.A No. 541 of 2022 on

18.06.2022. In this application, the Department of Income Tax raised a claim

of Rs. 7,71,39,553/- on 10.08.2022.

6. Counsel for the Appellant has submitted that on 28.06.2023, in the

application in question, Ms. Pankti Shah, Adv. appeared for Income Tax

Department and submitted that no charge was created against the demand

of income tax department, therefore, the decision in the case of State Tax Officer (1) Vs. Rainbow Papers Ltd., Civil Appeal No. 1661 of 2020 and Civil

Appeal No. 2568 of 2020 will not be applicable to the facts of this case and

the AA may take appropriate decision. The said order is reproduced as under:-

7. However, the Tribunal, while relying upon a decision in the case of

Rainbow Paper (Supra) and a decision of this Court in the case of Principal

Commissioner of Income Tax Vs. M/s Assam Company India Ltd., CA (AT)

(Ins) No. 243 of 2022 decided that the Income Tax department is a secured

creditor, therefore, at the time of distribution, the Appellant as the liquidator,

should not have considered the Income Tax Department as other creditors

instead of secured creditor. The Tribunal, therefore, observed that neither the

RoC nor the Income Tax Department have confirmed in writing their no

objection to the dissolution proposal submitted by the liquidator because of

the pending dues of the Income Tax, therefore, the application was rejected.

8. Counsel for the Appellant has submitted that the Tribunal committed

an error in rejecting the application only on the ground that the Income Tax

Department is a secured creditor while relying upon the decision of the

Hon'ble Supreme Court in the case of Rainbow Papers (Supra) and Principal

Commissioner of Income Tax (Supra). She has submitted that, in so far as, Rainbow Papers (Supra) is concerned that is an altogether different facts

because it was pertaining to Section 48 of the GVAT Act. She has further

submitted that in the case of Principal Commissioner of Income Tax (Supra),

decided by this Court is also not applicable because in that case an order of

attachment was passed which in a sense creation of a charge on the property

of the CD whereas in the present case no such attachment order has been

passed, therefore, the judgment in the case of Principal Commissioner of

Income Tax is not applicable. She has further submitted that even a statement

was suffered by the Counsel for the Income Tax Department on 28.06.2023

when she categorically stated before the Tribunal that the Income Tax

Department does not have any charge created on the demand of the Income

Tax, therefore, the decision in the case of Rainbow Papers (Supra) is not

applicable. The Income Tax Department did not challenge the order dated

28.06.2023 before the Higher Court if the said statement was not correct.

9. Be that as it may, during the pendency of this appeal, we thought it fit

to issue notice to the department and in this regard, passed the following

order:-

"28.02.2025 This appeal is directed against the order dated 09.05.2024 by which an application filed by the Appellant (Liquidator) in I.A. No. 541 of 2022 in C.P (IB) No. 566 of 2019 under Section 54 of the Insolvency and Bankruptcy Code, 2016 with a prayer to dissolve the CD i.e., M/s. Origin Formulation Private Limited, has been dismissed.

The Tribunal, while dismissing the application was of the view that neither the RoC nor the Income Tax Department had confirmed in writing their no objection to the dissolution proposal though they had sent a notice under Section 270 of the Income Tax Act, 1961 on 06.01.2021 and claimed a sum of Rs. 7,71,39,553/-.

Counsel for the Appellant has argued that the Counsel appearing on behalf of the Income Tax Department had suffered a statement on 16.08.2023 that neither the decision of the Hon'ble supreme Court in the case of Rainbow Paper vs. ST Department of Gujarat shall apply to this case nor the Department had filed any claim before the liquidator.

Since the Impugned Order has been passed in favour of the Income Tax Department, therefore, we are of the considered opinion that Income Tax Department is required to be impleaded as the party to contest the present appeal because there is no one else to contest the present appeal.

In view thereof, issue notice to Income Tax Department. The complete address along with the E-mail ID of the Department is as under :-

"The Assistant Commissioner, Central Circle-2(2) Ahmedabad, Aaykar Bhawan, Ashram Road, Navrangpura, Ahmedabad, Gujarat - 380009. Email :

ahmedabad.dcit.cen2.2@incometax.gov.in"

The Appellant is directed to deposit process fees along with requisites for the issuance of notice within three days from today to the Registry.

List on 14.04.2025."

10. As per office report, notice was served upon the Income Tax Department

but no one has put in appearance on its behalf either in the pre lunch session

when the case came up for hearing and then it was passed over to be taken

up in the post lunch session and at that time also no representation was made

on its behalf.

11. The reason appears to be obvious because the statement had already

been made by Counsel appearing on behalf of Income Tax Department on

28.06.2023, noticed in the previous part of this order, that the department

has no charge against the demand of income tax, therefore, the decision in

the case of Rainbow papers (Supra) is not applicable.

12. Thus, in view of the aforesaid facts and circumstances, we are of the

considered opinion that the Tribunal has committed a patent error in rejecting the application only by presuming that Income Tax Department is a secured

creditor while relying upon the decision in the case of Principal Commissioner

of Income Tax (Supra) which has already been distinguished.

13. No other point has been raised.

14. Counsel for Respondent No. 2 has also supported the case of the

Appellant.

15. In view of the aforesaid facts and circumstances, the present appeal

succeeds and the impugned order dated 09.05.2024 is set aside. The matter

is remanded back to the Tribunal for passing the order of dissolution in

accordance with law. The parties shall appear before the Tribunal on

16.09.2025.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sc/RR