Office Of The Asst State Tax ... vs Parthiv Parikh Resolution ...

Company Appeal (AT) (Ins) No.583 of 2020 Page 1 of 17 Taluka: Sanand, Ahmedabad-382170. ...Respondent No. 4

Judgment (Date: 26.3.2021)

{Per: Dr.Alok Srivastava, Member (T)}

1. This appeal has been filed under Section 61 of the Insolvency

and Bankruptcy Code, 2016 (hereinafter called IBC) by the

Appellant, who is aggrieved by the order of National Company Law

Tribunal, Ahmedabad Bench, the Adjudicating Authority in IA

572/2019 in C.P. (IB) No. 172/AHM/2018.

2. The fact of the case as presented and argued by both the

parties is that the Corporate Debtor(Respondent No.3) is a

company registered with the Maharashtra SalesTax Department

having TIN 27490008360V. In the course of its business, the

Corporate Debtor defaulted in payment of State Tax and thereby

created a liability of Rs.5,62,29,528/- (Five Crores Sixty Two Lakhs

Twenty Nine Thousand and Five Hundred and Twenty Eight only)

in accordance with the extant Maharashtra Value Added Tax Act,

2002 provisions which was due and payable to the Appellant. On

an application filed by an Operational Creditor M/s. SKE Projects

Private Limited (Respondent No.2) under Section 9 of IBC against

Company Appeal (AT) (Ins) No.583 of 2020 Page 2 of 17 the Corporate Debtor Jaihind Projects Ltd. (Respondent No. 3) Case

No.CP(IB) No. 172/AHM/2018 was taken up for consideration by

the Adjudicating Authority. This application was allowed as a

result of which Corporate Insolvency Resolution Process (CIRP) was

initiated against the Corporate Debtor and Premnarayan

Ramanand Tripathi was appointed as Interim Resolution

Professional. In pursuant to the CIRP, the Interim Resolution

Professional issued a public notice on 2.11.2018. Subesquently,

Parthiv Parikh was appointed as Resolution Professional on

23.01.2019 replacing earlier Interim Resolution Professional.

3. The Appellant has claimed that he was unaware of these

proceedings and the insolvency proceedings against Respondent

No.3 came to his knowledge only when the Joint Commissioner of

Sales Tax forwarded the order of the Adjudicating Authority dated

30.09.2019 to him. In order to secure the interest of the State Tax

Department, the Appellant filed a claim in Form B for

Rs.5,62,29,528/- on 20.12.2019. This claim was rejected by the

Resolution Professional vide email dated 31.12.2019 on the ground

of delay in filing the claim and as the Resolution Plan had been

submitted for approval to the Adjudicating Authority after approval

by the Committee of Creditors.

Company Appeal (AT) (Ins) No.583 of 2020 Page 3 of 17 4. As the Appellant was not satisfied with the rejection of his

claim, he sent an email on 10.02.2020 to erstwhile IRP

Premanarayan Tripathi for condoning delay in filing claim and

accepting his claim as Operational Creditor. As he was no longer

handling the CIRP, the erstwhile IRP forwarded this request to the

Resolution Professional for necessary action. The Resolution

Professional through an email dated 18.2.2020 rejected the claim.

Thereafter, the Appellant filed appeal under Section 60(5) of the

IBC (IA No.154 of 2020) on 21.2.2020 before the Adjudicating

Authority. As the Adjudicating Authority was already considering

the Resolution Plan submitted by the RP earlier, the IA No. 154 of

2020 was dismissed vide order dated 17.3.2020. Subsequently,

through order dated 19.03.2020 in IA No.593 of 2019 in CP(IB) 172

of 2018 the Adjudicating Authority approved the Resolution Plan

submitted by Respondent No. 4.

5. During the course of hearing, this Tribunal, vide order dated

25.8.2020, permitted the Appellant to implead the Successful

Resolution Applicant as a necessary party in the appeal.

Accordingly, M/s Parixit Irrigation Ltd., the Successful Resolution

Applicant, was joined as Respondent no. 4in the appeal.

Company Appeal (AT) (Ins) No.583 of 2020 Page 4 of 17 6. Reply to the Appeal Memo were filed by Respondent No. 1 and

Respondent No. 4 and written submissions were filed by the

Appellant, Respondent Nos. 1 and 4.Learned Counsels of the

parties were provided ample opportunity for advancing their oral

arguments.

7. The Ld. Counsel for Appellant has argued that the initiation

of CIRP and the public notice inviting claims were not in his

knowledge. He got to know of the CIRP through a communication of

his superior officer, the Joint Commissioner of State Tax. On

receiving such information, although at a late stage, the Appellant

filed the claim before the Resolution Professional in Form 'B'

relating to the operational debt for an amount of Rs.5,62,29,528/-

on 20.12.2019 which was rejected by the Resolution Professional

on the ground of delay in filing the claim as also for reason that the

Resolution Plan has already been submitted to the Adjudicating

Authority for approval. He has contended that it is a statutory

claim and should have been considered by the RP so that

government would not have been denied its just claim. He has

adverted to Regulation 12(2) of the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for Corporate

Company Appeal (AT) (Ins) No.583 of 2020 Page 5 of 17 Persons) Regulations, 2016 to claim that it is permissible for the

creditor to file its claim belatedly. Further he has contended that

since the Resolution Plan was under the consideration of the

Adjudicating Authority when the claim was filed, it would have

been fair to consider it. Moreover, the statutory dues of state tax

was included in the books of account of the Corporate Debtor

which should have been considered for inclusion in the Resolution

Plan even if no formal claim was filed. He cited the order of the

NCLT, Delhi Principal Bench dated 05.12.2018 in the case State

Bank of India v ARGL Ltd. (CA No. 1220(PB)/2018 in I.A. No.

(IB)531(PB)/2017) in support of his arguments. He has also

claimed that the Adjudicating Authority made a unilateral change

in the proposed Resolution Plan as approved by the COC by

directing other financial creditors to contribute amounts on pro

rata basis to the Axis Bank. In support he has cited the law as

expounded by the Hon'ble Apex Court in the two cases viz.

Committee of Creditors of Essar Steel v. Satish Kumar Gupta

2019 (16) SCC 319 and K. Sashidhar v. Indian Overseas Bank

and Ors. 2019 SCCOnLine SC 257.

8. In reply, the Ld. Counsel of the Respondent No. 1 has

opposed the acceptance of Appellant's claim at such a late stage

Company Appeal (AT) (Ins) No.583 of 2020 Page 6 of 17 pleading that it would completely upset the progress of the CIRP

which was nearing completion when the said claim was preferred.

According to him the CIRP, as stipulated in IBC, is a time-bound,

result-oriented process which should be taken to its logical

conclusion. If claims continue to be accepted even after the period

specified in the Public Notice issued in accordance with the

provisions of the IBC, and the extended time period of ninety days

provided in Regulation 12(2) of the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for Corporate

Persons) Regulations, 2016 has lapsed, there would be no end to

such claims being preferred. This could become a never ending

process and the CIRP will not reach its logical conclusion. This is

certainly not the expressed objective of the IBC. He has also stated

that the Resolution Plan as approved by the COC was under the

active consideration of the Adjudicating Authority for approval

when the claim of Appellant was submitted to the RP and RP and

the Adjudicating Authority have acted in consonance with

provisions of law by rejecting the said claim.

9. The Ld. Counsel of the Successful Resolution Applicant

(Respondent No. 4) has supported the arguments made by the Ld.

Counsel for Respondent No. 1. He has, in addition, pointed out

Company Appeal (AT) (Ins) No.583 of 2020 Page 7 of 17 that in the present case the CIRP had already taken more time

than the time period of 330 days that is envisaged in IBC and the

Respondent No. 4 will have to bear irreplaceable loss in case there

are further delays. He has prayed that he be allowed to start

working in accordance with the approved Resolution Plan to save

the Corporate Debtor from further deterioration, which is presently

a going concern.

10. The IBC stipulates thatCIRP is a time-bound process meant

for resolution of the Corporate Debtor, which is in the throes of

insolvency. If no successful Resolution Applicant can be found

during the CIRP period, the Corporate Debtor, which is otherwise

operational as a going concern, will go into liquidation. This would

mean corporate death of the Corporate Debtor, a situation which

must be avoided. Sincere efforts for successful resolution of the

Corporate Debtor should, therefore, be undertaken to revive and

strengthen the financial and economic condition of the Corporate

Debtor, so that it continues to function as a useful economic entity

in the economy saving precious human and monetary capital.

11. Section 29 of the IBC provides for preparation of information

memorandum as may be specified by the Insolvency and

Company Appeal (AT) (Ins) No.583 of 2020 Page 8 of 17 Bankruptcy Board of India for formulating a resolution plan.

Section 29(1) of the IBC is reproduced hereunder:-

"29. Preparation of Information Memorandum. -

xxxxxxx

(1) The resolution professional shall prepare an information

memorandum in such form and manner containing such

relevant information as may be specified by the Board for

formulating a resolution plan.

(2) The Resolution professional shall provide to the resolution

applicant access to all the relevant information in physical and

electronic form, provided such resolution applicant undertakes

-

(a) to comply with provisions of law for the time being in force

relating to confidentiality and insider trading;

(b) to protect any intellectual property of the corporate debtor it

may have access to; and

(c) not to share relevant information with third parties unless

clauses (a) and (b) of this sub-section are complied with.

Explanation. - For the purposes of this section, "relevant

information" means the information required by the resolution

applicant to make the resolution plan for the corporate debtor, which

Company Appeal (AT) (Ins) No.583 of 2020 Page 9 of 17 shall include the financial position of the corporate debtor and any

other matter of the corporate debtor as may be specified."

12. Regulation 36 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 outlines the process for submission of the

Information Memorandum and contents to be included therein to

each member of the Committee of Creditors within two weeks of

IRP's appointment. It is to be noted that Regulation 36(2)(d)

mentions that the Information Memorandum shall contain 'a list of

creditors containing the name of creditors, the amounts claimed by

them, the amounts of their claims admitted and the security interest,

if any, in respect of such claims;' among other particulars.

13. Further, in the same Regulations, very clear timeline has

been prescribed under Regulation 12(2) for submission of claim

with proof by financial and corporate debtor, quite obviously to

enable the potential resolution applicants to submit realistic and

workable resolution plans after due diligence, and which can be

taken up further for finalisation. The relevant regulation is

reproduced hereunder:

Company Appeal (AT) (Ins) No.583 of 2020 Page 10 of 17 "12. Submission of proof of claims. -

xxxxxx

(2) A creditor, who fails to submit claim with proof within the

time stipulated in the public announcement, may submit the

claim with proof to the interim resolution professional or the

resolution professional, as the case may be, on or before the

ninetieth day of the insolvency commencement date.

Xxxxx "

The purpose of issuing public notice is to make all the interested

parties/stakeholders aware of the initiation of the CIRP of the

Corporate Debtor and the information memorandum which is

issued subsequently, after the collection and collation of claims of

the operational and financial creditors is to provide the Resolution

Applicant all relevant information so that the applicant can make a

legally and financially sound Resolution Plan for the Corporate

Debtor as is required under Section 29 of the IBC. Such

Resolution Plan has to be submitted to the Resolution Professional

under Section 30 of IBC, which is considered by the Committee of

Creditors for approval and the final approval of the Resolution Plan

is provided by the Adjudicating Authority under Section 31 of the

IBC. It is quite logical to say that these actions have to be taken

Company Appeal (AT) (Ins) No.583 of 2020 Page 11 of 17 with alacrity so that the successful Resolution Applicant, if any,

can take the reins of the management of the Corporate Debtor in

good time for its proper management and consequent revival.

14. In the present case the Operational Creditor - State Tax

Department, Government of Maharashtra submitted its claim on

20.12.2019, more than about one year and one month after the

invitation of claims through public notice on 2.11.2018. The

extended time period for submission of claims with proof is ninety

days from the date of initiation of the insolvency resolution process.

This period also expired on 31.01.2019. It is undisputed that the

RP had filed the Resolution Plan as approved by the Committee of

Creditors to the Adjudicating Authority, much before the said claim

was preferred before the RP, and the Adjudicating Authority was

actively considering the Resolution Plan for necessary approval.

After rejection of claim of Appellant by RP, its appeal was filed

before the Adjudicating Authority on 21.02.2020 under Section

60(5) of the IBC.

15. Thus, it is clear that much water had flown under the bridge

from the date of issue of public notice (on 02.11.2018) and the

extended time period of ninety days as provided under Regulation

Company Appeal (AT) (Ins) No.583 of 2020 Page 12 of 17 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 and

the Resolution Plan as approved by the COC was submitted to the

Adjudicating Authority for necessary approval under Section 30.

Any interruption in the CIR Process at this stage by including a

delayed claim/s would have meant setting the clock back and

sending matter back to COC & RP. It cannot be ruled out that if

the claim of the Operational Creditor State Tax Department,

Government of Maharashtra was accepted at such a late stage,

there could have been other such applicants too, who would have

demanded accommodation on the same ground allowing late

submission of their claims once this window would have opened. It

would be trite to emphasise the fact that this would have meant

complete disruption of the CIRP and the timelines stipulated

therein. Delay would defeat Resolution as this would have resulted

in the CIRP and approval of successful Resolution Plan to continue

for an indefinite period of time, which is certainly not the intention

of IBC. A real hazard in such an event could be liquidation, and

corporate death, of an otherwise functional and corporate debtor,

with which Resolution Plan approved is set to come out of the Red

Company Appeal (AT) (Ins) No.583 of 2020 Page 13 of 17

16. The order of NCLT, New Delhi Principal Bench cited by the

Ld. Counsel of the Appellant in State Bank of India v ARGL Ltd.

does not hold relevance in the present case as it relates to

withdrawal of a successful (and approved resolution plan) on very

different grounds and that too, upon recommendation/approval of

the COC.

17. We have perused ratio of judgments in the two cases viz.

Committee of Creditors of Essar Steel v. Satish Kumar Gupta

and K. Sashidhar v. Indian Overseas Bank and Ors. (supra) cited

by the Ld. Counsel of Appellant. These relate to the role of

resolution applicants, resolution professionals, the Committee of

Creditors that are constituted under the IBC, and the jurisdiction

of the National Company Law Tribunal and the National Company

Law Appellate Tribunal qua resolution plans. These Judgments are

not helpful in the facts of the matter.

18. The relevant portion of the judgment in COC of Essar Steel

case is reproduced below:-

"99. So far as Civil Appeal No. 7266 of 2019 and Civil Appeal No. 7260 of 2019 are concerned, the resolution professional has rejected the claim of the Appellants on the ground of non-

Company Appeal (AT) (Ins) No.583 of 2020 Page 14 of 17 availability of duly stamped agreements in support of their claim and the failure to furnish proof of making payment of requisite stamp duty as per the Indian Stamp Act despite repeated reminders having been sent by the resolution professional. The application filed by the Appellants before the NCLT came to be dismissed by an order dated 14.02.2019 on the ground of non-prosecution. The subsequent restoration application filed by the appellants then came to be rejected by the NCLT through judgment dated 08.03.2019 on two grounds:

one, that the applications could not be entertained at such a belated stage; and two, that notwithstanding the aforementioned reason, the claim had no merit in view of the failure to produce duly stamped agreements. The impugned NCLAT judgment, at paragraphs 93 and 94, upheld the finding of the NCLT and the resolution professional. In view of these concurrent findings, the claim of the Appellants therefore requires no interference. Further, the submission of the Appellants that they have now paid the requisite stamp duty, after the impugned NCLAT judgment, would not assist the case of the Appellants at this belated stage. These appeals are therefore dismissed."

The ratio in the K. Sashidhar v. Indian Overseas Bank and Ors.

is also on the same lines.Quite clearly, the ratio in these judgments

do not support the case of the Appellant. Moreover, the Appellant

has not explicitly raised the issue of awarding a larger amount to

Axis Bank in the Appeal and has raised it only at the stage of oral

arguments. Appellant is not a party affected by the alleged change

Company Appeal (AT) (Ins) No.583 of 2020 Page 15 of 17 directed by the Adjudicating Authority. This matter has been dealt

by the Adjudicating Authority in the Impugned Order in accordance

with the provisions of the statute. The Appellant can't be given

relief on a matter that has not been prayed for in the appeal.

19. It is also worth noting that the successful Resolution

Applicant had objected to the IA No. 154/2020 filed by the

Operational Creditor during the course of its hearing by the

Adjudicating Authority inter-alia pointing out that he had already

submitted a big amount of the Earnest Money more than a year ago

and that for one reason or the other, the Resolution Plan though

filed on 24.9.2019 could not be approved by the adjudicating

Authority due to filing of number of applications by the Resolution

Professional as well as dissenting creditors.

20. In the light of the aforementioned discussion, we find that

Adjudicating Authority has dealt with the issue of approval of the

resolution plan submitted by the Resolution Professional and, inter

alia, rejecting the claim of the Appellant in accordance with the

requirements of the statute, and in keeping with the overall

objective and scheme of the IBC. The order of the Adjudicating

Authority provides sufficient and cogent reasons for dismissing IA

Company Appeal (AT) (Ins) No.583 of 2020 Page 16 of 17 NO. 154/2020 filed by the Appellant under Section 60(5) on

21.02.2020. It has, thereafter, gone ahead with the approval of

successful resolution Plan by passing order in IA No.593/2019 in

CP(IB) (172)/2018 while considering all the legal provisions and

facts of the case. We, therefore, find no ground and reason for

interfering with the Impugned Order and consequently dismiss the

appeal.

21. The appeal is thus dismissed with no order as to costs.

(Justice AIS Cheema) Member (Judicial)

(Dr.Alok Srivastava) Member(Technical) New Delhi _____March, 2020

Company Appeal (AT) (Ins) No.583 of 2020 Page 17 of 17