Rms Employees Welfare Trust vs Anil Goel

(Arising out of Order dated 14th September, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Chandigarh in CA No. 84/2018 in CP (IB) No. 07/Chd/Hry/2017)

IN THE MATTER OF:

RMS Employees Welfare Trust ...Appellant

Vs.

Anil Goel ...Respondent

Present: For Appellant: - Mr. Sanyam Goel, PCS, Mr. Sumant Batra, Ms. Pooja Mahajan, Mr. Mohtashim Kibriya, Ms. Srishti Kapoor and Ms. Mahima Singh, Advocates.

For Respondent:- Mr. Akshay Goel, Mr. Sugam Seth and Mr. Kinshuk Chatterjee, Advocates.

Mr. Rajiv Ranjan, Senior Advocate, Amicus Curiae assisted by Mr. Sanyam Seth, Advocate.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by the Appellant- 'RMS Employees

Welfare Trust'- ('Resolution Applicant') against part of the impugned

order dated 14th September, 2018, wherein the Adjudicating Authority

(National Company Law Tribunal), Chandigarh Bench, Chandigarh, while 2

approving the 'Resolution Plan' submitted by the Appellant observed as

follows:

"We find that in para C.4 of the minutes of the meeting of

COC held on 23.03.2018 (Annexure Q of the petition), it is

inter alia stated that no payment under the resolution plan

is envisaged for Government dues. The matter relating to

the waiver of Government dues, including waiver of MAT

liability under Section 115J of the Income Tax Act 1961,

may be considered by the respective Government

Department."

2. The Appellant has challenged the part of the impugned order

aforesaid on the ground that the debts payable to the Central

Government or the State Government or any other authorities are

'Operational Debt' within the meaning of Section 5(21) and are payable

in accordance with Section 30(2) (b) of the Insolvency and Bankruptcy

Code, 2016 ("I&B Code" for short). Therefore, the Adjudicating Authority

cannot direct the Central or State Government to consider the case of

waiver.

3. Learned counsel for the Appellant relied on different provisions and

the decisions of the Hon'ble Supreme Court including "B. Premanand

and Others vs. Mohan Koikal and Others─ (2011) 4 SCC 266"; "M/s.

Company Appeal (AT) (Insolvency) No. 699 of 2018 3

Hiralal Rattanlal Etc. vs. State of UP and Another etc.─ (1973) 1

SCC 216" and "Babu Manmohan Das Shah & Ors. vs. Bishun Das─

AIR 1967 SC 643" to suggest that there is no necessity to seek aid from

anywhere else for the purpose of providing any purposive interpretation

if there is no ambiguity in the meaning of 'Operational Debt'.

4. Other arguments were also advanced, but it is not necessary to

record all the submissions in view of the fact that the matter stands

decided.

5. Mr. Rajiv Ranjan, Senior Advocate along with Mr. Sugam Seth,

Advocate appeared as Amicus Curiae relied on extract of 'UNCITRAL

Legislative Guide' on Insolvency Laws and extract of the 'Interim Report

of the Bankruptcy Law Reform Committee' submitted in February, 2015.

Reliance has also been placed on the 'Final Report of the Bankruptcy Law

Reform Committee' submitted in November, 2015 and extracts of the

'Finance Bill, 2018' to suggest that the debt payable to the Central

Government or the State Government or legal authority pursuant to

existing law do not come within the meaning of 'Operational Debt'.

6. Similar issue fell for consideration before this Appellate Tribunal in

"Pr. Director General of Income Tax (Admn. & TPS) v. M/s. Synergies

Dooray Automotive Ltd. & Ors.─ Company Appeal (AT) (Insolvency)

No. 205 of 2017 etc.", wherein this Appellate Tribunal held as follows:

Company Appeal (AT) (Insolvency) No. 699 of 2018 4

"27. In "Swiss Ribbons Pvt. Ltd. & Anr. vs.

Union of India & Ors.─ Writ Petition (Civil) No. 99

of 2018", the Hon'ble Supreme Court while dealing

with the different provisions of the 'I&B Code',

including Section 5(20), observed as follows:

"23. A perusal of the definition of

"financial creditor" and "financial debt" makes

it clear that a financial debt is a debt together

with interest, if any, which is disbursed against

the consideration for time value of money. It

may further be money that is borrowed or

raised in any of the manners prescribed in

Section 5(8) or otherwise, as Section 5(8) is an

inclusive definition. On the other hand, an

'operational debt" would include a claim in

respect of the provision of goods or services,

including employment, or a debt in respect of

payment of goods or services, including

employment, or a debt in respect of payment of

dues arising under any law and payable to the

Government or any local authority."

Company Appeal (AT) (Insolvency) No. 699 of 2018 5

28. From the plain reading of sub-section (21) of

Section 5, we find that there is no ambiguity in the said

provision and the legislature has not used the word

'and' but chose the word 'or' between 'goods or

services' including employment and before 'a debt in

respect of the payment of dues arising under any law

for the time being in force and payable to the Central

Government, and State Government or any local

authority'.

29. 'Operational Debt' in normal course means a

debt arising during the operation of the Company

('Corporate Debtor'). The 'goods' and 'services'

including employment are required to keep the

Company ('Corporate Debtor') operational as a going

concern. If the Company ('Corporate Debtor') is

operational and remains a going concern, only in such

case, the statutory liability, such as payment of Income

Tax, Value Added Tax etc., will arise. As the 'Income

Tax', 'Value Added Tax' and other statutory dues

arising out of the existing law, arises when the

Company is operational, we hold such statutory dues

has direct nexus with operation of the Company. For

the said reason also, we hold that all statutory dues

Company Appeal (AT) (Insolvency) No. 699 of 2018 6

including 'Income Tax', 'Value Added Tax' etc. come

within the meaning of 'Operational Debt'.

30. For the said very reason, we also hold that

'Income Tax Department of the Central Government'

and the 'Sales Tax Department(s) of the State

Government' and 'local authority', who are entitled for

dues arising out of the existing law are 'Operational

Creditor' within the meaning of Section 5(20) of the

'I&B Code'."

7. In view of the aforesaid findings, we hold that the part of the

impugned order passed by the Adjudicating Authority, as quoted above,

relating to waiver of Income Tax is without jurisdiction. The debt of the

Central Government or the State Government arising out of the existing

law being 'Operational Debt', the question of asking for waiver does not

arise as per the 'Resolution Applicant' to decide how much to be paid to

the Central Government or the State Government against the

'Operational Debt' (Income Tax or G.S.T or any other statutory debt),

which should not be less than the amount to be paid to the 'Operational

Creditors' in the event of a liquidation of the 'Corporate Debtor' under

Section 53.

Company Appeal (AT) (Insolvency) No. 699 of 2018 7

8. The part of the impugned order dated 14th September, 2018 as

quoted above is set aside. The rest part of the impugned order approving

the 'Resolution Plan' is upheld.

The appeal is allowed with aforesaid observations. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI 30th May, 2019 AR

Company Appeal (AT) (Insolvency) No. 699 of 2018