Sales Tax Department, State Of ... vs Ambey Iron Pvt. Ltd. & Anr

Sales Tax Department, State of Maharashtra ...Appellant

Vs

New Phaltan Sugar Works Ltd. & Anr. ....Respondents

With

Company Appeal (AT) (Insolvency) No. 156 of 2020

IN THE MATTER OF:

Sales Tax Department, State of Maharashtra ...Appellant

Vs

Ambey Iron Pvt. Ltd. & Anr. ....Respondents

Present: For Appellant: Mr. Prashant S. Kenjale, Advocate. For Respondents:

ORDER

27.01.2020: In Company Appeal (AT) (Insolvency) No. 155 of 2020,

impugned order dated 11th November, 2019 having been served upon the

Appellant on 17th December, 2019 by the Successful Resolution Applicant, the

appeal preferred on 21st January, 2020 is beyond the statutory period of 30 days

but within the extended period of 45 days, if delay of 15 days is condoned.

Having heard learned counsel for the Appellant and keeping in view the reasons

assigned for seeking condonation of delay, we condone the delay of 6 days in

preferring the appeal. I.A. No. 385 of 2020 stands disposed of. -2-

2. In Company Appeal (AT) (Insolvency) No. 156 of 2020, computed from the

date of communication of the impugned order by the Successful Resolution

Applicant to the Appellant - Operational Creditor i.e. 5th December, 2019, the

appeal having been preferred on 20th January, 2020 is beyond the statutory

period of 30 days allowed for filing of an appeal in terms of Section 61(2) of the

Insolvency and Bankruptcy Code, 2016. However, the same falls within the

period of 15 days beyond 30 days, which can be condoned. Having regard to

the grounds projected, we find that a case is carved out for indulgence. Delay of

15 days in preferring the appeal is accordingly condoned. I.A. No. 387 of 2020

stands disposed of.

3. Appellant, Sales Tax Department, State of Maharashtra has preferred both

the appeals assailing one order dated 28th November, 2019 passed in M.A. No.

3271/2019 in CP No. 2956/2018 in Company Appeal (AT) (Insolvency) No. 155

of 2020 and another order dated 14th October, 2019 passed in M.A. No. 82/2019

in CP No. 1704/2017 in Company Appeal (AT) (Insolvency) No. 156 of 2020, both

impugned orders passed by the Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench. Learned counsel for the Appellant has taken same

ground in both the appeals and submits that the Appellant does not fall within

the definition of Financial Creditor or Operational Creditor under the Insolvency

and Bankruptcy Code, 2016 (for short 'I&B Code'), it

Company Appeal (AT) (Insolvency) No. 155 of 2020 & 156 of 2020 -3-

having first charge in terms of Section 37 of the Maharashtra Value Added Tax

Act, 2002, therefore, Resolution Plan is not binding on the Appellant who was

not a member of the Committee of Creditors which has reduced the claim of the

Appellant to bare 1% (in Company Appeal (AT) (Insolvency) No. 155 of 2020)/

NIL (in Company Appeal (AT) (Insolvency) No. 156 of 2020).

4. Upon hearing learned counsel for the Appellant, we are of the considered

opinion that issue raised in these appeals qua status of Appellant and mode and

manner of distribution under an approved Resolution Plan no more survives for

consideration in view of the dictum of Hon'ble Apex Court in "Committee of

Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.,

Civil Appeal No. 8766-67/2019 and other petitions", wherein it was held that

it is the commercial wisdom of the Committee of Creditors to determine what

amount be paid to different classes and sub-classes of creditors in accordance

with the provisions of the statute and regulations framed thereunder and not the

Adjudicating Authority or the Appellate Tribunal has the residual equity

jurisdiction to interfere in the merits of business decision taken by the requisite

majority of the Committee of Creditors, so long as it is in conformity with the

law. The Resolution Plan approved in terms of the impugned order reducing

claim of the Appellant to 1% (in Company Appeal (AT) (Insolvency) No. 155 of

2020)/ NIL (in Company

Company Appeal (AT) (Insolvency) No. 155 of 2020 & 156 of 2020 -4-

Appeal (AT) (Insolvency) No. 156 of 2020) is not open to question even on the

ground that the same contravenes the provisions of Maharashtra Value Added

Tax Act, 2002. Admittedly, Section 37 of the aforesaid act creating first charge

on the property of the assesse/ dealer in regard to any amount of tax, penalty,

interest etc. has overriding effect as far as there is a contract to the contrary but

the same has been subjected to any provision regarding creation of first charge

in any Central Act in force. It is not in controversy that I&B Code has the

overriding effect over other laws as specifically provided under Section 238, thus

provisions of I&B Code shall have effect notwithstanding anything inconsistent

therewith contained in any other law.

5. First charge under the Maharashtra Value Added Tax Act, 2002 has thus

to yield and can neither supersede the I&B Code Mechanism nor run parallel to

it. The argument advanced on behalf of the Appellant that the tax leviable under

the Maharashtra Value Added Tax Act, 2002 is not an operational debt is equally

fallacious as a liability or obligation arising in respect of a payment of dues under

any law and payable to Central Government, State Government or any local

authority falls within the ambit of Operational Debt as defined under Section

5(21) of the I&B Code, thereby, bringing the Appellant within the fold of

'Operational Creditor'.

Company Appeal (AT) (Insolvency) No. 155 of 2020 & 156 of 2020 -5-

6. In view of the finding that the Appellant is an' Operational Creditor' and

provision of Maharashtra Value Added Tax Act, 2002 creating first charge in its

favour get eclipsed under the over-riding effect of provisions of I&B Code,

Appellant cannot claim priority in distribution of money in an approved

resolution plan. The business decision taken by the Committee of Creditors in

its commercial wisdom reducing the Appellant's claim to 1% (in Company Appeal

(AT) (Insolvency) No. 155 of 2020)/ NIL (in Company Appeal (AT) (Insolvency) No.

156 of 2020 is beyond the pale of challenge before the Adjudicating Authority or

even before this Appellate Tribunal.

7. We find no merit in these appeals, both are accordingly dismissed.

[Justice Bansi Lal Bhat] Member (Judicial)

[Vijai Pratap Singh] Member (Technical)

[Shreesha Merla] Member (Technical) am/gc

Company Appeal (AT) (Insolvency) No. 155 of 2020 & 156 of 2020