Seth Thakurdas Khinvraj Rathi vs Cal Refineries Ltd. & Anr

[Arising out of Order dated 2nd August, 2018 passed by National Company Law Tribunal, New Delhi Bench, in Company Petition No. (IB) 447/2018]

IN THE MATTER OF:

M/s Seth Thakurdas Khinvraj Rathi Through its Partner Sh. Rajesh Rathi, Plot No. 643, Rajvilas, Sector - 8, Gandhinagar - 382 007. Gujrat. ...Appellant

Vs

1. M/s Cal Refineries Limited Through Resolution Professional Shri Rakesh Kumar Jain At registered office at Unit No. 209, 2nd Floor Suneja Tower - II, District Centre, Janakpuri New Delhi - 110058.

2. Assistant Commissioner of Income Tax Circle - 5(2), R. No. G-22C, Central Revenues Building I. P. Estate, New Delhi - 110 002.

3. Union of India, Though its Secretary, Department of Revenue, Ministry of Finance, 128-A North Block, New Delhi - 110001. ....Respondents

Present: For Appellant: Mr. Anurag Ojha, Advocate.

For Respondents: Mr. Lakshmi Gurung, Standing Counsle for Income Tax Department (Respondent Nos. 2 and 3). -2-

SUDHANSU JYOTI MUKHOPADHAYA, J.

Appellant (Operational Creditor) has challenged order dated 2nd August,

2018 passed by the Adjudicating Authority (National Company Law Tribunal),

New Delhi Bench whereby the Adjudicating Authority passed following order as

learned counsel for the Income Tax Department submitted that the department

wants a representation in the Committee of Creditors:-

"ORDER

Ms. Lakshmi Gaurang, Advocate appearing on behalf of

the Income Tax Department submits that the dept. wants a

representation in the COC. The RP is therefore directed to

work out and reconstitute the COC after due notice to the other

participants whose voting power shall consequently get

affected. It would not be out of place to record that the

Operational Creditors are highly aggrieved by the said

inclusion of the Income Tax Department, as from a majority on

the committee, they are not being reduced to a minuscule

percentage.

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Copy of the order be given to the petitioner. Dasti. The

RP is directed to convene the COC as expeditiously as

possible.

Learned counsels appearing for the SFIO, SEBI and

respondent 11 & 12 viz. Smt. Swaroopa Saha and M/s. Spice

Energy Private Limited confirm that in terms of the directions

given by SEBI to disgorge the sum of US $ 92 million, no

amount has been received. Further respondent 11 & 12 are

not facing any prosecution as alleged by the RP. Pursuant to

the order of SEBI whereby the ex-Directors of the Corporate

Debtor were directed to disgorge the aforesaid amount, all

parties confirm that no money has been received back in India.

The RP submits in that as per an observation of the Criminal

Court, it was noted that a sum of Rs.36,000/- crores has been

received by the ex-Director. However, these are observations

made by the Court and there is nothing to show that this

money can be traced out or attached.

As the statutory departments SEBI and SFIO have filed

their report, they are no longer required in this case and are

hereby discharged. There is no outcome in the application filed

Company Appeal (AT) (Insolvency) No. 473 of 2018 -4-

by the RP under Section 66 of the Code and no further action

is contemplated.

This application therefore does not merit any further

consideration and is being disposed off accordingly."

2. Learned counsel appearing on behalf of the Appellant submits that the

Central Government including the Income Tax Department cannot be treated to

be 'Operational Creditor' on the basis of claim of Income Tax. According to

learned counsel for the Appellant, the statutory debt as Income Tax do not come

within the meaning of 'Operational Debt' as defined under Section 5(21) of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code').

Therefore, it is submitted on behalf of the Operational Creditor that no

representation should be allowed to the Income Tax Department.

3. The aforesaid issue fell for consideration before this Appellate Tribunal in

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

Dooray Automotive Ltd. & Ors. in Company Appeal (AT) (Insolvency) No.

205 of 2017, etc. decided on 20th March, 2019' wherein this Appellate

Tribunal observed and held as follows:-

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

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

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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 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

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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'."

4. In view of the aforesaid finding that the Central Government for the

purpose of 'Income Tax' comes within the meaning of 'Operational Creditor', the

plea taken by the Appellant could not be accepted. In absence of any merit the

appeal is dismissed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice A. I. S. Cheema] Member (Judicial) NEW DELHI

14th May, 2019

AM

Company Appeal (AT) (Insolvency) No. 473 of 2018