State Of Haryana vs Uttam Strips Ltd

[Arising out of Impugned Order dated 18th December 2019 passed by the Adjudicating Authority/National Company Law Tribunal, Delhi Bench, bearing No. CA-1552/(ND)/2019 in Company Petition No. IB- 137/(ND)/2018]

IN THE MATTER OF:

State of Haryana Through Excise & Taxation Officer-cum-Assessing Authority Mewat O/o Dy. Excise & Taxation Commissioner (ST) HUDA Field Hostel, Roz ke Meo Nuh (Mewat), Haryana ...Appellant

Versus

1. Uttam Strips Ltd. Plot No.496 (A&C) Phase 1, RIICO Industrial Area Bhiwadi, Rajasthan - 301019

Also At: Uttam Strips Ltd. Village & Post Rangala Distt. Mewat, Haryana TIN No.06413101935 ...Corporate Debtor

2. Mr Sanjay Gupta Resolution Professional Uttam Strips Ltd. IBBI/IPA-003/IP-N00047/2007-18/10354 Email: sanjay@sgaindia.in ...Resolution Professional

3. Jyoti Strips Pvt. Ltd. Plot No. 100-106 HUDA Sector 59, Phase-II Faridabad, Haryana - 121004 ...Resolution Appellant

Present:

For Appellant : Mr Alok Sharma, Advocate

For Respondent : Mr Ankur Mittal and Ms Jasveen Kaur, Advocates for R-1 & 3

Company Appeal (AT) (Insolvency) No. 319 of 2020 1 of 11

[Per; V. P. Singh, Member (T)]

This Appeal emanates from the Impugned Order dated 18th December

2019 passed by the Adjudicating Authority/National Company Law

Tribunal, Delhi Bench, bearing No. CA-1552/(ND)/2019 in Company

Petition No. IB-137/(ND)/2018, whereby the Adjudicating Authority has

disposed of the Application and passed an order that the grievance of the

Applicant is highly belated and cannot be looked into at this stage when the

entire Resolution Plan has been implemented. The Parties are represented

by their original status in the Company Petition for the sake of convenience.

2. These brief facts of the case are as follows:

The Adjudicating Authority/NCLT Delhi Bench vide an Order dated

09th April 2019 admitted an Application under Section 9 of the Insolvency

and Bankruptcy Code, 2016 against the Corporate Debtor Uttam Strips

Limited, filed by Power2SME Private Ltd. on 26th December 2018. After the

completion of CIRP and approval of the Resolution Plan by the Adjudicating

Authority, the Resolution Plan got implemented.

3. The Appellant Excise & Taxation Officer-cum-Assessing Authority,

Mewat (Nuh), State of Haryana assessed Tax for Rs.9,03,665/- on gross

turnover of Rs.1,08,21,691/- for the Assessment Year 2015-16. The

Appellant came to know about the Corporate Insolvency Resolution Process

initiated against the Assessee/Corporate Debtor before the Adjudicating

Authority/NCLT in the first week of June 2019 through the Chartered

Accountant by an email dated 04th June 2019. The Assessment order, along

Company Appeal (AT) (Insolvency) No. 319 of 2020 2 of 11 with the tax demand notice, was served upon the dealer through Sh.

Mahesh Aggarwal, Chartered Accountant, who appeared on 29th March 2019

before the Appellant/Assessing Authority. The Chartered Accountant further

informed that the following Assessment order had been passed against the

Corporate Debtor:

The details of the assessment of the Corporate Debtor are as follows:

S. Demand/A.Y. Order Gross Volume VAT Dues No. Date Turnover Paid (Rs.) (GTO)

1. 515/2013-14 27.3.17 72591278 37,00,000 8,13,708/-

2. 400/2014-15 26.3.18 26709438 11115000 53,15,274/-

3. 553/2015-16 29.3.19 10821691 46,919 9,03,665/-

4. 85/2016-17 12.7.19 151445120 Nil 1,25,29,584/-

Total dues (Rs.) 1,95,62,231/-

4. The Appellant contends that for four Assessment Years, i.e. 2013-14

to 2016-17 total outstanding Dues against the Corporate Debtor is

Rs.1,95,62,231/- (Rupees One Crore Ninety-Five Lacs Sixty Two Thousand

Two Hundred Thirty One only). The Appellant/Excise & Taxation Officer-

cum-Assessing Authority in the first week of June 2019 and vide email

dated 04th June 2019 came to know about the CIRP initiated against the

Corporate Debtor, immediately after that, they contacted Mr Navneet Kumar

Jain, IRP and submitted the Proof of Claim along with the Assessment

Orders and Tax Demand Notices for Assessment Years 2013-14 to 2016-17

in the prescribed manner. But the IRP, vide email dated 04th June 2019,

informed that he is not dealing with the case. It is contended that due to

Company Appeal (AT) (Insolvency) No. 319 of 2020 3 of 11 non-cooperation of the IRP and lack of information/notice from any source,

the Appellant was not aware of the Order of the Adjudicating Authority

dated 06th June 2019. The whole situation was brought to the knowledge of

the higher officials in the Excise Department, State of Haryana. But due to

the declaration of Legislative Assembly Elections in the State of Haryana in

October 2019, the Appellant could not file the documents before the NCLT.

The Counsel informed the Appellant about the passing of the Order dated

06th June 2019 and Resolution Plan submitted by M/s Jyoti Strips Private

Limited. After that, the Appellant applied Section 60(5) of the I&B Code,

seeking directions against the Resolution Professional to accept its claim as

an Operational Creditor and modify the Resolution Plan by incorporating the

statutory dues of the Appellant. But the Adjudicating Authority has

dismissed the said application by a non-speaking Order which is under

Appeal before this Tribunal. It is on record that the Adjudicating Authority

has passed the impugned Order stating that:

"CA-1552/19 has been filed on behalf of the Excise and Taxation

Officer, Nuh (Mewat), Haryana. It is submitted that there is total

outstanding of Rs.1,95,62,231/- from the Corporate Debtor. This

grievance of the applicant is highly belated and cannot be looked into at

this stage when the entire resolution plan has been implemented. No

directions can be given to the non-applicant who has taken over the

Operation of the Corporate Debtor to settle this liability as no claim was

filed.

Company Appeal (AT) (Insolvency) No. 319 of 2020 4 of 11 This Court is also apprised that an appeal arising out of against the

order approval the Resolution Plan is pending before the Hon'ble

NCLAT. The Resolution Plan has been implemented subject to the

outcome of the Appeal. The monitoring committee wishes to be

discharged.

Keeping in view the Appeal is still pending for disposal; we consider it

expedient not to discharge the monitory committee till such time as the

Appeal is a final disposed off. To come up on 29th January 2020."

5. We have heard the arguments of the Learned Counsel for the parties

and perused the records.

6. Admittedly, the Corporate Insolvency Resolution Process was admitted

against the Corporate Debtor Uttam Strips Limited by Order of the

Adjudicating Authority/NCLT dated 09th April 2018. It is also clear that the

Committee of Creditors with 100% votes share approved the Resolution Plan

submitted by Jyoti Strips Limited by its Order dated 06th June 2019, which

was finally approved by the Adjudicating Authority. It is also on record that

the Appellant/Excise & Taxation Officer-cum-Assessing Authority assessed

the tax Rs.1,95,62,231/-, for the year 2013-14 to 2016-17 on the corporate

debtor.

7. The I&B Code envisages the treatment of all debts, whether statutory

or contractual, operational or financial, secured or unsecured, arising out of

or related to a period prior to the Insolvency Commencement Date, be

brought under a common umbrella, so as to enable the Resolution Applicant

Company Appeal (AT) (Insolvency) No. 319 of 2020 5 of 11 to comprehensively deal with them. The main objective required to be served

is that once a treatment is given to the debts under the Resolution Plan, no

other action may be taken either against the Corporate Debtor or against a

Resolution Applicant who acquires the Corporate Debtor through the

Corporate Insolvency Resolution Process.

8. As per the statutory provision, a Resolution Applicant stepping into

the shoes of the corporate debtor, by acquiring the Corporate Debtor

undergoing CIRP, should be given a fresh slate to be able to effectively revive

the Corporate Debtor and fulfil the purpose of the I&B Code. Hon‟ble

Supreme Court in the case of Committee of Creditors of Essar Steel India

Limited Vs. Satish Kumar Gupta & Ors. Supreme Court [Civil Appeal

No.8766-67/2019 and other petitions] ("Essar Case") 2019 SCC OnLine SC

1478 had observed as follows:

Para 88.

" For the same reason, the impugned NCLAT judgment in

holding that claims that may exist apart from those decided on

merits by the resolution professional and by the Adjudicating

Authority/Appellate Tribunal can now be decided by an

appropriate forum in terms of Section 60(6) of the Code, also

militates against the rationale of Section 31 of the Code. A

successful resolution applicant cannot suddenly be faced with

"undecided" claims after the resolution plan submitted by him

has been accepted as this would amount to a hydra head

popping up which would throw into uncertainty amounts payable

Company Appeal (AT) (Insolvency) No. 319 of 2020 6 of 11 by a prospective resolution applicant who successfully take over

the business of the corporate debtor. All claims must be

submitted to and decided by the resolution professional so that a

prospective resolution applicant knows exactly what has to be

paid in Order that it may then take over and run the business of

the corporate debtor. This the successful resolution applicant

does on a fresh slate, as has been pointed out by us

hereinabove. For these reasons, the NCLAT judgment must also

be set aside on this count."

9. Based on the above case, the law laid down by Hon‟ble Supreme

Court; it is clear that a Successful Resolution Applicant is not to be

burdened with undecided claims at the stage of implementation of the

Resolution Plan. The Successful Resolution Applicant is to be provided with

a company free from past liabilities. It has been rightly understood that a

Successful Resolution Applicant cannot be saddled with past liabilities

indefinitely. Such an act will make it impossible for the Successful

Resolution Applicant to run the business of the Corporate Debtor effectively.

In fact, saddling a Resolution Applicant with past claims will defeat the

entire purpose and mechanism set out under the I&B Code, mainly when all

claims have been appropriately dealt under the Resolution Plan itself.

10. The statutory dues are operational debts, and once a resolution plan

is approved by the NCLT, the treatment of all stakeholders, including

Operational Creditors, is to be determined as per the terms of the approved

Resolution Plan.

Company Appeal (AT) (Insolvency) No. 319 of 2020 7 of 11

11. In the case of Pr. Director General of Income Tax (Admn. TPS) vs M/s

Synergies Doorway Automotive Ltd. & Ors. [Company Appeal (AT)

(Insolvency) No.205 of 2017], while considering the issue of whether „Income

Tax‟, „Value Added Tax‟ or other statutory dues, such as „Municipal Tax‟,

„Excise Duty‟, etc. come within the meaning of „Operational Debt‟ or not, this

Tribunal has held that all such dues shall fall within the definition of

„Operational Debt‟ under Section 5(21) of the IB Code.

12. Further, the Resolution Plan submitted by the Resolution Applicant

has provided a mechanism for the treatment of operational dues. Once a

Resolution Plan is approved by the NCLT, all dues, whether financial or

operational, have to be dealt with in the manner provided under such

Resolution Plan. Even otherwise, any creditor of the Corporate Debtor

should not be allowed to raise such belated claims and challenge the

approved Resolution Plan, much after its implementation.

13. That insofar any contingent liabilities or claims are concerned, or any

creditors who failed to file any claim during CIRP, the same were duly

accounted for in the Resolution Plan of the corporate debtor and were given

a NIL value. It is to be noted that the liquidation value of the Appellant‟s

claim, in any case, would have been NIL.

14. Relevant clauses of the approved Resolution Plan is as under:

"iii. The Operational Creditors shall not have any rights or claims against the Company relating to the period prior to the Effective Date. The Company shall not have any liability towards

Company Appeal (AT) (Insolvency) No. 319 of 2020 8 of 11 Operational Creditors for the amounts owed prior to the Effective Date.

v. Any and all legal proceedings initiated by any of the Operational Creditors whether admitted or not, due or contingent, asserted or unasserted, crystallised or uncrystallised, known or unknown, disputed or undisputed, present or future against the Company towards rights or claims relating to the period prior to the Effective Date shall also be withdrawn, and shall be of no legal consequence insofar as Company is concerned."

15. Based on the terms of the approved Resolution Plan, it is clear that

the Operational Creditors has no rights against the acquiring Company

relating to the period, before the Effective Date. The Acquiring Company

shall not have any liability towards Operational Creditors for the amounts

owed prior to the Effective Date. Since the claim of the Appellant, i.e. the

Statutory dues are the operational debt of the corporate debtor, Uttam

Strips Pvt Ltd, and no claim was filed by the Appellants before the

Resolution Professional, despite the knowledge of the Corporate Insolvency

Resolution Process against the Corporate Debtor Uttam Strips Ltd, therefore

the Appellants does not have any right to claim its dues from the acquiring

Company, i.e. Jyoti Strips Ltd. The approved Resolution Plan is binding on

all the stakeholders; therefore, the Appellant is abode by the terms of the

Approved Resolution Plan.

Learned Counsel for the Appellant contends that the Assessment

Order, along with the Tax Demand Notice was served through Chartered

Accountant Sh. Mahesh Aggarwal on 29th March 2019. Admittedly, petition

Company Appeal (AT) (Insolvency) No. 319 of 2020 9 of 11 for Initiation of CIRP was admitted against the Corporate Debtor on 09th

April 2018 and Resolution Applicant Jyoti Strips Limited was approved by

the Adjudicating Authority on dated 06th June 2019. The Appellant has

annexed affidavit of Sh. Rakesh Kumar Dahia E&TO-cum Assessing

Authority along with the Form B regarding proof of claim by Operational

Creditor dated 11th November 2019, which is from page No. 41 to 53 of the

paper book.

16. The Appellant further contends that he got to know about the CIRP

initiated against the Corporate debtor on 04th June 2019 vide email. It is

also claimed that he contacted the Insolvency Resolution Professional Mr

Naveen Kumar Jain and submitted the proof of claim along with the

assessment order and tax demand notices from 2013-14 to 2015-16. But he

informed that he is not dealing with the case. It is further stated by the

Appellant that due to the Haryana Assembly Election, he could not submit

the claim before the Resolution Professional. It is also contended that

Counsel was engaged by State of Haryana, who had informed about the

approval of Resolution Plan dated 06th June 2019. Appellant also alleges

that he submitted fresh claims along with updated proof of claim on 11th

November 2019, to the Mr Sanjay Gupta Resolution Professional. But he

didn't receive any reply of Mr Sanjay Gupta after that application was filed

under Section 60(5) of the Code before the Adjudicating Authority, which

has been rejected by the impugned Order.

17. It is beyond doubt the claims of the Appellant is relating to the

statutory dues, which is an Operational Debt. It is also on record that the

Company Appeal (AT) (Insolvency) No. 319 of 2020 10 of 11 Appellant had not properly filed its claim before the Resolution Professional

up to the prescribed time limit. Since the Appellant failed to submit its claim

before the Resolution Professional and the Resolution Plan submitted by

Jyoti Strips Private Limited was implemented after approved from the

Adjudicating Authority. Therefore as per the law laid down by Supreme

Court in the case of Committee of Creditors of Essar Steel India Limited

(supra), Successful Resolution Applicant cannot be burdened with the past

liabilities. Such an act will make it impossible for the successful resolution

applicant to run the business of the corporate debtor. It will ultimately

defeat the entire purpose and mechanism set out under the I&B Code.

18. In view of our finding as aforesaid, no interference is called for against

the impugned Order dated 18th December 2019. In the impugned Order, the

statutory dues have been treated as „Operational Debt‟ and equated them

with similarly situated „Operational Creditors‟. Thus we find no reason to

interfere with the impugned Order. No cost.

[Justice Venugopal M.] Member (Judicial)

[V. P. Singh] Member (Technical)

[Alok Srivastava] Member (Technical) NEW DELHI 23rd JUNE, 2020

pks/nn

Company Appeal (AT) (Insolvency) No. 319 of 2020 11 of 11