The Asst. Commissioner Cgst & Central ... vs Mr. Kuresh Hatim Khambati (Irp/Rp

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins.) No. 174 of 2021 [Arising out of Order dated 01st January, 2021 passed by the Adjudicating Authority, NCLT, Ahmedabad Bench, Court 1 in IA 661 of 2020 with IA No. 759 of 2020 in CP (IB) No. 453 of 2018)]

IN THE MATTER OF: The Asst. Commissioner of CGST & Central Excise, Division I, Surat GST Bhavan, Near Bahumali, Nanpura, Surat - 395001 Email - div1srt-cgstsurat@outlook.com ...Appellant. Versus 1. Sh. Kuresh Hatim Khambati (Resolution Professional) Having Registration No. IBBI/IPA-001/IP-P01521/2018-19/12454 GT Restructuring Services LLP, Kaledonia 1st Floor, C Wing (Opp J&J Office) Sahar Road, Andheri East Mumbai - 400669, Maharashtra Email - Kuresh.Khambati.IP@outlook.com ...Respondent No. 1

2. MCPI Private Limited Bengal Eco Intelligent Park Tower - I, Block EM, Plot No. 3, Saltlake City Sector - V 3RD Floor, Kolkata, West Bengal-700091 Email; paheli.choraia@mcpi-pte.com Sayantam.banerjee@mcpi-pta.com ...Respondent No. 2

For Appellant: Mr. Nitya Sharma, Standing Counsel CGST. For Respondent: Ms. Sandhya Iyer, RP, R-1. Mr. Arun Kathpalia, Sr. Advocate with Mr. Rohit Ghosh, Mr. Prateek Kumar, Mr. Rajeev Vidhani, Mr. Zacarias Joseph and Ms. Snehal Kakrania, Advocates for R-2, SRA. 2

(27th July, 2021)

A.I.S. Cheema, J.:

1. The Asst. Commissioner of CGST & Central Excise, Division I, Surat

has filed this Appeal against the Impugned Order dated 1st January, 2021

passed by the Adjudicating Authority (National Company Law Tribunal,

Ahmedabad Bench, Court 1) in I.A. No. 661 of 2020 with I.A. No. 759 of 2020

in CP (IB) No. 453 of 2018 which was filed by Respondent No. 1-Resolution

Professional and was approved by the Adjudicating Authority accepting

Resolution Plan submitted by the Respondent No. 2 (MCPI Pvt. Ltd.) in the

Corporate Insolvency Resolution Process( CIRP in short) of Corporate Debtor-

Garden Silk Mills Ltd. The Resolution Plan had been approved by the

Committee of Creditors (CoC in short).

2. It is argued for the Appellant and the Appeal claims that on 24th June,

2020 Adjudicating Authority had admitted CP(IB) No.

453/7/NCLT/AHM/2018 against the Corporate Debtor. The Appellant filed

claim on 04th September, 2020 and Revised Claim on 16th September, 2020

in Form 'B' as per Regulation 7 of Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (CIRP

Regulations, 2016 in short) to the extent of Rs. 7376.41 Lakhs which included

penalty but did not include interest, which was due from the Corporate

Debtor. According to the Appellant after filing of the claim later the Appellant

became aware of the Resolution Plan approved by Adjudicating Authority vide

Impugned Order when the Appellant received e-mail form the Resolution

Professional (Respondent No. 1) dated 13th January, 2021 (Annexure A-7,

Company Appeal (AT) (Ins) No. 174 of 2021 3

Page 98) informing that the Resolution Plan had been approved and that in

the Resolution Plan towards statutory dues and claims the approval was

settled at Nil Value and the claims stood extinguished. Thus the present

Appeal.

3. The Appeal has reproduced portions from the Impugned Order which

had reproduced portions from the Resolution Plan and it is claimed that the

Impugned Order does not show as to how the Liquidation Value in respect of

Operational Creditors (government dues) was arrived at. The Appellant claims

that under Section 30(2)(b) of IBC the amounts payable to Operational

Creditors shall not be less than the amounts to be paid to Operational

Creditors in the event of Liquidation of the Corporate Debtor under Section

53 of IBC. It is argued that the Corporate Debtor has evaded huge penalty

and duty payable to the Central Government in the process. Argument is that

the necessary provisions of IBC and the regulations of IBC were not followed.

The Government would suffer huge loss, was not considered by the

Adjudicating Authority keeping in view earlier Judgment in the matter of

"Binani Industries Pvt. Ltd. Vs. Bank of Baroda" passed by this Tribunal in

Company Appeal (AT) (Ins.) No. 82 of 2018 on 14th November, 2018. It is stated

that the plan cannot be discriminatory against one or other Financial Creditor

or Operational Creditor. It is stated that a class of Operational Creditors have

been given part of their claims but statutory dues have not been included.

The Appellant refers to Paragraph 11 of the Impugned Order which

summarized payments proposed to be made under the Resolution Plan as

under:

Company Appeal (AT) (Ins) No. 174 of 2021 4

"11. The Summary of the payments proposed to be made under the Resolution

Plan is as under:

Sr. No. Description Amount (in INR Lakh) 1 Total Discharge Not exceeding and up to INR Amount 747,00,00,000 (Indian Rupees Seven Hundred and Forty Seven Crore) 2 Proposal for Financial An amount of INR 717,50,00,000 (Indian Creditor Rupees Seven Hundred and Seventeen Crores and Fifty Lakh) ("FC Consideration") subject to adjustments, if any, towards payment of (i) balance CIRP Costs (ii) Differential OC Discharge Amount (as defined in the Resolution Plan); And (iii) payment to dissenting Financial

Creditor (if any), (hereinafter collectively referred to as the "Adjustment Amounts").

3. Proposal for INR 8,50,00,000 (Indian Rupees Eight Operational Creditors Crore and Fifty Lakh) (Workmen and Employees)**

4. Proposal for Nil Operational Creditors (Statutory dues, liabilities including outstanding Government Authority Dues, Taxes, etc.)**

5. Proposal for An ex-gratia amount up to INR Operational Creditors 21,00,00,000 (Indian Rupees Twenty One (Other than Workmen Crore) and Employees and Statutory Dues)**

6. Proposal for Dissenting Since there is only one Financial Creditors Financial Creditors as per the IM, no provision for dissenting financial creditors has been made.

However, in case there is any, such financial creditor shall be paid an amount as prescribed under Section 30(2)(b) of the Code and in priority over payments to

Company Appeal (AT) (Ins) No. 174 of 2021 5

assenting Financial Creditors out of the FC Consideration

7. Proposal for other Nil stakeholders (including public shareholders and other creditors)

8. Proposal for Related This Resolution Plan does not propose any Parties payment to the Related Parties of the Corporate Debtor other than those forming part of Balance CIRP Costs approved by the CoC or the Resolution Professional

9. Working capital As and when necessary to the extent infusion decided by the Resolution Applicant "

4. The Learned Counsel for the Respondent No. 1-Resolution Professional

relying on the Reply filed by the Respondent No. 1 argued that all necessary

steps in conformity with the provisions of the IBC were taken and then I.A.

661 of 2020 for approval of Resolution Plan was put up before the

Adjudicating Authority. The Plan of Respondent No. 2-MCPI Pvt. Ltd. was

approved by the Committee of Creditors. The approved Resolution Plan

proposed the statutory dues and claims to be settled at Nil on account of

Liquidation Value computed in accordance with Section 30(2) of IBC being

Nil. Respondent No. 1 has stated that the Appellant initially filed claim of Rs.

80.28 crores on 04th September, 2020 which was revised to Rs. 73.76 Crores

vide email dated 16th September, 2020. The claim of the Appellant was

admitted on a contingent basis as the matter pertaining to the claim was sub-

judice and the liability was not crystalized. The Resolution Professional has

argued that Valuation was got done pursuant to Regulation 27 of Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process of Corporate

Persons) Regulations, 2016 (CIRP Regulations) for determining the

Company Appeal (AT) (Ins) No. 174 of 2021 6

Liquidation Value of the Corporate Debtor. The Resolution Professional is

pointing out that according to the Valuation Report it was clear that the

amounts payable to the Appellant would be Nil in case of Liquidation and as

has been set out in the approved Resolution Plan and when the Amounts

payable to the Appellant as Operational Creditor were determined to be Nil,

Regulation 38 of CIRP Regulations, 2016 to pay on priority would not be

relevant. It is argued that the Resolution Plan was in compliance with Section

30(2) of the IBC read with Regulation 38 of CIRP, Regulations and thus it was

placed before the CoC. Workmen and Employees as Operational Creditors

were the continuing stakeholders and on humanitarian grounds it was

required that their dues should be paid to the fullest extent and hence

Resolution Plan contains corresponding allocation to them. Other Operational

Creditors (Other than Workman and Employees and Statutory Dues) who

provide continuous support to the Corporate Debtor to ensure that in the

future also their support is received to run the Corporate Debtor, the

Resolution Plan provided for allocation ex gratia to such Operational

Creditors. It is argued that although if the Company was to go in Liquidation

the Operational Creditors would have got Nil, still the Resolution Plan made

provisions for Workman and Employees and other Operational Creditors

(Other than Workman and Employees and Statutory Dues) and thus the

Resolution Plan was not bad in law. It is argued that the CoC has considered

the Resolution Plan and approved the same in commercial wisdom and may

not be interfered with. The Resolution Professional has also argued that

Annexure 5 filed with the Resolution Plan gives a list of various litigations

with regard to the claim made by the Appellant and in such factual

background the claim made by the Appellant was admitted only on contingent

Company Appeal (AT) (Ins) No. 174 of 2021 7

basis and now with the Approval of Resolution Plan, the claim would not be

enforceable. The claim made by the Appellant was less than 10 % of the

aggregate debt of Corporate Debtor and thus the Appellant was not entitled

to even notice under Section 24(3) of IBC.

5. The Respondent No. 2-SRA has submitted that the Resolution Plan has

been approved by 100% voting in favour and that the Resolution Professional

had collated and verified claims of Financial Creditors and Operational

Creditors and compiled the total admitted claims. The Liquidation Value of

the Corporate Debtor was valued at far below the amounts due and payable

even to the secured Financial Creditors. It was found that the Liquidation

Value was insufficient to even meet the required value for settling the dues of

secured Financial Creditors and consequently Liquidation Value was Nil for

all other Creditors. Still the Resolution Plan has provisions for

Workmen/Employees and Other Operational Creditors (Other than statutory

Dues) and thus the plan cannot be faulted with.

6. We have heard Learned Counsel for both sides and considered the

submissions made by the parties. The Reply of Respondent No. 2 Diary No.

26401 refers to the approved Resolution Plan at Annexure R-1 page 63 and

reference is made to Paragraph 3.5 which deals with proposal for Operational

Creditors where the Resolution Applicant stated that Liquidation Value

payable towards full and final extinguishment of statutory dues and claims is

expected to be Nil and the Liquidation Value is insufficient to meet the dues

of even secured Financial Creditors and thus the minimum statutory

discharge payable is Nil and so Nil payment has been proposed towards

statutory dues and claims.

Company Appeal (AT) (Ins) No. 174 of 2021 8

7. The Respondent No. 1 Resolution Professional in Reply Diary No. 26429

has filed Form 'H' (Page 1028) which showed that fair value was calculated at

Rs. 1294.04 Crores and Liquidation Value was calculated at Rs. 694.18

Crores.

8. Adjudicating Authority has considered the Revised Position of claims

received as on 28th October, 2020 (Paragraph 4 of the Impugned Order) which

showed that the amounts claimed by the Financial Creditors admitted were

Rs. 20,904,644,307/- and that the dues of Operational Creditors (Workman

and Employees) admitted were of Rs. 82,253,253/-. It is recorded that

amounts claimed by Operational Creditors (Statutory Dues, Liabilities

including outstanding government authority dues, taxes, etc.) were Rs.

4,827,297,551/- (which includes amounts admitted on provisional as well as

contingent basis). Then there are dues which were admitted by Operational

Creditors (Other than Workmen and Employees and statutory dues) which

were of R. 213,192,038/- (including amount admitted on/contingent basis).

Considering these amounts and the Liquidation Value, it is difficult to find

fault with the Resolution Plan as has been approved. There is substance in

the submissions made by the Resolution Professional that if the Corporate

Debtor was to go in Liquidation, the Appellant would get Nil amount.

9. Keeping in view judgment in the matter of "Ghanashyam Mishra and

Sons Private Limited Through the Authorized Signatory Vs. Edelweiss Asset

Reconstruction Company Limited Through the Director & Ors." Civil Appeal

No. 8129 of 2019 passed by the Hon'ble Supreme Court of India on 13th April,

2021, the Resolution Plan as has been passed is binding on the Appellant.

Company Appeal (AT) (Ins) No. 174 of 2021 9

10. We do not accept the claims made by the Appellant to find fault in the

Resolution Plan. As such, there is no substance in the Appeal.

The Appeal is dismissed. No order as to costs.

[Justice A.I.S. Cheema] The Officiating Chairperson

[Dr. Alok Srivastava] Member (Technical)

New Delhi 27.07.2021 Basant

Company Appeal (AT) (Ins) No. 174 of 2021