The Commissioner Central Goods And ... vs East India Transpot Agency & Anr

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022 [Arising out of order dated 16.03.2022 passed by the Adjudicating Authority, National Company Law Tribunal, Ahmedabad, Division Bench, Court-1 in I.A. No. 415(AHM)2022 arising out of CP(IB) No. 55 of 2020)].

IN THE MATTER OF: The Commissioner Central Goods & Service Tax. Kutch Gandhidham Gujarat. ...Appellants

Versus

1. East India Transport Agency (Union of EITA India Limited) 301, Steel Chambers Devji Ratansey Marg Mumbai - 400 009. ...Respondent No. 1

2. SRK Multimodal Solutions Pvt. Ltd. Plot No. 315, Ward-12-B, Deepak Complex, First Floor, Office No. 2 Gandhidham - 370201(Gujarat). Represented by Shri Kunal Tanna, Interim Resolution Professional (Success Resolution Applicant) 603, Fortune Business Hub, Near Shell Petrol Pump, Science City Road, Sola, Ahmedabad-380006. ....Respondent No. 2

Present: For Appellant: Mr. Vijay Joshi, Advocate Mr. Gurjas Singh Narula, Advocate For Respondent: Ms. Ekta Bhasin, Ms. Aastha Trivedi, Advocates Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

1 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) by the Appellant arise out of order dated

09.05.2022 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Ahmedabad, Division

Bench, Court-1) in I.A. No. 415(AHM)2022 arising out of CP(IB) No. 55 of 2020.

By the impugned order, the Adjudicating Authority on an application filed by

Interim Resolution Professional of Corporate Debtor under Section 60(5) read

with Section 19 of the Insolvency and Bankruptcy Code directed the present

Appellant to take part in the Corporate Insolvency Resolution Process ('CIRP' in

short) and pay CIRP costs as per voting share. Aggrieved by this, the present

appeal has been preferred.

2. The brief facts of the case which are necessary to note for deciding

this appeal are as follows: -

 A Section 9 petition under IBC filed by East India Transport Agency against

SRK Multimodal Solution Pvt. Ltd., the Corporate Debtor was admitted on

23.11.2021 by the Adjudicating Authority and an Interim Resolution

Professional ('IRP' in short) was appointed.

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

2  The IRP started the process of collating claims and thereafter proceeded to

hold Committee of Creditors ("CoC" in short) meetings. The present

Appellant submitted a claim of Rs. 23,88,77,845/- being pending tax dues.

Since there were no Financial Creditors, the CoC was constituted on

16/12/2021 of all claimants who had claimed as Operational Creditors in

accordance with Regulation 16 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons) Regulation,

2016 ('CIRP Regulations' in short).

 The CoC comprised of following three members with voting share as

assigned against their names, namely, East India Transport Agency (2%);

the Asst. Commissioner, CGST, Gandhidham (88%) (the present Appellant)

and Asst. Commissioner of Income Tax, Gandhidham (10%).

 The 1st and 2nd CoC meetings were held on 23-24 December 2021 and

29-30 December 2021 respectively. The 2nd CoC meeting was held to

confirm appointment of IRP as Resolution Professional; to ratify and

approve remuneration of IRP; expenses incurred by the IRP etc. The

present Appellant, however, did not cast his vote during the second CoC

meeting and stated during the said meeting that CBIC Master Circular No. Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

3 1081/02/2022-CX dated 19.01.2022 on Recovery and Write-off of Arrears

of Revenue do not provide for payment of fees and CIRP costs.

 Since two of the Operational Creditors of the CoC including the present

Appellant did not cast their vote in the 2nd CoC meeting, the Resolution

Professional approached the Adjudicating Authority for directions. The

Adjudicating Authority on 16.03.2022 in IA/65(AHM) 2022 in CP(IB) 55

of 2020 held that CoC cannot deny to act under law and directed the CoC

members to cast their vote in CoC meetings in respect of resolutions placed

before it.

 In the 3rd CoC meeting held on 11.04.2022, the Appellant again did not

vote while the other two members of the CoC voted in favour of resolution

confirming appointment of IRP as Resolution Professional as well as

payment of IRP fees and CIRP cost. Since the Appellant with 88% vote-

share had not cast his vote, the Resolution Professional again moved the

Adjudicating Authority for directions to the present Appellant to cast its

vote in CoC meetings and contribute to CIRP costs.

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

4  In the 4th CoC meeting, the Appellant ratified the CIRP costs except that

of IRP fees and sought a decision of the CoC in the next meeting for

withdrawal of CIRP process. Accordingly, this matter was taken up in the

5th CoC meeting held on 17.05.2022. Since the other two members of

CoC with 12% share voted against the withdrawal resolution, hence, the

Section 12 A withdrawal application falling short of 90% vote share could

not get passed. The Appellant during the 5th CoC meeting stated that they

were not interested to run the CIRP process and preferred to go for

liquidation. This was also agreed by Asst. Commissioner of Income Tax,

Gandhidham and hence with 98% voting share, the CoC members decided

to go for liquidation.

 In IA/415 (AHM) 2022 in CP(IB) 55 of 2020 filed by the Resolution

Professional, the Adjudicating Authority on 09.05.2022 ordered the

Resolution Professional to proceed with CIRP; directed the Appellant to

take part in CIRP and directed CoC to pay CIRP costs as per voting share.

 The Appellant, aggrieved with the above orders of the Adjudicating

Authority dated 09.05.2022 has come up in appeal seeking

exemption/exclusion from bearing the expenses and fee of Resolution

Professional and CIRP costs.

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

5

3. The Learned Counsel for the Appellant submitted that Rule 112 of NCLT

Rules, 2016 has restricted collection of any kind of fees payable from the Central

Government at the time of filing any application and hence CIRP costs cannot be

collected from them. It is further submitted that it is not justified on the part of

the Adjudicating Authority to compel the Appellants to pay CIRP costs when

they voted against this resolution in the CoC meeting. It was further added that

the aforementioned CBIC Master Circular of 19.01.2022 also do not provide

scope for payment of IRP fees and CIRP costs.

4. Contesting the above submissions, the Learned Counsel for the Respondent

stated that the decision of the Adjudicating Authority directing the CoC to pay

the CIRP cost in proportion to their voting share was in order as it was in

consonance with the provisions of IBC.

5. We have heard the submissions of the Learned Counsel for both the parties

and perused the material on record carefully.

6. The issues which have come before our consideration are two-fold, firstly,

whether the Appellant by virtue of CBIC Master Circular and NCLT Rules is

dispensed from payment of IRP fees and CIRP expenses and whether this

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

6 Tribunal can allow relief to the Appellant by exempting them from bearing the

expenses of CIRP cost and fees of RP; and, secondly, whether the AA had erred

in directing the Resolution Professional to proceed with CIRP and also recover

CIRP costs.

7. We may therefore first dwell upon the tenability of the contention of the

Appellants that as Rule 112 of the NCLT Rules, 2016 restricts collection of fees

payable at the time of application filed by an officer on behalf of Central

Government, therefore, CIRP costs also cannot be collected from Government

department.

8. At this stage it is relevant to extract Rule 112 of NCLT Rules, 2016 which

deals with "Fees":

112. Fees.-- (1) In respect of the several matters

mentioned in the Annexures, there shall be paid fees as

prescribed in the Schedule of Fees appended to these rules;

Provided that no fee shall be payable or shall be liable

to be collected on a petition or application filed or reference

made by the Registrar of Companies, Regional Director or by

any officer on behalf of the Central Government.

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

7 (2) In respect of every interlocutory application, there

shall be paid fees as prescribed in Schedule of Fees of these

rules:

Provided that no fee shall be payable or shall be liable

to be collected on an application filed by the Registrar of

Companies, Regional Director or by an officer on behalf of the

Central Government.

(3) In respect of a petition or appeal or application

filed or references made before the Principal Bench or the

Bench of the Tribunal, fees referred to in this Part shall be

paid by means of a bank draft drawn in favour of the Pay and

Accounts Officer, Ministry of Corporate Affairs, New

Delhi/Kolkata/Chennai /Mumbai, as the case may be or as

decided by the President.

9. The definitions clause of NCLT Rules, 2016 at Rule 2 (12), states that

unless the context otherwise requires, "fee" is the amount payable in pursuance

of the provisions of the Act and these rules for any petition or application or

interlocutory application or a document or for certified copy of document or order

of the Tribunal or such other paper as may be specified in Schedule of Fees to

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

8 these rules and includes any modifications as may be made thereto or any fee

as prescribed for filing of documents to the Tribunal by these rules.

10. From a bare reading of the above NCLT Rules, it is quite clear that fees

mentioned in Rule 112 read with the definition clause 2(12) does not mention

either CIRP costs or the fees to be paid to the IRP or RP. The aforesaid NCLT

Rules are confined to fees payable on account of petition or appeal or application

filed or references made for documents/orders before the NCLT. This is clearly

distinguishable from the expenses which constitute insolvency resolution

process costs; costs of the IRP or the Resolution Professional cost which are

defined in Section 5(13) read with CIRP Regulation 31, 33 and 34 respectively.

Hence we find that the argument advanced by the Learned Counsel for the

Appellant that CIRP cost and IRP fees is not recoverable from government

departments to be misconceived and untenable as we find no such express

provision either in the IBC or the NCLT Rules.

11. This brings us to the applicability of CBIC Master Circular No.

1081/02/2022-CX dated 19.01.2022 on Recovery and Write-off of Arrears of

Revenue in IBC matters in the context of payment of CIRP costs and IRP fees.

From a cursory glance at the aforementioned circular as at pages 117-133 of the

Appeal Paper Book, contents of the Master Circular do not appear to refer to how

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

9 CIRP costs and IRP fess are to be handled. Be that as it may, we cannot lose

sight of the well settled legal proposition that IBC is a complete code in itself and

the Hon'ble Supreme Court has taken a clear view in "Innoventive Industries

Ltd. Vs ICICI Bank Ltd. & Anr (Civil Appeal Nos. 8337-8338 of 2017) and

Principal Commissioner of Income Tax Vs Monnet Ispat & Energy

Ltd.(2018) SCC Online SC 3465 that the provisions of IBC will prevail over

other laws in view of the non-obstante clause contained in Section 238 of IBC. It

is beyond any pale of doubt that IBC is a complete code in itself and that being

the case, in the present matter, in respect of payment of fees of Resolution

Professional and CIRP cost, the norms as laid down in the IBC and relevant CIRP

Regulations will prevail over the Master Circular and will be squarely applicable

on the Appellant. Therefore, we hold that the Appellants cannot find any

succour in the Master Circular issued by CBIC in support of their contention.

12. The Learned Counsel for the Appellant has prayed before this Tribunal for

grant of exemption from bearing the expenses and fees of Resolution

Professional and CIRP cost. For the reasons stated above, it clearly is beyond

the remit of this Tribunal to allow any exemption or waiver from the payment of

fees of Resolution Professional and CIRP costs. We are therefore of the considered

view that the Adjudicating Authority had committed no error in directing CoC

to pay CIRP costs as per voting share.

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

10

13. This brings us to the question as to whether the Adjudicating Authority

had erred in directing the Resolution Professional to proceed with the CIRP and

further directing the Appellant having 88% voting share to take active part in

CIRP. From the material on record, it is borne out that the Adjudicating

Authority having admitted the CIRP proceedings on 23.11.2021 and appointed

the IRP, the latter had started discharging his duties and responsibilities

diligently in terms of IBC Code and Rules/ Regulations framed thereunder.

14. The IRP started collating claims in a timely manner and the Appellant also

submitted his claim. Thus the Appellant was very much an integral part of the

CIRP process from its inception. As there were no Financial Creditors of the

Corporate Debtor and the IRP was obligated to scrupulously follow the

procedures prescribed in the IBC Code and the Rules/Regulations framed

thereunder, he had no choice but to set up the CoC with only operational

creditors under CIRP Regulation 16 and hence cannot be put to fault for this.

We also note that Appellant had taken a consistent stand that it did not want to

participate in the CoC/CIRP process and at one stage expressed a desire to

withdraw. However, the desired resolution for seeking withdrawal from CIRP

process was duly considered by CoC but could not pass muster as it fell short

of the prescribed 90% vote share. It is also noted that the Resolution Professional

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

11 had approached the Adjudicating Authority not once but twice for directions so

that the CIRP could proceed smoothly and the Adjudicating Authority was well

within his jurisdiction to have directed the CIRP to proceed and direct the CoC

to pay CIRP costs. On this aspect too, we are of the considered view that the

decision of the Adjudicating Authority also does not suffer from any infirmity

and we therefore concur in it.

15. In view of the above discussions, facts and circumstances, we are of the

considered opinion that there are no convincing reasons to interfere with the

Impugned Order. In the result, the appeal having no merit is dismissed. No costs.

(Justice M. Satyanarayana Murthy) Member(Judicial)

(Barun Mitra) Member(Technical)

Place: New Delhi Date: 30.09.2022

shashi

Company Appeal (AT) (Insolvency) No. 1119 of 2022 & I.A. No. 3332, 3308 of 2022

12