Vaibhav Goel vs Deputy Commissioner Income Tax

[Arising out of order dated 17.09.2020 in IA No. 3412/ND/2020 in (IB)- 447/ND/2018 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Court - IV.]

IN THE MATTER OF:

1. Vaibhav Goel (Resolution Applicant) 854, Khalapar, Meerut Road, Muzaffarnagar - 251002 (U.P.) 2. Madhu Goel (Resolution Applicant) 854, Khalapar, Meerut Road, Muzaffarnagar - 251002 (U.P.) .... Appellants.

Versus

1. Deputy Commissioner of Income Tax Circle-3(2)1, Muzzaffarnagar, U.P. Aaykar Bhawan, Meerut Road Muzzafarnagar 251201, UP ....... Respondent No. 1. 2. Mr. Ajay Kumar Aggarwal (Monitoring Professional) Address-655, Patel Nagar, New Mandi, Muzaffarnagar- 251001 (U.P.) ....... Respondent No. 2. (Proforma Respondent)

Present: For Appellant: Mr. Anil Goel (PCA), Ms. Udita Singh, Mr. Nipun Gautam, Mr. Gaurav Mitra and Ms. Shriya Ray Chaudhuri, Advocates. 2

For Respondents: Mr. Himanshu Chakrvarty and Mr. Sanjay Kumar, Advocate for R-1/ IT Department.

JUDGMENT

(25th November, 2021)

Justice Anant Bijay Singh;

This Appeal has been preferred by the Appellants namely Mr. Vaibhav

Goel and Mrs. Madhu Goel (Joint Resolution Applicants) aggrieved and

dissatisfied by the order dated 17.09.2020 passed by the Ld. Adjudicating

Authority (National Company Law Tribunal), New Delhi, Court - IV in IA No.

3412/ND/2020 in (IB)-447/ND/2018 whereby and where under the

application filed by the Monitoring Professional (Respondent No. 2 herein) was

dismissed with cost of Rs. 1,00,000/- was imposed on the present Applicants

(Joint Resolution Applicants).

2. The facts giving rise in the instant Appeal are as under:

i) That the Corporate Insolvency Resolution Process (for short CIRP) was

initiated against the Corporate Debtor on 31.05.2018 on an application filed

by one operation creditor namely, Amit Steels.

ii) The Ld. Adjudicating Authority appointed Praveen Bansal as the

Interim Resolution Professional (for short IRP) of the Corporate Debtor and IRP

was later confirmed as Resolution Professional by the Committee of Creditors.

iii) Further case is that after the subsequent developments and earnestly

following the CIRP regulations, 2016 one Resolution Applicant came forth

Company Appeal (AT) (Insolvency) No. 956 of 2020 3

upon the publication of the Form-G (Expression of Interest). The Joint

Resolution Applicants (Appellants herein) submitted a resolution plan.

iv) Further case is that in the 6th Committee of Creditors meeting took

place on 02.02.2019, the CoC approved the resolution plan submitted by the

Joint Resolution Applicants and as a natural outcome an application under

Section 30(6) of the Code was moved by the Resolution Professional for the

approval of the Resolution Plan. The copy of the Resolution Plan is Annexure

A-3 at page 44 to 93 of the Appeal Paper Book.

v) The Learned Adjudicating Authority approved the Resolution Plan on

21.05.2019 submitted by the Joint Resolution Applicants (Annexure A-4 at

page 94 to 120 of the Appeal Paper Book).

vi) Further case is that the Ld. Adjudication Authority while approving the

Resolution Plan in the para 25 of the Resolution Plan approval order recorded

that the Resolution Plan is in compliance of the Section 30(2) of the Code and

recorded as under:

"Secondly as per clause (b) of Section 30 (2) of the Code, the

Resolution Plan must provide for the payment of the debts

of operational creditors in such manner as may be specified

by the Board which shall not be less than the amount to be

paid to the operational creditors in the event of a liquidation

of the corporate debtor under section 53. Resolution plan

offers to make payment equivalent to 50% of the amount due

to operational creditors. The said amount is more than the

amount payable to the operational creditors in the event of Company Appeal (AT) (Insolvency) No. 956 of 2020 4

liquidation of the corporate debtor under Section 53. Proof of

claim has not been received from any worker. Considering

the estimated liability due to workers from insolvency

commencement date i.e. 31.05.2018, CoC has allocated Rs.

0.17 Crores for payments to workers and employees.

Payment to workers and employees will be made for whole

of the liability in the normal course of business. Resolution

Plan proposes to make full payments towards any claim on

account of unpaid wages, salaries and other entitlements

relating to the period before the commencement of the CIRP.

There is thus clear allocation of fund and protection, and

therefore this condition stands satisfied."

vii) Further, in the paragraph 18 of the Resolution Plan approval order, the

Ld. Adjudicating Authority in respect of the Resolution Plan recorded as

under:

" 3. No waiver has been sought in respect of debt in respect

of statutory dues, unsecured financial creditors and

workers and employees. Payment will be made in the due

course of business.

5. Contingent liabilities on account of show cause notices

issued by electricity department, central excise department,

income tax department, VAT department has been proposed

to be paid in full in instalments post availing all remedies

available with resolution applicants, without any interest,

Company Appeal (AT) (Insolvency) No. 956 of 2020 5

penal interest or damages. Resolution Applicants has also

proposed for protection from coercive action by these

departments for deposit/settlement of the demand, which

are subject to the appeal and waiver of the requirement for

pre-deposit."

viii) Further case is that the Ld. Adjudicating Authority denied granting the

protection to the Joint Resolution Appellants with regard to waiver of

requirement of pre-deposit, waiver of interest etc. in reference to statutory

dues. The Ld. Adjudicating Authority while approving the Resolution Plan

recorded as under:

" 44. In the resolution plan, relief and concession has been

sought in respect of statutory dues for making payment in

instalments, no coercive action, waiver of requirement of

pre-deposit for filing appeals, waiver of interest, penal

interest or damages. These are issues to be decided by the

respective government department and appropriate

application may be moved before them."

ix) Further case is that the Resolution Plan was approved by the Ld.

Adjudicating Authority, however, it is imperative to add that after the approval

of the Resolution Plan, the Respondent No. 1 started agitating demands which

were prior to the CIRP initiation.

x) Further case is that the Resolution Professional did not receive any

claim from the Respondent No. 1 till the time of submission of Resolution Plan,

however, the Resolution Professional had disclosed / admitted liability of INR Company Appeal (AT) (Insolvency) No. 956 of 2020 6

16,85,79,469 Crores for the assessment year 2014-15, which was pending as

contingent liability of the Corporate Debtor towards the Respondent No. 1.

xi) Further case is that it is a matter of covered the dues of the Respondent

No. 1 pertaining to assessment year 2014-15 and the Joint Resolution

Applicants undertook to pay the liability of the department in full after

exhausting all the remedies available with the Joint Resolution Applicants

[Annexure A-5 (Colly) at page 121 to 122 of the Appeal Paper Book].

xii) Further case is that the Respondent No. 1 also agitated the fresh

demands after the approval of the Resolution Plan which is completely against

the scheme of the Code and regulations therein. The Respondent No. 1 after

the approval of the Resolution Plan raised two demand notices relating to the

assessment year 2012-13 and assessment year 2013-14 [Annexure A-6 (Colly)

at page 123 to 183 of the Appeal Paper Book].

xiii) The reply letter dated 30.01.2020 (Annexure A-7 at page 184 to 215 of

the Appeal Paper Book) was sent by the Monitoring Professional to the

Respondent No. 1 stating therein clearly that no demand can be raised from

the Corporate Debtor at the stage of implementation of the already approved

resolution plan and requested the Respondent No. 1 not to take any coercive

action.

xiv) The Appellant again received the notice on 02.06.2020 and agitation of

the fresh demands by the Respondent No. 1 were assailed by the Monitoring

Professional before the Adjudicating Authority and the Adjudicating Authority

after hearing the submissions made by the Counsel of Monitoring Professional

issued notice on 27.08.2020 to the Respondent No. 1 as service affidavit was Company Appeal (AT) (Insolvency) No. 956 of 2020 7

also filed on behalf of Monitoring Professional in compliance of order dated

27.08.2020 [Annexure A-9 (Colly) at page 218 to 224 of the Appeal Paper

Book] surprisingly, the IA No. 3412/ND/2020 in (IB)-447/ND/2018 filed by

the Monitoring Professional (Respondent No. 2 herein) was dismissed on

17.09.2020 with cost of Rs. 1,00,000/- was imposed on the present Applicant

and Joint Resolution Applicant and hence this Appeal.

Submissions on behalf of the Appellants

3. The Learned Counsel for the Appellants during the course of argument

and his memo of Appeal alongwith Written Submissions submitted that the

Ld. Adjudicating Authority approved the Resolution Plan on 21.05.2019 and

observed that the Resolution Plan submitted qualifies the requirements

stipulated under Section 30(2) of the Code.

4. It is further submitted that the Ld. Adjudicating Authority denied

granting the protection to the Joint Resolution Applicants with regard to

waiver of requirement of pre-deposit, waiver of interest etc. in reference to

statutory dues.

5. It is further submitted that the Ld. Adjudicating Authority failed to

appreciate that the Deputy Commissioner of Income Tax - Respondent No. 1

after the approval of the plan started agitating for the demands which were

prior to the CIRP initiation.

6. It is further submitted that the letter dated 30.01.2020 (Annexure A-7

at page 184 to 215 of the Appeal Paper Book) sent by Monitoring Professional

to the Respondent No. 1 stating therein clearly that no demand can be raised

Company Appeal (AT) (Insolvency) No. 956 of 2020 8

from the Corporate Debtor at the stage of implementation of the already

approved resolution plan and requested the Respondent No. 1 not to take any

coercive action.

7. The Learned Counsel for the Appellant further submitted that these

facts are not considered by the Ld. Adjudicating Authority while passing the

impugned order. So, based on these submissions the impugned order is fit to

be set aside and the Appeal be allowed.

Submissions on behalf of the Respondent No. 1

8. The Learned Counsel for the Respondent No. 1 during the course of

argument and his Reply Affidavit alongwith Written Submissions submitted

that a search operation was conducted by the Directorate General of Central

Excise Intelligence (DGCE) on 04.07.2013 at the premises of the above named

company. On the basis of information/documents gathered during the search

operation, the Central Excise Department estimated that the assesse company

had evaded Union Excise duty on account of clandestine removal of goods.

The said information was passed on to the Income Tax Department by the

Excise Authorities. On the basis of information so passed on by the Excise

Department, the case of the assesse company for A.Ys 2012-13 to 2014-15

were re-opened by issuing notices under Section 148 of the Income Tax Act,

1961. The assessment proceedings for A.Y. 2014-15 was completed on

18.12.2017 itself, while those for A.Y. 2012-13 was completed on 26.12.2019

and for A.Y. 2013-14 on 27.12.2019 which led to the creation of the following

demands: -

Company Appeal (AT) (Insolvency) No. 956 of 2020 9

A.Y. 2014-15 Rs. 16,85,79,469/-

A.Y. 2012-13 Rs. 9,46,80,622/-

A.Y. 2013-14 Rs. 25,55,43,350/-

First Appeal of the assesse company against these three assessment

orders are still pending with CIT(A).

9. It is further submitted that during the FY 2018-19 one M/s Amrit Steels

(operational Creditor of the assesse) filed an application against the assesse

company before the NCLT, New Delhi under Section 9 of the Insolvency and

Bankruptcy Code, 2016 and the same was admitted by the NCLT vide its order

dated 31.05.2018 appointed as the IRP and moratorium was also imposed

under Section 14 of the Code. The Ld. NCLT vide its order dated 21.05.2019

[in (IB)-447/ND/2018] approved the resolution plan. The Ld. NCLT vide para

47 of its order lifted the moratorium imposed by it vide order dated

31.05.2018.

10. It is further submitted that the resolution plan itself offered and

approved 100% payment of tax dues on crystallization of tax demand. The

instant demands were raised by the Income Tax Department pursuant to

assessment order dated 26.12.2019 and 27.12.2019 i.e. after the moratorium

imposed by the Ld. NCLT on 21.05.2019. Hence, on the date of demand, no

moratorium under Section 14 of the Code was operative.

11. It is further submitted that the Appellants preferred an application

before the Ld. NCLT for stay of demand which was dismissed by Ld. NCLT vide

Company Appeal (AT) (Insolvency) No. 956 of 2020 10

its order dated 17.09.2020 with cost of Rs. 1,00,000/- for wasting the precious

judicial time.

12. It is further submitted that the order approving the Resolution Plan at

para 44 (page 119 of the Appeal Paper Book) is hereunder:

" 44. In the resolution plan, relief and concession has been

sought in respect of statutory dues for making payment in

instalments, no coercive action, waiver of requirement of

pre-deposit for filing appeals, waiver of interest, penal

interest or damages. These are issues to be decided by the

respective government department and appropriate

application may be moved before them"

13. The Learned Counsel for the Respondent No. 1 further submitted that

the Ld. Adjudicating Authority rightly dismissed the IA No. 3412/ND/2020 in

(IB)-447/ND/2018 filed by the Monitoring Professional (Respondent No. 2

herein) with cost of Rs. 1,00,000/- was imposed on the present Applicant and

Joint Resolution Applicant. Based on these submissions there is no merit in

the instant Appeal, the Appeal is fit to be dismissed.

FINDINGS

14. After hearing the parties and having gone through the pleadings made

on behalf of the parties, we are of the view that the IA No. 3412/ND/2020 in

(IB)-447/ND/2018 filed by Mr. Ajay Kumar Aggarwal, Monitoring Professional

(Respondent No. 2 herein) with a prayer before the Ld. Adjudicating Authority

(at page 37 of the Additional Affidavit) is hereunder:

Company Appeal (AT) (Insolvency) No. 956 of 2020 11

"a) Declare that the demand raised in respect of the Assessment

year 2012-13 are invalid in light of Hon'ble Supreme Court

decision rendered in Essar Steel and restrain the Respondent

from raising such demand;

b) Declare that the demand raised in respect of the Assessment

Year 2013-14 is invalid in light of Hon'ble Supreme Court

decision rendered in Essar Steel and restrain the Respondent

from raising such demand;

c) Re-adjudicate and Reconsider the relief sought by the Joint

Resolution Applicants in reference to the statutory dues for

making payments in instalments, requirement of Pre-deposit for

filing appeals, waiver of interest, penal interest or damages,

coercive action etc. for effective implementation of the Resolution

Plan;

d) Any other relief that this Hon'ble Tribunal may consider

necessary in the interest of justice, equity and fair play."

15. Since the Appellants are successful resolution applicants, the resolution

plan was not challenged by them and the judgment passed by the Hon'ble

Supreme Court reported in 2021 SCC OnLine SC 313 (Ghanashyam Mishra

and Sons Vs. Edelweiss Asset Reconstruction Company Limited through

the Director & Ors.) as has been relied by the Learned Counsel for the

Appellants is not applicable. This Appellate Tribunal cannot appreciate the

ratio of the judgment of "Ghanashyam Mishra" in this case in much as the

Judgment of "Ghanashyam Mishra" was not cited before the Ld. Company Appeal (AT) (Insolvency) No. 956 of 2020 12

Adjudicating Authority and further in absence of challenge the Resolution

Plan which was approved vide order dated 21.05.2019.

16. The Ld. Adjudicating Authority while approving the Resolution Plan

vide order dated 21.05.2019 in para 44 has rightly observed that " In the

resolution plan, relief and concession has been sought in respect of statutory

dues for making payment in instalments, no coercive action, waiver of

requirement of pre-deposit for filing appeals, waiver of interest, penal interest or

damages. These are issues to be decided by the respective government

department and appropriate application may be moved before them".

17. The Appellants herein through Respondent No. 2 have filed the IA No.

3412/ND/2020 in (IB)-447/ND/2018 and has rightly pointed out by the Ld.

Adjudicating Authority that the application is filed for wasting precious time

of Judicial Forum and delay the matter.

ORDER

18. In view of the above, we are of the considered view that there is no

illegality committed by the Ld. Adjudicating Authority while passing the

impugned order therefore, we do not need to interfere in the impugned order.

The impugned order dated 17.09.2020 passed by the Ld. Adjudicating

Authority (National Company Law Tribunal), New Delhi, Court - IV in IA No.

3412/ND/2020 in (IB)-447/ND/2018 is hereby affirmed. There is no merit in

the Appeal. The Appeal is hereby dismissed. No order as to costs.

Company Appeal (AT) (Insolvency) No. 956 of 2020 13

19. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority

(National Company Law Tribunal), New Delhi, Court - IV, forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 25th November, 2021 R. Nath.

Company Appeal (AT) (Insolvency) No. 956 of 2020