NCLAT: Section 37 Of The MVAT Act And Section 33 Of The MPVAT Act Not Pari Materia With Section 48 Of The GVAT Act
The National Company Law Appellate Tribunal, New Delhi bench, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member) has held that Section 37 of the Maharashtra Value Added Tax Act, 2002 (“MVAT Act") and Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (“MPVAT Act”) are not pari materia...
The National Company Law Appellate Tribunal, New Delhi bench, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member) has held that Section 37 of the Maharashtra Value Added Tax Act, 2002 (“MVAT Act") and Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (“MPVAT Act”) are not pari materia with Section 48 of the Gujarat Value Added Tax Act, 2003 (“GVAT Act”). The Tribunal held that the claim of the Commercial Tax Department could not be considered a 'secured debt' merely because of its statutory status as a first charge on property.
Background Facts:
On 26th March 2021, an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) was admitted against M/s Rajpal Abhikaran Pvt. Ltd. (“Corporate Debtor”) by the Adjudicating Authority. Ms. Teena Saraswat (“Respondent No. 1”) was appointed as the Interim Resolution Professional.
On 17th December 2021, the Committee of Creditors approved Agarwal Real City Pvt. Ltd.'s Resolution Plan with 90.41% of the votes. The Prospective Resolution Applicant proposed to pay Rs. 22,61,33,000 against the total admitted claim with NIL payments to operational creditors. Thereafter, the Resolution Professional filed an application under Section 30(6) read with Section 31 of IBC for the approval of the Resolution Plan. The same was allowed on 25.08.2022.
The Commercial Tax Department, Government of Madhya Pradesh (“Appellant”) filed the appeal challenging the impugned order dated 25.08.2022 on the grievance that its claim of Rs. 12,61,57,345 was treated as an unsecured debt and not a secured debt under Section 30 of the IBC.
Observations by the Tribunal:
The Tribunal noted that the Appellant's case heavily relied on the Supreme Court's judgment in State Tax Officer (1) vs. Rainbow Papers Limited [Civil Appeal No. 1661 of 2020], where the State Tax Office was held to be a 'secured creditor' under Section 48 of the GVAT Act.
The Tribunal found that Section 33 of the MPVAT Act is subject to Section 530 of the Companies Act, 1956, and that Section 530 is subject to Section 529A of the Act, which gives overriding preference to workmen's dues and debts due to secured creditors.
The Tribunal referred to Department of State Tax vs. Zicom Saas Pvt. Ltd. [CA (AT) (Ins) No. 246 of 2022], where it was observed that:
“...Section 37 was subject to any provision in Central Act. …Section 53 itself provides waterfall mechanism which may be treated to be law which has been contemplated under Section 37 of the MVAT Act, 2002.”
Relying upon the above case, the Tribunal held that Section 37 of the MVAT Act and Section 33 of the MPVAT Act are not pari materia with Section 48 of the GVAT Act. Thus, the Appellant was not treated as a 'secured creditor', and the Rainbow Papers case was held not to be applicable.
In the result, the appeal was dismissed.
Case Title: Commercial Tax Department vs Mrs. Teena Saraswat Pandey & Anr.
Case Number: Company Appeal (AT) (Ins.) No. 1265 of 2022
Date of Judgment: 09.09.2024