NCLAT Delhi: Treatment Of Income Tax Dues In The Resolution Plan As 'Operational Creditor' Doesn't Violate Section 30(2) Of IBC

Background Facts:

On 07.02.2003, Yamuna Expressway Industrial Development Authority and Jaiprakash Associates Limited ('JAL') entered into a Concession Agreement with JAL being granted a concession to develop the expressway against the right to collect toll charges for a period of 36 years and the right to develop 6177 acres at actual compensation cost. Jaypee Infratech Ltd. (Corporate Debtor) was assigned all the rights and obligations under the Agreement.

The consortium of banks provided finances for the project. The Corporate Insolvency Resolution Process ('CIRP') filed by IDBI Bank against the Corporate Debtor was revived by the Supreme Court. Later on, Resolution Plans submitted by Suraksha Realty and NBCC were approved by the Committee of Creditors ('CoC') as well as NCLT New Delhi on 07.03.2023.

JAL and Manoj Gaur (Appellants) erstwhile Managing Director and personal guarantor of Corporate Debtor's loan have filed the appeals against NCLT New Delhi's Order approving the Resolution Plans in the CIRP of the Corporate Debtor.

NCLAT Verdict:

The NCLAT Delhi dismissed the appeals and held that the treatment of Income Tax dues in the Resolution Plan as an 'Operational Creditor' and offering only Rs. 10 Lakhs does not violate Section 30(2) of IBC.

NCLAT placed reference on Section 30(2) of IBC which is read as follows:

Section 30. Submission of Resolution Plan

(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—

(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor;

(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than—

(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53,

whichever is higher and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor—

(i) where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

(iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;

(c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;

(d) the implementation and supervision of the resolution plan;

(e) does not contravene any of the provisions of the law for the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

Explanation.—For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law];

It observed that the Appellate Tribunal will not interfere in its decision dated 26.09.2023 that no no-compliance exists of Section 30(2)(b) of IBC exists relating to the treatment of the Income Tax Department's claim as that of an 'Operational Creditor' under the Resolution Plan and thus, no violation can be established.

It also noted that the Appellant is not allowed to point out any further issues relating to the Income Tax Department's dues when the same has been concluded by NCLAT.

NCLAT also pointed out that the questions relating to 'Yamuna Expressway Industrial Development Authority' ('YEIDA') as a Secured creditor of the Debtor and whether its claims towards farmers' compensation and other claims in the Resolution Plan can be treated as that of an 'Operational Creditor' and not being violative of Section 30(2) of IBC cannot be decided by the Appellate Tribunal since YEIDA is not a party.

Case Title: Jaiprakash Associates Ltd. vs. Jaypee Infratech Ltd. and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 548 of 2023 & I.A. No. 2643, 3702 of 2023

Counsel for Appellant: Mr. Krishnan Venugopal, Sr. Advocate with Mr. Anupam Chaudhary, Mr. Sarvesh Mehra, Mr. Krishnan Aggarwal, Mr. Avinash Mathews, Advocates.

Counsel for Respondents: Mr. Sumant Batra, Mr. Sanjay Bhatt, Mr. Sarthak Bhandari, Ms. Mehreen Garg, Advocates for IMC of JIL/R-1. Mr. Krishnendu Datta, Sr. Advocate with Mr. Mahesh Agarwal, Ms. Geetika Sharma, Ms. Eshna Kumar, Mr. Sagar Bansal, Ms. Varsha Himatsingka, Mr. Rajat Sinha, Advocates for SRA, R- 3 & 4. Mr. Tushar Jain, Mr. Vaibhav Chowdhary, Mr. Mukesh Kumar, Advocates in IA 2643/2023. Mr. Parth Tandon and Mr. Harsh Sharma, Advocates for Applicant in I.A. 3218/2023. Mr. Amit K. Mishra, Mr. Akshat Hansaria, Advocates for Homebuyers/Intervenors. Mr. Vierat K. Anand, Ms. Srishty Kaul, Mr. Harish Nadda, Advocates.

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