Any Claimed/Unclaimed Dues Prior To Approval Date Of Resolution Plan Stand Extinguished: NCLT Kolkata
Tazeen Ahmed
29 Oct 2024 12:00 PM IST
The National Company Law Tribunal (NCLT), Kolkata bench of Smt. Bidisha Banerjee (Judicial Member) and Shri D. Arvind (Technical Member) have held that the income tax notice, demand notice and payment for past dues that accrued prior to the date of the Resolution Plan against the corporate debtor is null and void. It observed, “It is a well-established law that the corporate debtor...
The National Company Law Tribunal (NCLT), Kolkata bench of Smt. Bidisha Banerjee (Judicial Member) and Shri D. Arvind (Technical Member) have held that the income tax notice, demand notice and payment for past dues that accrued prior to the date of the Resolution Plan against the corporate debtor is null and void. It observed, “It is a well-established law that the corporate debtor was come out of insolvency resolution process by way of successful resolution of its insolvency cannot be settled with past dues as the successful resolution applicant takes over the corporate debtor on a fresh slate principal and assets as such, any dues claimed/unclaimed for the period up to the date of approval of the resolution plan stands extinguished…”
Brief Facts:
Gandhamardhan Sponge Industries Pvt. Ltd. (the "Applicant/Corporate Debtor") filed the application under section 60(5) of the Insolvency and Bankruptcy Code, 2016 r/w Rule 11 of the National Company Law Tribunal Rules, 2016 against the Deputy Commissioner of Income Tax Circle One, Cuttack (the "Respondent"). In the application, the Successful Resolution Applicant (SRA) sought an order to declare the income tax notice dated 25.01.2024 null and void; quash/set aside the demand notice dated 25.01.2024 and order dated 28.03.2024; and declare that the applicant is not liable to make payment to respondent for the past dues accrued prior to the date of resolution plan, i.e. 25.03.2021.
The Corporate Debtor underwent a Corporate Insolvency Resolution Process (CIRP) that commenced on 04.10.2019. The NCLT approved the resolution plan of the corporate debtor vide its Order dated 25.03.2021. The Respondent had submitted a claim amounting to Rs. 55,46,41,862 of which ₹4,43,72,000 was paid. The income tax notice pertained to dues that arose before the approval of the resolution plan.
Submissions:
Counsel for the Applicant submitted that an SRA takes over a corporate debtor on a fresh led principal and assets, any past dues or claims, including the respondent, stand extinguished, and no proceedings can be initiated in respect of dues prior to the period of approval of the resolution plan. Reliance was placed upon Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. and Essar Steel Limited v. Satish Kumar Gupta.
Counsel for the Respondent submitted that the stand taken by the applicant was not maintainable because the liability of the petitioner company for Assessment Years 2009-2010, 2010-2011, 2013-2014 and 2014-2015 was settled by the NCLT vide its Order dated 25.03.1021. However, the proceeding was in relation to Financial Year 2019-2020. This period was not covered by the Order which approved the Resolution Plan. Reliance was placed upon the Supreme Court's judgment in State Tax Officer v. Rainbow Papers Limited to contend that resolution applicant's approval is invalid for invoking the statutory dues of the tax authority.
Observations:
The Tribunal observed as follows:
“It is a well-established law that the corporate debtor was come out of insolvency resolution process by way of successful resolution of its insolvency cannot be settled with past dues as the successful resolution applicant takes over the corporate debtor on a fresh slate principal and assets as such, any dues claimed/unclaimed for the period up to the date of approval of the resolution plan stands extinguished as held by the Hon'ble Supreme Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. V. Edelweiss Asset Reconstruction Company Ltd., reported in 2021 9 SCC 657 and Essar Steel Limited V. Satish Kumar Gupta reported in (2020) 8 SCC 531.”
The Tribunal found that the notice and demand in question were for the Financial Year 2020, whereas the resolution plan was approved on 25.03.2021. It held that any dues up to that period stood extinguished consequent to the approval of the resolution plan.
The Tribunal allowed the application and granted the relief sought.
Case Title: Gandhamardhan Sponge Industries Pvt. Ltd. vs. Income Tax Department and Anr.
Case Number: I.A. (I.B.) No. 880/KB/2024 in C.P. (I.B.) No. 180/KB/2024
Date of Order: 17.09.2024
