Attachment Of Bank A/C By Tax Authorities During Pendency Of CIRP Violative Of Section 14 IBC: NCLT Mumbai

The National Company Law Tribunal at Mumbai has ruled that an attachment by the Tax Authorities during the pendency of a Corporate Insolvency Resolution Process (CIRP) is violative of Section 14 (Moratorium) of the Insolvency and Bankruptcy Code.

"The claim of the Respondent (Dy. Commissioner of State Tax) will be dealt in the manner as provided u/s. 53 of the IBC and therefore, Respondent No. 1 i.e Dy Commissioner of State Tax cannot continue to enforce its lien over the bank accounts of the Corporate Debtor," the Tribunal observed.

The Bench comprising of HV Subba Rao (Member, Judicial) and Chandra Bhan Singh (Member, Technical) was dealing with an application filed by the Liquidator against the Dy. Commissioner of State Tax and Axis Bank, seeking direction to unfreeze/lift the attachment on the Bank Account of the Corporate Debtor.

It was submitted that the applicant had communicated to the Respondents about the initiation of the CIRP of the Corporate Debtor and had requested the Bank) to remove the attachment / lien marked on its accounts. However, no action was taken thereof.

Findings

At the outset, the Tribunal opined that the attachment is violative of Section 14 of the Code and thus needs to be lifted.

It noted that the Dy. Commissioner of State Tax had already submitted its claim before the liquidator and the same shall be dealt with under Section 53 (Distribution of assets) of the IBC.

Reliance was placed on Om Prakash Agarwal v. Tax Recovery Officer & Anr., where the Principal Bench of the Tribunal at New Delhi in like circumstance held that the monies of the CD lying in the bank account shall be construed to be an asset of the CD even if tan attachment order is passed against the same.

Reference was also made to Ram Ratan Modi (RP of Duncans Industries Ltd.) Vs. ICICI Bank where the NCLT Kolkata Bench expressed that upon coming to knowledge of the order of admission of the corporate debtor into CIRP, the statutory authorities should withdraw their direction of attachment from the assets of the corporate debtor.

In view of the above, the Tribunal directed Tax Authorities to lift their attachment over the Bank Accounts of a Corporate Debtor.

"The respondent No.2 i.e. Axis Bank Limited is further directed to unfreeze the bank account of the Corporate Debtor and allow the applicant to manage its operations," it added.

Adv Nausher Kohli appeared for the Liquidator.

Case Title: Asis Global Ltd. v. Dy. Commissioner of State Tax

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