PCIT Vs Shristi Hotel Pvt Ltd. (Calcutta High Court)
Summary: The Calcutta High Court allowed GA/3/2024 filed by Shristi Hotel Pvt. Ltd. and dismissed the Revenue’s appeal in ITA/36/2020 after holding that the liability sought to be pursued by the department stood extinguished consequent to approval of the insolvency resolution plan. The assessee sought dismissal of the departmental appeal on the ground that an order had been passed by the National Appellate Law Tribunal under the Insolvency and Bankruptcy Code and the resolution plan had been approved. The High Court was guided by the Supreme Court decision in Ruchi Soya Industries Ltd. and Others v. Union of India, reported in (2022) 6 Supreme Court Cases 343. In that decision, the Supreme Court had applied the law laid down in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. concerning the binding effect of an approved resolution plan.
The Supreme Court had held that once a resolution plan is duly approved under Section 31 of the IBC, claims covered by the plan stand frozen and all claims not forming part of the resolution plan stand extinguished. This principle extends to statutory dues owed to the Central Government, State Government or local authorities.
The Supreme Court had further held that the 2019 amendment to Section 31 was clarificatory and declaratory and that statutory dues omitted from the resolution plan could not be pursued for the period preceding approval of the plan. It was also noted that the relevant demand in Ruchi Soya had not been lodged after public announcements under Sections 13 and 15 of the IBC. Applying that decision, the Calcutta High Court allowed the assessee’s application GA/3/2024 and dismissed the departmental appeal in ITA/36/2020, treating it as on the day’s list.
Cases Discussed
- Ruchi Soya Industries Ltd. and Others v. Union of India, (2022) 6 Supreme Court Cases 343 (Supreme Court) — Followed/guided the High Court; the Supreme Court held that after approval of the resolution plan, claims not forming part of the plan stand extinguished and cannot thereafter be legally pursued.
- Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 (Supreme Court) — Relied upon in Ruchi Soya for the proposition that once a resolution plan is approved under Section 31 of the IBC, claims outside the plan, including statutory Government dues, stand extinguished and proceedings concerning such claims cannot be initiated or continued.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
This application being GA/3/2024 has been filed by the assessee to dismiss the appeal filed by the revenue in ITA No. 36 of 2020 on the ground that on account of an order passed by the National Appellate Law Tribunal under the provision ofInsolvency and Bankruptcy Code the entire liability stands extinguished and the insolvency resolution plan has also been approved. In this regard we are guided by the decision of the Hon’ble Supreme Court inRUCHI SOYA INDUSTRIES LTD. AND OTHERS v. UNION OF INDIA, reported in (2022) 6 Supreme Court Cases 343, wherein the Hon’ble Supreme Court held as follows :-
“8. Mr. Tripathi, learned Senior Counsel appearing for the appellant, has submitted that the present case is squarely covered by the law laid down by this Court inGhanashyam Mishra & Sons (P) Ltd.v. Edelweiss Asset Reconstruction Co. Ltd.He submits that as a matter of fact, the office of professional in respect of one of their demands. However, so far as the demand, which is the subject matter of the present proceedings is concerned, no claim was lodged in respect thereof, and as such, in view of the law laid down by this Court while interpreting Section 31 IBC, the respondents are now not entitled to claim any amount, which is not part of the resolution plan.
9. Ms Bagchi, learned counsel appearing for Respondent 2, the Revenue, on the contrary submits that no notice was issued to the Authority at Mangalore. She further submits that there was certain confusion as to whether the operational debt as defined under Section 5(21) IBC would cover the claim of Respondent 2, the Revenue. It is, therefore, submitted that in view of said confusion, there is a possibility that the office of Respondent 2 might not have lodged the claim with respect to the present proceedings.
10. We find that the present appeals are square covered by the law laid down by this Court iGhanashyam Mishra & Sons (P) Ltd. It will be relevant to refer to para 102 of the said judgment which reads as under: (SCC p.716).
102. In the result, we answer the questions framed by us as under:
102. I. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
102.2. The 2019 Amendment to Section 31 of the I&b Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.
102.3. Consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued.
11. Admittedly, the claim in respect of the demand which is the subject matter of the present proceedings was not lodged by Respondent 2 after public announcements were issued under Sections 13 and 15 IBC. As such, on the date on which the resolution plan was approved by the learned NCLT, all claims stood frozen, and no claim, which is not a part of the resolution plan, would survive.
12. In that view of the matter, the appeals deserve to be allowed only on this ground. It is held that the claim of the respondent, which is not part of the resolution plan, does not survive. The amount deposited by the appellant at the time of admission of the appeals along with interest accrued thereon is directed to be refunded to the appellant.
13. The appeals are allowed, accordingly. Pending IA(s), if any, shall stand disposed of.”
In the light of the above decision, the application being GA/3/2024 is allowed and the appeal filed by the department in ITA/36/2020 is dismissed treating the same as on day’s list.
