Avenue Realty Vs Assistant Commissioner (Madras High Court)
Conclusion: Since Assistant Commissioner, Srirangam GST Circle (1st Respondent) was a secured creditor whose rights could not be diluted, the sale effected by the liquidator had compromised its interest. Assessee’s remedy lied in recovering the amounts wrongly disbursed through the liquidation process, with the liquidator assisting in such recovery. Upon full satisfaction of the 1st Respondent’s dues, the attachment should stand vacated.
Held: Assessee had purchased the property in an auction conducted by the Liquidator appointed by National Company Law Tribunal (NCLT) during the course of liquidation of the 3rd Respondent company. The 3rd Respondent was represented by its Liquidator, namely Mr. Shekher. The 3rd Respondent company was ordered to be liquidated in a petition filed by M/s.Foseco India Limited, an operational creditor, under Section 9 of IBC Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Assistant Commissioner, Srirangam GST Circle, expressed the Department’s inability to recover the dues directly from the 3rd Respondent and, therefore, requested that the property of the 3rd Respondent be sold, and the dues recovered and be paid to the Department. A claim petition was filed by the 1st Respondent before the 3rd Respondent, the Liquidator. The same was rejected by the Official Liquidator. Meanwhile, the subject property was thereafter sold by the Official Liquidator, and a Sale Certificate was also issued to assessee by the Official Liquidator. Assessee paid a sum of 3,05,55,143/-. However, the registration of the subject property was now pending in view of the Impugned Attachment Order of the property by the 1st Respondent. Assistant Commissioner approached the NCLT against the Order of the Liquidator. Assessee submitted that the 1st Respondent attached the property purchased by assessee, on account of non-payment of Tamil Nadu Value Added Tax and Central Sales Tax and it had filed its claim before the Official Liquidator after a delay of one year, and the same was rejected. This decision has attained finality. It was further submitted that the underlying claim had long since been extinguished, akin to an attachment without a decree. It was held that even if the secured creditor failed to file a claim statement within the stipulated time, its rights could not be defeated. Under Section 52 of the IBC, 2016 (“the Code”), a secured creditor enjoys an independent statutory right to either (a) relinquish its security interest and participate in liquidation proceeds, or (b) realise its security interest independently, subject to accounting for surplus to the liquidator. The Court emphasized that secured creditors stand on a different footing than other creditors, and their claims were sacrosanct. The liquidator erred in auctioning the property without safeguarding the 1st Respondent’s rights under Section 52. Since the 1st Respondent had opted to enforce its security interest under Section 52(4), the subsequent sale and issuance of the Sale Certificate compromised its rights. As assessee had invested ₹3.05 crore in purchasing the secured interest, its remedy lies in recovering the amounts wrongly distributed by the liquidator to other creditors. The liquidator was directed to assist in such recovery, and upon full payment to the 1st Respondent, the tax attachment would stand vacated.
