Case Law Details
Ultra Tech Nathdwara Cement Ltd. Vs Union of India (Rajasthan High Court)
Conclusion: The purpose of the statute is very clear that it intends to revive the dying industry by providing an opportunity to a resolution applicant to take over the same and begin the operation on a clean slate. The courts are given an extremely limited power of judicial review into the resolution plan duly approved by the COC. Therefore, the issuing of notices by Goods and Service Tax (GST) Department of Rajasthan for all the old unpaid dues of Binani Cement would be acting in a totally illegal and arbitrary manner and the demand notices were ex-facie illegal, arbitrary and per-se and could not be sustained.
Held: Assessee-company named Binani Cement suffered huge losses and was unable to pay the debts to the Financial Creditor i.e. Bank of Baroda, which preferred an insolvency application before the National Company Law Tribunal(‘NCLT’). A Corporate Insolvency Resolution Process (‘CIRP’) was initiated by the NCLT under the provisions of the IBC 2016. After reviewing and comparing the resolution plans received, the Committee of Creditors (COC) came to the conclusion that the resolution plan of assesse company Ultra Tech was the best one equipped to achieve the purpose of the IBC i.e. the maximization of the value of the assets. In the meeting of the COC, the resolution plan submitted by Ultra Tech was approved unanimously and it was declared to be the successful resolution applicant. The resolution plan dealt with the dues of all the creditors equitably and was superior in terms of recovery to the banks and other creditors as compared to the losses which all the creditors would have suffered in case the company had gone into liquidation. The primary issue in the dispute lies in several notices issued by the Goods and Service Tax (GST) Department of Rajasthan for all the old unpaid dues of Binani Cement. The Goods and Service Tax (GST) Department of Rajasthan contended that it was not heard by the committee of creditors (CoC) before finalizing the resolution plan and as such, it was not bound by it. On appeal. It was held that it was the financial creditors who are given right to vote in the COC whereas, the operational creditors viz. Commercial Taxes Department of the Central Government or the State Government as the case may be, have no right of audience. The purpose of the statute is very clear that it intends to revive the dying industry by providing an opportunity to a resolution applicant to take over the same and begin the operation on a clean slate. The courts are given an extremely limited power of judicial review into the resolution plan duly approved by the COC. In present case, the operational creditors i.e. the Commercial Taxes Department of Govt. of Rajasthan as well as Commissioner of Goods and Service Tax assailed the resolution plan by filing appeals before Hon’ble the Supreme Court with a specific plea that their dues had not been accounted for by the COC in the resolution plan. It might be mentioned here that from the two possible situations; one being liquidation and the other being revival, the respondents will gain significantly in the later because as per the assessed liquidity value, their dues had been assessed as nil, whereas as per the resolution plan with revival of the industry at the instance of the resolution applicant (assessee company herein), their rights had been secured to the extent of Rs.72 crores odd. Therefore, the respondents would be acting in a totally illegal and arbitrary manner and the demand notices were ex-facie illegal, arbitrary and per-se and could not be sustained.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The writ petitioner Ultra Tech Nathdwara Cement Ltd. has approached this Court by way of the instant writ petition being aggrieved of the demands raised vide notice dated 11.2.2019 (Annex.10), letter dated 7.9.2018 (Annex.11), order dated 20.3.2019 (Annex.12), notice dated 6.3.2019 (Annex.13), notice dated 8.3.2019 (Annex.14), notice dated 29.3.2019 (Annex.15), notice dated 29.3.2019 (Annex.16), notice dated 10.4.2019 (Annex.18), order dated 9.4.2019 (Annex.19), two notices dated 11.6.2019 (Annex.20) issued by the respondent Central Goods and Service Tax Department, Govt. of India whereby the petitioner was called upon to pay Goods and Service Tax (G.S.T.) for the period before it took over a company named M/s.Binani Cements Ltd. A restraint order is also sought for against the respondents from raising any further demands or from proceeding with any coercive steps so far as dues incurred in relation to the period prior to the transfer date on which the petitioner took over the company M/s Binani Cements in proceedings under the Insolvency Bankruptcy Code 2016 (hereinafter to be referred to as ‘IBC’ for brevity).
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