Department of State Tax Vs Pranav Constructions Systems Pvt. Ltd. & Anr. (NCLAT Delhi)
The National Company Law Appellate Tribunal (NCLAT), Delhi, first allowed an application seeking condonation of a 14-day delay in filing the appeal. The appellant explained that the delay occurred due to the time taken to obtain the necessary departmental approval for filing the appeal. Finding sufficient cause, the Tribunal condoned the delay and disposed of the application.
The appeal challenged the order dated 16.01.2024 passed by the Adjudicating Authority in IA No. 773/2023 approving the Resolution Plan of the corporate debtor, Pranav Constructions. The appellant, the Department of State Tax, contended that it had filed claims relating to MVAT and GST but had been allocated only 0.45% of its admitted claim under the approved Resolution Plan.
The NCLAT noted that it had already considered an identical issue in Department of State Tax, Through the Dy. Commissioner of State Tax vs. Zicom Saas Pvt. Ltd. & Anr., decided on 07.02.2023. In that decision, the Tribunal had rejected the State Tax Department’s contention that it should be treated as a secured creditor.
Referring to its earlier judgment, the Tribunal compared Section 48 of the Gujarat Value Added Tax Act, which was considered by the Supreme Court in Rainbow Paper Limited, with Section 37 of the Maharashtra Value Added Tax Act, 2002. The Tribunal observed that Section 37 expressly provides that the first charge created under the MVAT Act is subject to any provision regarding the creation of a first charge under any Central Act. It held that Section 53 of the Insolvency and Bankruptcy Code provides the waterfall mechanism contemplated by Section 37 of the MVAT Act. Consequently, the Tribunal reiterated its earlier view that the Supreme Court’s decision in Rainbow Paper Limited was distinguishable in cases governed by Section 37 of the MVAT Act.
The Tribunal held that the appellant could not be treated as a secured creditor. It further observed that under Section 30(2) of the Insolvency and Bankruptcy Code, the appellant was entitled only to receive an amount not less than what it would have received in the event of liquidation. The Tribunal recorded that the appellant had not contended that the amount provided under the Resolution Plan was less than its liquidation entitlement.
Finding no ground to interfere with the approval of the Resolution Plan, the NCLAT dismissed the appeal.
Cases Discussed
- Department of State Tax, Through the Dy. Commissioner of State Tax vs. Zicom Saas Pvt. Ltd. & Anr. (NCLAT), Company Appeal (AT) (Ins.) No.246 of 2022
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
1. This is an application praying for condonation of 14 days’ delay in filing the application. Learned counsel for the applicant submits that time was taken in seeking necessary approval from the departmental authority for filing the appeal. Sufficient cause has been shown in the application for condonation of delay. Delay condoned. I.A. No.7207 of 2024 is disposed of.
2. This appeal has been filed against order dated 16.01.2024 passed in IA No.773/2023 which was filed by the Resolution Professional for approval of the Resolution Plan. By the impugned order dated 16.01.2024, the Adjudicating Authority has approved the Resolution Plan with regard to the Corporate Debtor – Pranav Constructions. Appellant claim that they filed their claim with regard to MVAT and GST and amount which has been paid in the plan to the Appellant is only 0.45% as is reflected from the plan.
3. In Company Appeal (AT) (Ins.) No.246 of 2022, Department of State Tax, Through the Dy. Commissioner of State Tax vs. Zicom Saas Pvt. Ltd. & Anr. we have considered the similar contention raised by the Appellant and had upheld the approval of the plan by our order dated 07.02.2023. The Appellant’s claim of being Secured Creditor was considered and it was held that the Appellant cannot claim that they are Secured Creditors. In Para 7 to 10 of aforesaid judgment, we have held following:
“7. There are no dispute between the parties regarding the facts which took place in the CIRP and the claim which was admitted in the CIRP. In “Rainbow Paper Limited” (supra), Section 48 of the GVAT Act was relied, which has been quoted in paragraph 2 of the Judgement which is to the following effect:
“The short question raised by the appellant in this appeal is, whether the provisions of the IBC and, in particular, Section 53 thereof, overrides Section 48 of the GVAT Act which is set out herein below for convenience:-
48. Tax to be first charge on property.-Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person”
8. The Provision of Section 37 of Maharashtra Value Added Tax, 2002 is to the following effect:
“37. Notwithstanding anything contained in any contract to the contrary, but subject to any provision regarding creation of first charge in any Central Act for the time being in force, any amount of tax, penalty, interest, sum forfeited, fine or any other sum, payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or as the case may be, person.”
9. When we compare the provisions of Section 48 of the provision of Gujarat Values Added Tax which was relied in “Rainbow Papers Limited” and the Provisions of Section 37 which is sought to be relied on in the present Appeal, distinction between the provisions is clear. Section 37 specifically uses the expression “subject to any provision regarding creation of first charge in any central act”. The provision itself contemplated thus that Section 37 was subject to any provision in Central Act. The IBC Section 53 itself provides waterfall mechanism which may be treated to be law which has been contemplated under Section 37 of the MVAT Act, 2002.
10. We thus are of the view that the Judgement of the Hon’ble Supreme Court in “Rainbow Paper Limited” relied by Learned Counsel for the Appellant is distinguishable. The Appellant having been treated as Operational Creditor allocation of amount in the Resolution Plan cannot be said to be in violation of Section 30 (2)(b). We thus are of the view that no ground has been made to interfere with the Impugned Order.”
4. We, thus, are of the view that Appellant’s claim cannot be accepted as Secured Creditor and as per Section 30(2) of the Code, the Appellant was entitled only for amount not less than the amount to be received by the Appellant in event of liquidation. Present is not a case where it is claimed that amount is less than the liquidation value. We, thus, do not find any ground to interfere with the order approving the Resolution Plan. Appeal is dismissed.
