Department of State Tax Vs Zicom Saas Pvt. Ltd. & Anr. (NCLAT Delhi)
The National Company Law Appellate Tribunal (NCLAT), Delhi, dismissed an appeal filed by the Department of State Tax challenging the order dated 16.12.2021 of the National Company Law Tribunal, Mumbai Bench, approving the resolution plan submitted during the Corporate Insolvency Resolution Process (CIRP).
The appellant submitted that it had filed a claim of ₹43,72,97,479 before the Resolution Professional, out of which ₹36,68,12,729 was admitted. Under the approved resolution plan, however, it was allocated only 1% of its admitted claim. The appellant contended that its claim ought to have been treated as a secured claim in light of the Supreme Court’s judgment in State Tax Officer Vs. Rainbow Papers Limited [2022 SCC OnLine SC 1161] and relied upon Section 37 of the Maharashtra Value Added Tax Act, 2002.
The respondent submitted that a review petition against the Supreme Court’s decision in Rainbow Papers Limited had been filed and notice had been issued by the Supreme Court on 02.02.2023. It was also contended that the decision in Rainbow Papers Limited was distinguishable from the facts of the present case.
The NCLAT observed that there was no dispute regarding the CIRP process or the amount of the admitted claim. It compared Section 48 of the Gujarat Value Added Tax Act, which had been considered in Rainbow Papers Limited, with Section 37 of the Maharashtra Value Added Tax Act, 2002. The Tribunal noted that while Section 48 of the GVAT Act provides for a first charge on the property of the dealer, Section 37 of the MVAT Act expressly states that such first charge is “subject to any provision regarding creation of first charge in any Central Act for the time being in force.”
The Tribunal held that Section 53 of the Insolvency and Bankruptcy Code provides the waterfall mechanism contemplated by Section 37 of the MVAT Act. On that basis, it concluded that the Supreme Court’s decision in Rainbow Papers Limited was distinguishable.
The NCLAT held that the appellant had been correctly treated as an operational creditor and that the allocation made under the resolution plan did not violate Section 30(2)(b) of the Insolvency and Bankruptcy Code. Finding no ground to interfere with the order approving the resolution plan, the Tribunal dismissed the appeal.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
Heard Learned Counsel for the Appellant as well as Learned Counsel for the Respondents.
2. This Appeal has been filed by the Department of State Tax challenging the Order dated 16th December, 2021 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court-III) by which Order, the Adjudicating Authority has approved the Resolution Plan submitted by the Resolution Professional.
3. The Appellant’s case in the Appeal is that Appellant has filed a claim before the Resolution Professional in ‘Corporate Insolvency Resolution Process’ (CIRP in short) for an amount of Rs. 43,72,97,479/- out of which claim Resolution Professional accepted the claim of Rs. 36,68,12,729/- and in the Resolution Plan, they have been allotted only 1% of the admitted claim.
4. Learned Counsel for the Appellant submits that the Appellant’s claim was required to be treated as secured charge in view of the Judgement of the Hon’ble Supreme Court in the matter of “State Tax Officer Vs. Rainbow Papers Limited” [2022 SCC OnLine SC 1161]. It is submitted that the Adjudicating Authority committed error in not accepting the entire claim of the Appellant which was admitted. Learned Counsel for the Appellant has relied on the provisions of Section 37 of the Maharashtra Value Added Tax Act, 2002.
5. Learned Counsel for the Respondent refuting the submissions of Learned Counsel for the Appellant contends that with regard to the judgement of the Hon’ble Supreme Court in “State Tax Officer Vs. Rainbow Papers Limited” (supra), Review Petition (CIVIL) Diary No. 32268 of 2022 has been filed on which Hon’ble Supreme Court has issued notice on 02.02.2023. It is further submitted that in any view of the order, the Judgement in “Raibow Papers Limited” (supra) is distinguishable from the facts of the present case.
6. We have heard the Learned Counsel for the parties and have perused the record.
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.
The Appeal is dismissed.
