Allahabad High Court
M/S Tata Steel Limited vs State Of U P And 2 Others on 4 July, 2022
Bench: Surya Prakash Kesarwani, Yogendra Kumar Srivastava
HIGH COURT OF JUDICATURE AT ALLAHABAD RESERVED Court No. - 3 1. Case :- WRIT TAX No. - 728 of 2020 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U P And 2 Others Counsel for Petitioner :- Rahul Agarwal,Navin Sinha (Senior Adv.),Sanyukta Singh Counsel for Respondent :- C.S.C. WITH 2. Case :- WRIT TAX No. - 1085 of 2018 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U.P. And 4 Others Counsel for Petitioner :- Sanyukta Singh,Navin Sinha (Senior Adv.) Counsel for Respondent :- C.S.C. 3. Case :- WRIT TAX No. - 697 of 2019 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U.P. And 2 Others Counsel for Petitioner :- Sanyukta Singh, Rahul Agrawal,Sanyukta Singh Counsel for Respondent :- C.S.C. 4. Case :- WRIT TAX No. - 843 of 2019 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U.P. And 2 Others Counsel for Petitioner :- Sanyukta Singh,Rahul Agarwal Counsel for Respondent :- C.S.C. 5. Case :- WRIT TAX No. - 449 of 2020 Petitioner :- M/S Tata Steel Limited Respondent :- Union Of India And 5 Others Counsel for Petitioner :- Rahul Agarwal,Navin Sinha (Senior Adv.),Sanyukta Singh Counsel for Respondent :- A.S.G.I.,Aradhna Chauhan,Ashok Singh,B.K.Singh Raghuvanshi, Gopal Verma. 6. Case :- WRIT TAX No. - 609 of 2020 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U P And 2 Others Counsel for Petitioner :- Rahul Agarwal,Navin Sinha (Senior Adv.),Sanyukta Singh Counsel for Respondent :- C.S.C. 7. Case :- WRIT TAX No. - 318 of 2021 Petitioner :- M/S Tata Steel Limited Respondent :- State Of U.P. And 2 Others Counsel for Petitioner :- Sanyukta Singh,Navin Sinha (Senior Adv.),Rahul Agarwal Counsel for Respondent :- C.S.C. Hon'ble Surya Prakash Kesarwani,J.
Hon'ble Dr. Yogendra Kumar Srivastava,J.
(Per: Hon'ble Surya Prakash Kesarwani, J)
1. Heard Sri Rakesh Dwivedi, learned Senior Advocate and Sri Navin Sinha, learned Senior Advocate and Shri Kavindra Gulati, learned Senior Advocate assisted by Sri Rahul Agarwal, Ms. Sanyukta Singh, Sri Raghav Dwivedi, Sri Eklavya Dwivedi, Sri Arvind Thapliyal, Sri Manik Ahluwalia, Sri Sarvana Vasanta and Varad Chaudhary, learned counsel for the petitioners, Sri Manish Goyal, learned Additional Advocate General assisted by Sri C.B. Tripathi, learned Special Counsel for State-Respondents, Sri Gopal Verma, learned Central Government Standing Counsel representing the Union of India and Sri Ashok Singh, learned Senior Standing Counsel for Indirect Taxes representing C.G.S.T. Authorities.
2. The reliefs sought in these batch of writ petitions are reproduced below:
Writ Petition No. Relief Writ Tax No. 728 of 2021 a. To issue an appropriate writ, order or direction in the nature of CERTIORARI quashing the Impugned Orders (Annexure No. 1) (colly) b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take anyu coercive steps against the Petitioner qua the Impugned Orders and/or qua any subsequent demands in this regard against the petitioner.Writ Tax No. 1085 of 2018
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI by quashing the Notices Dated 17.7.2018 and 18.07.2018 and the impugned order dated 24.07.2018 (Annexure No. 1 (colly) to the writ petition) issued by the Respondent No. 2 and 4; as well as all future/subsequent demands in this regard, if any, raised by Respondents against the Petitioner;
b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Notices Dated 17.7.2018 and 18.07.2018 and the impugned order dated 24.07.2018 (Annexure No. 1 (colly) to the writ petition) and/ or qua any subsequent demands in this regard against the Petitioner, otherwise the Petitioner shall suffer irreparable loss and injury;Writ Tax No. 697 of 2019
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI by quashing the four Impugned Assessment Orders all dated 12.11.18 (Assessment Order bearing No. 23 for A/Y (2002-2003) under the Uttar Pradesh Trade Tax Act, 1948, Assessment order bearing No. 24 for A/Y 2002-2003 under the central Sales Tax Act, 1956, Assessment Order bearing No. 25 for A/Y 2003-2004 under the Uttar Pradesh Trade Tax Act, 1948 and Assessment Order bearing No. 26 for A/Y 2003-2004 under the Central Sales Tax, 1956) passed by the Respondent No.2, four Demand Notices all dated 07.5.19 bearing no. 34 and 35 for the period 2002-2003 and Notices bearing No. 36 and 37 for the period 2003-2004 and two Rejection Orders both dated 22.05.2019. (Annexure No. 1) (Colly) b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Impugned Notices and/ or qua any subsequent demands in this regard against the Petitioner.Writ Tax No. 843 of 2019
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI quashing the Impugned Notices (Annexure No. 1) (colly).
b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Impugned Notices and/or qua any subsequent demands in this regard against the Petitioner.Writ Tax No. 449 of 2020
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI by quashing the Show Cause Notice dated 27.03.2012, Statement of Demand dated 01.11.2017, Statement of Demand dated 17.12.2018, Order In Original dated 29.03.2019, Order In Original dated 15.01.2019, the Order In Original dated 25.10.2019 and the Notice dated 31.12.2019 (Annexure No. 1 collectively).
b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Show Cause Notice dated 27.03.2012, Statement of Demand dated 01.11.2017, Statement of Demand dated 17.12.2018, Order In Original dated 29.03.2019, Order in Original dated 15.01.2019, the Order In Original dated 25.10.2019 and the Notice dated 31.12.2019 (Annexure No.1 collectively) and/ or qua any subsequent demands in this regard against the Petitioner.Writ Tax No. 609 of 2020
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI quashing the Impugned Notices (Annexure No.1) (colly).
b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Impugned Notices and/or qua any subsequent demands in this regard against the Petitioner.Writ Tax No. 318 of 2021
a. To issue an appropriate writ, order or direction in the nature of CERTIORARI quashing the Impugned Orders (Annexure No. 1) (colly).
b. To issue an appropriate writ, order or direction in the nature of MANDAMUS directing the Respondents not to take any coercive steps against the Petitioner qua the Impugned Orders and/or qua any subsequent demands in this regard against the Petitioner.
3. Since controversy involved in all these writ petitions are common on facts and law, therefore, with the consent of learned counsel for the parties, writ petition no. 728 of 2020 is taken as leading writ petition and facts thereof are being noted.
4. It would be appropriate to summarise the facts of the case as under:-
FACTS:-
(i) M/s Bhushan Steel Limited is a public limited company registered under the Companies Act. It was also registered under U.P Tax on Entry of Goods into Local Areas Act, 2007, the U.P. VAT Act, 2008 and Central Sales Tax Act, 1956.
(ii) It appears that M/s Bhushan Steel Ltd. incurred huge loan liabilities. Therefore, pursuant to the directions issued by the Reserve Bank of India, the Corporate Insolvency Resolution Process (for short "CIRP") with respect to Bhushan Steel Ltd., was initiated by the State Bank of India (S.B.I.) (a lender bank) which filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short "IBC") being Company Petition No.(IB)-201(PB)/2017 on 05.07.2017 before the National Company Law Tribunal (in short "NCLT"), i.e. Adjudicating Authority.
(iii) The aforesaid petition of the S.B.I. was admitted by the Adjudicating Authority on 26.07.2017 and an Interim Resolution Professional (in short "IRP") was appointed under Section 13 of the IBC to be incharge of the affairs and management of the aforesaid Bhushan Steel Ltd. in accordance with Section 17 of the IBC. A public announcement was made by the IRP in terms of Section 15 of the IBC inviting for claims by all the creditors of M/s Bhushan Steel Ltd. Thus, 26.07.2017 is the "Insolvency Commencement Date".
(iv) The resolution plans containing proposal for the "CIRP" of M/s Bhushan Steel Ltd. were invited by Resolution Professional (for short "RP") under Section 25(2)(h) of the IBC.
(v) On 27.10.2017, the Joint Commissioner (Corporate Circle) - II, Commercial Tax, Ghaziabad Zone II, Ghaziabad, Uttar Pradesh filed Form-B before the Resolution Professional (RP) along with a detailed list of tax dues of M/s Bhushan Steel Ltd. As per the aforesaid Form-B submitted by the Joint Commissioner, the stages of the tax dues amount and stages of litigation may be compiled as under:
Sl.No. Particulars Amount in Lacs
1.
Balance amount of recovery certificates 17,999.60 + Interest 2,179.81
2. Amount stayed in first appeal 2,103.25
3. Amount stayed in second appeal 7,559.14
4. Amount stayed by High Court in Writ Petition Nos.230, 231 and 232, all of 2017, relating to AY 2005-2006 (U.P. and Central), AY 2006-2007 (U.P. and Central) and AY 2007-2008 (U.P. and Central), 898.61
5. Amount stayed by Hon'ble Supreme Court in SLP (admitted tax of February, March and April, 2008, Rs.368.072 lacs not deposited) 2,242.94 Total= 32,983.35
(vi) On 03.02.2018, M/s Tata Steel Ltd. submitted its resolution plan and was selected as the highest compliant resolution applicant by the Committee of Creditors (CoC) constituted under the IBC. The resolution plan so submitted by M/s Tata Steel Ltd., was approved with addendum thereto on 20.03.2018. On 23.03.2018, the Resolution Professional filed an application for approval of the resolution plan before the Adjudicating Authority/ NCLT. On 15.05.2018, the Adjudicating Authority/ NCLT approved the resolution plan submitted by the Resolution Professional, making binding on all the creditors in terms of Section 31(1) of the IBC, with clarification/ observation that the relief and concession set-forth in Annexure-8 to the resolution application must abide by the directions issued in the preceding paragraphs. Thus, the application filed by the RP for accepting the resolution plan approved by the CoC and submitted by the resolution applicant, i.e. Tata Steel Ltd., was accepted with clarification and modification as mentioned by the Adjudicating Authority in the aforesaid order dated 15.05.2018. The operative portion of the order of the Adjudicating Authority/ NCLT dated 15.05.2018 is reproduced below:
"81. In view of the above we accept and approve the CoC approved resolution plan of HI Resolution Applicant-TSL. We also approve the appointment of monitoring agency from the date of the approval of the CoC approved resolution plan to function until the closing date i.e. the date on which the implementation of the steps set out in Annexure-5 of the CoC approved resolution plan would be completed. The monitoring agency shall have the same function, power and protection as conferred on the resolution professional under the Code and the CoC shall continue with its role and responsibility and have protection as set out in the Code including approving the matter as has been approved during the period prior to effective date.
82. In respect of the relief and concession as set forth in Annexure-8 it is not possible for us to issue any directions except to say that the monitoring agency alongwith the resolution applicant may make a claim before the authorities which shall be considered in accordance with law. Moreover, these reliefs and concession are also not condition precedent for the acceptance of resolution plan and would not be any impediment for us to accept the Resolution Plan.
83. As a sequel to the above discussion we pass following directions:-
(i) C.A. No. 244 (PB_/2018- The application filed by the Resolution Professional for accepting the resolution plan approved by the CoC submitted by Resolution Applicant-TSL, is accepted and it is clarified that the relief and concession set forth in Annexure-8 must abide by the directions issued in the preceding paras. The Monitoring Agency and the Resolution Applicant-TSL may file appropriate applications before the Public Authorities/Government Authorities and it is needless to say that their applications would be duly considered in accordance with law. We make it clear that we are not expressing any opinion on the claim concerning reliefs and concession nor any part of this order shall be understood in that spirit.
(ii) CA No. 186 (PB)/2018 filed by Larsen & Turbo Limited is dismissed with cost of Rs. 1/- lakh. The cost be deposited in the account of Corporate Debtor.
(iii) CA No. 217(PB)/2018 filed by Bhushan Employees is also dismissed with cost of Rs. 1/- lakh to be paid by Mr. Rahul Sengupta personally. The cost be deposited in the account of Cooperative Debtor.
(iv) The objection raised by the BEL are rejected and it is held that the claim made by BEL is wholly frivolous and cannot be sustained.
(v) CA No. 176(PB)/2018- The Ex-Management is directed to cooperate in all respects during the implementation of the resolution plan. Liberty is granted to the Monitoring Agency to apply for any further direction against the Ex-Management, its Directors or any other officers, if such a necessity arises.
All other application are also disposed of."
(vii) It appears that in some cases M/s Bhushan Steel lost before the Supreme court and some of the writ petitions were also dismissed and even subsequent to the aforesaid order of the Adjudicating Authority, certain tax liabilities were also crystallised by way of assessment orders which resulted in recovery proceedings against M/s Tata Steel BSL Ltd. (the name of the company changed w.e.f. 27.11.2018). M/s Tata Steel BSL Ltd. participated in the aforesaid assessment proceedings and the assessment orders were passed. The creation of demand and recovery of amount gave rise to the filing of the present set of writ petitions.
(viii) From the averments made in the writ petition, the counter affidavit as well the discussion made in the order of the Adjudicating Authority/ NCLT dated 15.05.2018, it appears that one of the major point on facts is Annexure-8 to the resolution application. Copy of the aforesaid Anenxure-8 has been filed by the petitioners in Volume 1A, along with a supplementary affidavit in Writ Tax No.1085 of 2018 annexing therewith copy of application bearing Company Application No.244 of 2018 filed by the Resolution Professional before the Adjudicating Authority. Annexure-8 of the aforesaid application is reproduced below:
Annexure 8:-
"Extracts of Sections 10.1 and 10.2 of the COC Approved Resolution Plan (Resolution Plan of H1 Resolution Applicant as amended and supplemented by the First Addendum and the Second Addendum) Capitalised terms used but not defined in this Annexure shall have the meaning ascribed to them in the COC Approved Resolution Plan.
10.1 Reliefs and Concessions sought by the Resolution Applicant:
Regulation 37(1) of the CIRP Regulations provides a resolution plan may provide for the measures required for implementing it, including but not limited to obtaining necessary approvals from the Central and State Governments and other authorities. Accordingly, the Resolution Applicant seeks the following reliefs and concessions from the Adjudicating Authority, for timely implementation of this Plan addressing the interest of all stakeholders. It is clarified that the reliefs and concessions sought below are to enable the Resolution Applicant to accelerate and facilitate the implementation of the Plan.
The Adjudicating Authority is humbly requested to kindly consider the following reliefs and concessions for the effective implementation of this Plan for the benefit of all stakeholders:
10.1.1 Licenses and approvals held by the Company, which expire prior to the Closing Date or within a period of 6 (six) months thereafter (including but not limited to those set out in Annexure 17, shall be renewed / extended by the relevant Governmental Authorities, and the Company shall be permitted to continue to operate its business and assets in the manner operated prior to submission of this Plan until the renewal / extension of such licenses and approvals. The relevant Governmental Authorities will provide a reasonable period of time after the Closing Date in order for the Resolution Applicant to: (i) assess the status of licenses and approvals required by the Company and to procure that the Company applies for the same; and (ii) regularize any non-compliances under the Applicable Law (including non-registration, inadequate / non-stamping of documents as required under Applicable Law) existing prior to the Closing Date.
10.1.2 The relevant Governmental Authorities shall not initiate any investigations actions or proceedings in relation to any non-compliance with Applicable Law by the Company during the period prior to the Closing Date. Neither shall the Resolution Applicant, nor the Company, nor their respective directors, officers and employees appointed on and as of the Closing Date be liable for any violations, liabilities, penalties or fines with respect to or pursuant to the Company not having in place the requisite licenses and approvals required to undertake its business as per Applicable Law, or any non-compliances of applicable Law by the Company. Further, the relevant Governmental Authorities will provide a reasonable period of time after the Closing Date, for the Resolution Applicant to assess the status of any non-compliances under the Applicable Law (including with respect to applicable environmental laws, directions or orders by the Ministry of Environment and Forest, permits, clearances and forest related clearances) and to procure that the Company regularizes such non-compliances under the Applicable Law existing prior to the Closing Date.
10.1.3 Under Section 115JB of the Income-tax Act, 1961, assessee company for which a rehabilitation scheme was approved or reference was made under the provisions of the erstwhile Sick Industrial Companies (Special Provisions), Act, 1985 was not subject to minimum alternate tax until the net worth becomes positive. Accordingly, a similar benefit ought to be extended to a resolution plan approved in accordance with the IBC since the IBC supersedes all other Applicable Law and deals with the same subject matter as the erstwhile Sick Industrial Companies (Special Provisions), Act, 1985. In light of this, The Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India (hereinafter referred to as "CBDT/DOR") shall: (i) exempt income / gain / profits, if any, arising as a result of giving effect to the Plan from being subjected to minimum alternate tax in the hands of Company Income-tax Act, 1961; (ii) exempt income / gain / profit, if any, arising as a result giving effect to the plan from being subjected to tax in the hands of the Company under the provisions of Income-tax Act, 1961; (iii) grant an exemption to receive all income without deduction of any Tax under the provisions of Chapter XVII-B of the Income-tax Act, 1961 for a period of 10 (ten) years from the Closing Date; and (iv) waive all Liabilities in respect of Taxes (including interest and penalty) arising in respect of periods up to the Closing Date, including such Liabilities for period up to the Closing Date that may crystallize subsequent to the Closing Date.
10.1.4 The CBDT/DOR shall grant exemption / waiver from: (a) applicability of section 281 of the Income Tax Act, 1961 including obtaining no-objection certificate from income tax authorities in respect of all the pending proceedings and dues (including interest and penalty) of the Company arising for periods up to the Closing Date (including such proceedings and dues for periods prior to the Closing Date that may crystallize subsequent to the Closing Date). Further, CBDT/ DOR shall restrict/ restrain from treating any transactions contemplated in this Plan as being void or non-compliant with any provisions of the Income- Tax Act, 1961; and (b) all Tax Liabilities (including interest and penally) and tax proceedings arising in respect of periods up to the Closing Date, including such liabilities/ proceedings for periods up to the Closing Date that may crystallize subsequent to the Closing Date in respect of on-going or potential income tax litigations at all levels, including but not limited to for the following issues:
(i) Disallowance of capital subsidy received from the State Government by way of exemption/reduction of Sales Tax;
(ii) Disallowance of bogus expenses; and
(iii) Disallowance of bogus purchase of Zinc.
10.1.5 SEBI shall exempt compliance with the provisions of Regulation 37 of the listing Regulations and the SEBI circular dated March 10, 2017 on ''Schemes of arrangement by Listed Entities and Relaxation under sub-rule (7) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957', in respect of the schemes of arrangement and also permit a scheme of arrangement involving the Company and the Resolution Applicant during the period that the Resolution Applicant holds in excess of 75% of the paid up equity share capital of the Company, 10.1.6 The Ministry of Corporate Affairs and / or the Adjudicating Authority shall exempt compliance with the provisions of Chapter XV of the Companies Act, 2013 (and the corresponding rules issued under the Companies Act, 2013). In respect of schemes of arrangement contemplated under the Plan.
10.1.7 The Department of Registration and Stamps of the relevant states (including Odisha, Maharashtra and Uttar Pradesh) and the Ministry of Corporate Affairs shall exempt the Resolution Applicant and the Company. From the levy of stamp duty and fees applicable in relation to this Plan and its implementation.
10.1.8 The Competition Commission of India: (i) shall permit the Resolution Applicant to make payment of the CIRP Costs and liquidation value due to Operational Creditors within the prescribed period under the IBC and the CIRP regulations: and
(ii) shall not consider such payments to be in breach of the Competition Act, 2002.
10.1.9 The concerned state revenue/ stamp authorities are requested to waive penalties for non-registration and inadequate/ non-stamping of the documents executed by the Company, including but not limited to the documents set out in Annexure 18.
10.1.10 Waiver in respect of the requirement of obtaining consent and applicable transfer charges on account of implementation of this Plan (including but not prior approval for change of control, change in constitution, modification of charter documents etc.), and waiver of termination related provisions, in respect of the following premises occupied by the Company from the relevant Governmental Authorities (as indicated below):
(i) Properties located in Sahibabad which are granted on lease by UPSIDC to the Company under the lease deeds set out at serial numbers 19 to 38 in Annexure 19;
(ii) Plot no. 104/3 admeasuring 3.39 acres situated at Hosur, Tamil Nadu which is granted on lease by SIPCOT to the Company under the lease deed dated August 7, 2012 bearing document no. 10413, SIPCOT; and
(iii) properties granted located in Odisha which are granted on lease by IDCO to the Company under the lease deeds set out at serial numbers 1 to 18 in Annexure 19.
10.1.11 The Ministry of Mines shall waive the requirement of obtaining its approval in relation to the iron ore mine awarded to the Company at Kalamang West (Northern Part), over an area of 92.875 hectares in Keonjhar and Sundargarh districts of Odisha, to the extent required, for change of control pursuant to the implementation of this plan.
10.1.12 Notwithstanding the terms of the relevant agreements with the suppliers / customers of the Company, as the case may be, the Adjudicating Authority shall direct that prior approval of the counterparties shall not be required to be separately obtained for change in control/ constitution of the Company pursuant to the terms of this plan and the counterparties shall not terminate or take any adverse actions against the Company on account of such change in control / constitution of the Company. The Adjudicating Authority shall also direct the customers / suppliers to waive all objections or liabilities of the Company, arising out of non-compliance by the Company for obtaining prior consent for appointment of the Resolution Professional and in respect of the implementation of this Plan. An indicative list of agreements of the Company with such suppliers /customers is set out in Annexure 22.
10.1.13 The Adjudicating Authority shall direct that the Company shall not be liable for any non-compliance, default, breach, etc., during the period prior to the Closing Date, in relation to: (i) any contractual arrangements of the Company with counter-parties, including Governmental Authorities (such as IDCO, UPSIDC, SIPCOT, etc.); and (ii) failure to take or obtain any approvals, consents or permits relating to use of land for premises for industrial purposes.
10.1.14 The Adjudicating Authority shall direct that all proceedings, investigations, inquiries, etc. made, commenced or initiated by any person (including SEBI) against the Company in relation to the period prior to the Closing Date shall irrevocably and unconditionally stand abated, withdrawn, settled and/or extinguished, and the company shall have no Liability in this regard.
10.1.15 The Adjudicating Authority shall direct relevant Governmental Authorities to: (i) refund all duties / taxes paid under protest by the Company in respect of Tax related litigations; and (ii) continue with Tax credits and State incentives available to the Company.
10.1.16 The Adjudicating Authority shall direct termination of all agreements / arrangements between the Company and the persons classified as related parties (in accordance with the Applicable Laws), including without limitation the agreements / arrangements set out in Annexure 15 of this plan, with no liability to the Company. All claims of the Company against such related parties and Liabilities of such related parties towards the Company shall remain outstanding, due and payable in accordance with their terms.
10.1.17 The Adjudicating Authority shall direct: (A) termination of the following onerous agreements: (i) the Memorandum of Agreement for Lease dated May 1, 2015 entered into between the Company and Vistrat Real Estates Private limited in respect of the Company's Registered and Corporate Office Premises; and (ii) the Bhushan Energy Power Purchase Agreements which termination shall take effect from the later of (I) three months from the Closing Date; or (II) the completion of the corporate insolvency resolution process of Bhushan Energy Limited; and such termination, shall in each case, be without prejudice to the rights of the Company and without any liability towards any claims, demands or liabilities arising out or in relation to the aforesaid agreements (including but not limited to with regard to any previous breaches). Further, until the termination of the Bhushan Energy Power Purchase Agreements, any power if purchased by the Company from Bhushan Energy Limited shall be at the rate prescribed by the expert appointed by the Resolution Professional and provided as a part of the Data Room. Other than for such power purchase, Bhushan Energy Limited shall not have any other claims against the Company, and (B) that all claims of the Company against the aforementioned counterparties shall remain outstanding, due and payable in accordance with the terms of the aforesaid agreements. Upon termination of the aforementioned Agreements, the Resolution Applicant and the Company may enter into discussions with Bhushan Energy Limited and Vistrat Real Estates Private Limited to enter into fresh agreements on mutually agreeable terms on an arms length basis.
10.1.18 The Adjudicating Authority to permit supply from Tata Steel's captive mines to the Company to improve business viability and operations of the Company.
10.1.19 The Directorate of Industries shall waive the requirement of obtaining an approval for change in ownership/ constitution / management of the Company and shall continue to grant state and other incentives.
10.1.20 The relevant Governmental Authority in relation to Tax shall waive any Tax or interest and shall not initiate any penal proceedings in case of non-fulfilment of any obligations of the Company in relation to which benefit has been claimed by the Company prior to the effective Date, including in relation to non-fulfilment of export obligation in respect of customs incentive including but not limited to imports under Export Promotion Capital Goods licenses, non-submission of forms for concessional duty rates, non fulfilment of conditions relating to grant of state incentives etc. 10.1.21 The Adjudicating Authority shall direct that: (A) pending the occurrence of the Closing Date, no Financial Creditor shall be entitled to take, initiate or continue any steps or proceedings against the Company or its assets (whether by way of demand, legal proceedings, alternative determination process (including arbitration or an expert determination process), the levying of distress, execution of judgment or otherwise) in any jurisdiction whatsoever for the purpose of obtaining payment of any Liability, or for the purpose of placing the Company into liquidation or any analogous proceedings; and (B) pending the occurrence of the Closing Date, no Operational Creditor shall be entitled to take, initiate or continue any steps or proceedings against the Company or its assets (whether by way of demand, legal proceedings, alternative determination process (including arbitration or an expert determination process), the levying of distress, execution of judgment or otherwise) in any jurisdiction whatsoever for the purpose of obtaining payment of any Liability, or for the purpose of placing the Company into liquidation or any analogous proceedings.
10.1.22 The Adjudicating Authority shall direct the Ministry of Corporate Affairs to waive the requirements under Section 140 of the Companies Act, 2013 in respect of removal of the existing auditors of the Company.
10.1.23 The Adjudicating Authority shall direct that:
(a) there shall be no interruption or stoppage in the supply of ''essential goods and services' (as defined under Regulation 32 of the CIRP Regulations) to the Company until the Closing Date;
(b) until such time that the redemption process is complete on the Closing Date, the RPS Holders shall not have any rights with respect to such redeemable preference shares, including the right to receive dividend, conversion rights, voting rights, rights covering operation and management of the Company, whether in law, contractually or otherwise;
(c) Any person (including the Existing Promoter Group) that has provided any form of security for and on behalf of, and / or in order to secure any obligations of the Company (whether by way of hypothecation, pledge, mortgage, guarantee or otherwise), shall not be entitled to exercise any 33 subrogation rights, directly or indirectly, in respect of such arrangement, and they shall have no rights or claims against the Company. All obligation, liabilities, claims or proceedings against the Company in this regard shall be deemed to be owed to the relevant security provider and due as of the insolvency Commencement Date, and shall immediately, irrevocably and unconditionally stand extinguished, waived, withdrawn and abated on and from the Closing Date. The Existing Promoter Group and any other security provider shall have deemed to have waived the right of subrogation against the Company and the Company shall not be liable in respect of any such claims, demands or proceedings.
10.1.24 The Company shall incur no Liabilities, directly or indirectly (including but not limited to debt servicing Liabilities), other than to the extent specified in this Plan, for the period from the Insolvency Commencement Date until the Closing Date, further, the Company shall not incur any Liabilities post the Closing Date which relate to a period prior to the Closing Date, other than pursuant to or as per the Plan.
10.1.25 The Reserve Bank of India shall permit repayment or settlement of the ECBs as well as ECA lenders, as the case may be, by the Company, including novation of any ECB/ECA facility from the Financial Creditors in favour of the Resolution Applicant as per the terms of this Plan.
10.1.26 SEBI shall:
(a) provide dispensation from Regulation 31A(7)(b) of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 in respect of shareholding of the Existing Promoter Group post re-classification of the Existing Promoter Group to public shareholder category to be counted towards satisfaction of the minimum public shareholding requirement;
(b) exempt compliance, for a period of 3 (three) years from the Closing Date, with provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Rule 19A of the Securities Contracts (Regulation) Rules, 1957 and the provisions of the SEBI Circular No. CFD/CMD/CIR/P/2017/115 dated October 15, 2017, which require every listed company to maintain a minimum public shareholding of at least 25% of the share capital of the Company. In order to improve the capital structure of the Company and fund it with adequate equity, the shareholding of the resolution Applicant may exceed 75%. SEBI to also grant exemptions for compliance with the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 in respect of the pricing requirements and shareholder approval requirements;
(c) exempt compliance, for a period of 3 (three) years from the Closing Date, with provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009 (as amended from time to time); and
(d) allow merger of the Company with the Resolution Applicant during the time that the Resolution Applicant's shareholding in the Company is in excess of 75%.
Further, in respect of the reliefs stated in (a) to (d) above, if SEBI issues any circulars, notifications, amendments, etc. relaxing any provision of the aforementioned SEBI regulations post the Closing Date, then the benefit of such relaxation should also be available to the Company and the Resolution Applicant.
10.1.27 The Ministry of Corporate Affairs shall relax and waive the procedural requirements under the Companies Act in respect of change in the registered price of the Company either to another premises within New Delhi or any other location outside New Delhi.
10.1.28 The Resolution Applicant be granted such reliefs and concessions as granted by the Adjudicating Authority from time to time in favour of resolution applicants for corporate insolvency resolution processes of other corporate (debtors as maybe beneficial to the Resolution Applicant and/or the Company for successful corporate insolvency resolution of the Company and which shall not adversely impact the financial proposal under this Plan for the Financial Creditors.
10.1.29 The Adjudicating Authority shall approve the terms set out in Section 8.7.3(i) and Section 8.7.5 of this plan respectively.
10.1.30 The Adjudicating Authority shall approve the continuation of the Resolution professional along with certain representatives of Deloitte Touche Tohmatsu India LLP as the Monitoring Agency for the period from the Effective Date until the Closing Date in accordance with the terms of this Plan. The Monitoring Agency shall have the same functions, powers and protections as ascribed to the Resolution Professional under the Code. The CoC shall continue with its roles and responsibilities, and have protections, as set out in the IBC including approving the matters as are being approved during the period prior to the effective Date.
10.1.31 The obligation of the Guarantors shall not be extinguished or waived towards the Financial Creditors for such Personal Guarantee Amount and the rights of subrogation of the Guarantors shall stand waived.
The secured Financial Creditors shall be entitled to take all steps and remedies and recourse available to them under Applicable Laws for the invocation of the Personal Guarantees and the recovery of the Personal Guarantee Amount from the Guarantors provided that the Company and/or the Resolution Applicant shall not be made a party to any such recovery proceedings against the Guarantors.
10.2 It is clarified that the implementation of the plan is not conditional upon fulfilment of the terms in the manner set out in Section 10.
(ix) The aforesaid resolution plan defines certain words. Definitions of the words given in the said resolution which are relevant for the purposes of the present case are "Closing Date", "Contingent Liabilities", "Government Authority", "Insolvency Commencement Date" and "Taxes", are reproduced below:
Term Meaning Closing Date Meaning ascribed to the term in Section 4.2.1 of this Plan Contingent Liabilities Meaning ascribed to the term in Section 8.2.5 of this Plan Government Authority Any nation or government or any province, state or any other political subdivision thereof; any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of India as applicable, or any political subdivision thereof or any other applicable jurisdiction, any court, tribunal or arbitrator or other adjudicatory authority, and any securities exchange or body or authority regulating such securities exchange.
Insolvency Commencement Date July 26, 2017 Taxes Any tax on income, capital stock, profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, octroi, service taxes, severance, environmental, real property, movable property, ad valorem, occupancy, license, occupation, employment, payroll, disability, workers' compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto), and customs duties
(x) The claims of statutory creditors have been provided in Part-C of Annexure-8 of the resolution plan contains the details of the total Outstanding Operational Debt (excluding claims of the workmen and employees) as stated in Part-A, "the verified and admitted amounts payable to the statutory creditors are set out in the table below".
(xi) Annexure-9 to the aforesaid resolution plan contains the claims of operational creditors that are under verification which does not include tax dues except the item No.375.
(xii) Annexure-10 to the aforesaid resolution plan contains particulars of claims of operational creditors that are subjudice which includes various writ petition filed before the Orrisa High Court and Delhi High Court as well several cases pending before different subordinate courts or authorities but it does not include any of the writ petitions filed before this court or SLP filed before the Hon'ble Supreme Court. At the end of the Annexure-10, a note has been added that "in addition to the list above, the subjudice claims listed in Annexure-12 are also deemed to be incorporated herein".
(xiii) Annexure-11 contains claims of operation creditor that are contingent which are reproduced below:
"ANNEXURE 11:
CLAIMS OF OPERATIONAL CREDITORS THAT ARE CONTINGENT Part A | Contingent Liabilities as set out under the Annual Report for FY 16-17 Sr. No. Nature of Contingent Liability Amount as of March 31, 2017 (in ₹ lakh)
1. Sales Tax 120,953.36
2. Excise Duty / Custom Duty / Service Tax 57,105.35
3. Entry Tax 79,755.57
4. Income Tax 51,188.67
5. Bills discounted
6. Others 11,688.34 7 Claims / Disputed bills not acknowledged 22,562.00 8 Water conservation fund 14,333.80 Total 357,587.09 Part B | Potential liabilities Any outstanding guarantees issued by the Financial Creditors, counter guarantee by the Company in connection with the letter(s) of credit"
(xiv) Annexure-12 as referred in Annexure-10 aforesaid, contains particulars "applicable laws and proceeding against the company". Serial Nos.52, 53, 54, 55, 56, 57 and 58 of it reads as under:
"52. The Central Sales Tax Act, 1956
53.Relevant VAT and Trade Tax laws of respective states
54.Relevant Entry Tax laws of respective states
55. The Integrated Goods and Services Tax Act, 2017
56. The Central Goods and Services Tax Act, 2017
57. Goods and Services Tax laws of respective States and Union Territories
58. GST (Compensation to States) Act, 2017"
5. The facts as mentioned above have not been disputed by learned counsels for the parties. Thus, the facts aforenoted are undisputed facts.
6. It appears that during the course of assessment proceeding for the assessment year 2016-17 in the matter of M/s Bhushan Limited, a show cause notice was issued to the assessee. On behalf of the assessee, the petitioner i.e. M/s Tata Steel B.S.L. Limited appeared in the assessment proceedings. Petitioner submitted a reply dated 16.03.2020. In paragraph no.1 of the reply dated 16.03.2020 submitted before the respondent no.2, the petitioner has stated as under:-
"Prior to adverting to the response to the notice, it is pertinent to mention herein that the name of M/s Bhushan Steel Limited has been changed to M/s Tata Steel BSL Limited (herein after called "the Noticee") from November, 27, 2018. Your good office is thus requested that all and any further communication/correspondence may be addresses to Tata Steel BSL Limited".
7. Petitioner submitted a detailed reply and participated in the assessment proceedings. Thereafter, Assessing Authority passed the impugned assessment order dated 29.10.2020 relating to Assessment Year 2016-17, under the U.P. VAT Act, Central Sales Tax Act and the U.P. Tax on Entry of Goods into Local Areas Act, 2007. The aforesaid Assessment Orders were accompanied by demand notices issued by the Assessing Authority in terms of provisions of the Act, 2008 and Rules framed thereunder.
8. Aggrieved with the Assessment Orders, the petitioners have filed the present writ petitions.
9. Subsequently, the petitioners moved a civil misc. amendment application no. 5 of 2022 stating therein that during the pendency of the present writ petition, the NCLT Mumbai, vide order dated 29.10.2021 ("Amalgamation Order") approved and sanctioned the Scheme of Amalgamation. Subsequently, each of the Companies filed the certified true copy of the Amalgamation Order along with Form INC-28 with the respective jurisdictional Registrar of Companies on 11.11.2021. In terms of Clause 3.1 read with Clause 1.9 para III of Part I of the Scheme of Amalgamation, the captioned Scheme of Amalgamation became operative from 11.11.2021 ("Effective Date") and accordingly TSBSL and Bamnipal Steel Limited stand amalgamated into with TSL from the effective date. Accordingly the amendment application was allowed and the cause title of the petitioner was permitted by order dated 213.3.2022 to be amended as M/s Tata Steel Limited as per description given in paragraph 9 of the affidavit accompanying the amendment application.
10. Learned Senior Advocates for the petitioners have made several submissions which have been noted in the order dated 18.12.2020, 18.8.2021, 27.8.2021, 3.9.2021, 6.9.2021, 7.9.2021, 18.9.2021, 9.9.2021, 30.9.2021 and 28.3.2022.
11. Shri Rakesh Dwivedi, learned Senior Advocate made exhaustive submissions explaining the various provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC, 2016) including the preamble, various definition clauses in section 3 (4),(6), (8), (10), (11), (12), (30), Section 4, Section 5, Section 6, Section 13, Section 14, Section 17, Section 21, Section 30, Section 31, Section 32, Section 53, Section 60, Section 61, Section 62, Section 63 and Section 238 of the IBC, 2016 and relied upon the judgment of the Hon'ble Supreme Court in the case of Ghanshyam Mishra and Sons Private Limited through the Authorized Signatory Vs. Edelweiss Asset Reconstruction Company Limited Through The Director and others 2021 SCC OnLine SC 313 (Paragraphs 65, 67, 73, 77, 82, 86, 87, 91, 95, 121, 124, 126, 127, 130, 131, 132, 135, 141 and 149) and submitted that in view of the provisions of the IBC, 2016 and the law laid down by the Supreme Court in the case of Ghanshyam Mishra (supra), the writ petitions deserve to be allowed. It is further submitted that neither there is any allegation of unjust enrichment in the impugned assessment order nor any material has been brought on record by the respondents to establish that there was any unjust enrichment and on account of that the demands created under the impugned assessment orders are liable to be recovered. He further submits that unjust enrichment would not apply once the resolution plan has been sanctioned. He submitted that if the State respondents were aggrieved with the order of NCLT, they could have challenged it in appeal before Appellate Tribunal but they cannot be allowed to raise any objection against the sanctioned Scheme in writ petition filed by the petitioners herein praying to quash the impugned assessment orders and notices.
12. Shri Manish Goyal, learned Addl. Advocate General has vehemently opposed the submissions advanced by learned counsel for the petitioners. His submissions have been noted by us in our earlier orders. He additionally submitted that the petitioners have passed on the burden of the tax determined under the impugned orders/indicated in the notices and, therefore, the case of the petitioners is hit by principles of unjust enrichment. He extensively argued on the question of unjust enrichment which have been replied by Shri Rakesh Dwivedi, learned Senior Advocate for the petitioners.
13 We have carefully considered the submissions of the learned counsel for the parties and perused the records.
14. It is undisputed that a resolution plan was prepared after following due procedure as provided under the IBC, 2016 which was submitted to the Committee of Creditors on 3.2.20218 and was approved by the Committee of Creditors under the IBC, 2016 on 23.3.2018. The NCLT approved the resolution plan with some modification on 15.5.2018. The demand created under the impugned assessment orders which is part of the resolution plan sanctioned by NCLT, therefore in view of the law settled by the Hon'ble Supreme Court in the case of Ghanshyam Mishra (supra), it cannot be recovered from the petitioners.
15. In the case of Ghanshyam Mishra (supra) vide paragraphs 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 76, 77, 82, 86, 87, 88, 89, 90, 91, 94, 95, 130 and 132 held as under:
"61. It could thus be seen that one of the dominant objects of the I&B Code is to see to it that an attempt has to be made to revive the corporate debtor and make it a running concern. For that, a resolution applicant has to prepare a resolution plan on the basis of the information memorandum. The information memorandum, which is required to be prepared in accordance with Section 29 of the I&B Code along with Regulation 36 of the Regulations, is required to contain various details, which have been gathered by RP after receipt of various claims in response to the statutorily mandated public notice. The resolution plan is required to provide for the payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the resolution plan; the implementation and supervision of the resolution plan. It is only after the adjudicating authority satisfies itself that the plan as approved by CoC with the requisite voting share of financial creditors meets the requirement as referred to in sub-section (2) of Section 30, grants its approval to it. It is only thereafter that the said plan is binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The moratorium order passed by the adjudicating authority under Section 14 shall cease to operate once the adjudicating authority approves the resolution plan. The scheme of the I&B Code therefore is, to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency to continue the business of the corporate debtor as a going concern until a resolution plan is drawn up. Once the resolution plan is approved, the management is handed over under the plan to the successful applicant so that the corporate debtor is able to pay back its debts and get back on its feet.
62. This Court recently in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd.[Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401 : 2021 SCC OnLine SC 204] has, in detail, considered the provisions of Sections 30 and 31 of the I&B Code, the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 and the judgments of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] and Maharashtra Seamless Ltd.v. Padmanabhan Venkatesh [Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799] and observed thus : (Kalpraj Dharamshi case [Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401 : 2021 SCC OnLine SC 204] , SCC paras 153-171) "153. It is thus clear, that the Committee was of the view, that for deciding key economic question in the bankruptcy process, the only one correct forum for evaluating such possibilities, and making a decision was, a creditors committee, wherein all financial creditors have votes in proportion to the magnitude of debt that they hold. The BLRC has observed, that laws in India in the past have brought arms of the Government (legislature, executive or judiciary) into the question of bankruptcy process. This has been strictly avoided by the Committee and it has been provided, that the decision with regard to appropriate disposition of a defaulting firm, which is a business decision, should only be made by the creditors. It has been observed, that the evaluation of proposals to keep the entity as a going concern, including decisions about the sale of business or units, restructuring of debt, etc. are required to be taken by the Committee of the financial creditors. It has been provided, that the choice of the solution to keep the entity as a going concern will be voted upon by CoC and there are no constraints on the proposals that the resolution professional can present to CoC.
154. The requirements, that the resolution professional needs to confirm to the adjudicator, are:
154.1. That the solution must explicitly require the repayment of any interim finance and costs of the insolvency resolution process will be paid in priority to other payments.
154.2. That the plan must explicitly include payment to all creditors not on the creditors committee, within a reasonable period after the solution is implemented; and lastly 154.3. The plan should comply with existing laws governing the actions of the entity while implementing the solutions.
155. The Committee also expressed the opinion, that there should be freedom permitted to the overall market, to propose solutions on keeping the entity as a going concern. The Committee opined, that the details as to how the insolvency is to be resolved or as to how the entity is to be revived, or the debt is to be restructured will not be provided in the I&B Code but such a decision will come from the deliberations of CoC in response to the solutions proposed by the market.
156. This Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] observed thus : (SCC pp. 173-74, para 32) ''32. Having heard the learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by CoC of the respective corporate debtor, namely, KS&PIPL and IIL, by a vote of less than seventy-five per cent of voting share of the financial creditors; and about the correctness of the view [Kamineni Steel & Power (India) (P) Ltd. v. Indian Bank, 2018 SCC OnLine NCLAT 654] taken by Nclatthat the percentage of voting share of the financial creditors specified in Section 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor [other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be] which, according to the resolution applicant and the stakeholders supporting the resolution plan, may be relevant?'
157. After considering the judgment of this Court in ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] and the relevant provisions of the I&B Code, this Court further observed in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] thus : (K. Sashidhar case [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , SCC p. 183, para 52) ''52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable.'
158. This Court has held, that it is not open to the adjudicating authority or appellate authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code. It has further been held, that the commercial wisdom of CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. This Court thus, in unequivocal terms, held, that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. It has been held, that the opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. It has been held, that the legislature has consciously not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority and that the decision of CoC's "commercial wisdom" is made non-justiciable.
159. This Court in Essar Steel (India) Ltd. (CoC) [Essar Steel (India) Ltd. (CoC)v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] after referring to the judgment of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] observed thus : (Essar Steel case [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , SCC p. 584, para 64) ''64. Thus, what is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.'
160. This Court held [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , that what is left to the majority decision of CoC is the "feasibility and viability" of a resolution plan, which is required to take into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. It has further been held, that CoC is entitled to suggest a modification to the prospective resolution applicant, so that carrying on the business of the corporate debtor does not become impossible, which suggestion may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, etc. It has been held, that what is important is, the commercial wisdom of the majority of creditors, which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.
161. The view taken in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] and Essar Steel (India) Ltd. (CoC)[Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] has been reiterated by another three-Judge Bench of this Court in Maharashtra Seamless Ltd. [Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799]
162. In all the aforesaid three judgments [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , [K. Sashidharv. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] ,[Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799] of this Court, the scope of jurisdiction of the adjudicating authority (NCLT) and the appellate authority (Nclat) has also been elaborately considered. It will be relevant to refer to para 55 of the judgment in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , which reads thus : (SCC pp. 185-86) ''55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.'
163. It has been held, that in an enquiry under Section 31, the limited enquiry that the adjudicating authority is permitted is, as to whether the resolution plan provides:
163.1. The payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor.
163.2. The repayment of the debts of operational creditors in prescribed manner.
163.3. The management of the affairs of the corporate debtor.
163.4. The implementation and supervision of the resolution plan.
163.5. The plan does not contravene any of the provisions of the law for the time being in force.
163.6. Conforms to such other requirements as may be specified by the Board.
164. It will be further relevant to refer to the following observations of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] : (SCC pp. 186-87, para 57) ''57. ... Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or Nclat as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers "by the resolution professional" during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds--be it under Section 30(2) or under Section 61(3) of the I&B Code--are regarding testing the validity of the "approved" resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision.'
165. It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or Nclat, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same.
166. The position is clarified by the following observations in para 59 of the judgment in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , which reads thus : (SCC p. 187) ''59. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (Nclat) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors.'
167. This Court in Essar Steel (India) Ltd. (CoC) [Essar Steel (India) Ltd. (CoC)v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] after reproducing certain paragraphs in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] observed thus : (Essar Steel case [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , SCC p. 589, para 67) ''67. ... Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the adjudicating authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] .'
168. It can thus be seen, that this Court has clarified, that the limited judicial review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC.
169. In Maharashtra Seamless Ltd. [Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799] , NCLT had approved [United Seamless Tubulaar (P) Ltd. Resolution Professional v. Indian Bank, 2019 SCC OnLine NCLT 713] the plan of appellant therein with regard to CIRP of United Seamless Tubulaar (P) Ltd. In appeal, Nclat directed [Padmanabhan Venkatesh v. V. Venkatachalam, 2019 SCC OnLine NCLAT 285] , that the appellant therein should increase upfront payment to Rs 597.54 crores to the "financial creditors", "operational creditors" and other creditors by paying an additional amount of Rs 120.54 crores. Nclat further directed, that in the event the "resolution applicant" failed to undertake the payment of additional amount of Rs 120.54 crores in addition to Rs 477 crores and deposit the said amount in escrow account within 30 days, the order of approval of the "resolution plan" was to be treated to be set aside. While allowing the appeal and setting aside the directions of Nclat, this Court observed thus : (Maharashtra Seamless case [Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799] , SCC p. 487, para 30) ''30. The appellate authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the adjudicating authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an adjudicating authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront.'
170. This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appellate authority ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront.
171. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code."
(emphasis in original)
63. Another three-Judge Bench of this Court in Karad Urban Coop. Bank Ltd. v. Swwapnil Bhingardevay [Karad Urban Coop. Bank Ltd. v. Swwapnil Bhingardevay, (2020) 9 SCC 729 : (2021) 2 SCC (Civ) 797] , taking a similar view, has observed thus : (SCC pp. 735-36, para 14) "14. The principles laid down in the aforesaid decisions, make one thing very clear. If all the factors that need to be taken into account for determining whether or not the corporate debtor can be kept running as a going concern have been placed before the Committee of Creditors and CoC has taken a conscious decision to approve the resolution plan, then the adjudicating authority will have to switch over to the hands off mode. It is not the case of the corporate debtor or its promoter/Director or anyone else that some of the factors which are crucial for taking a decision regarding the viability and feasibility, were not placed before CoC or the resolution professional."
64. It could thus be seen, that the legislature has given paramount importance to the commercial wisdom of CoC and the scope of judicial review by adjudicating authority is limited to the extent provided under Section 31 of the I&B Code and of the appellate authority is limited to the extent provided under sub-section (3) of Section 61 of the I&B Code, is no more res integra.
65. Bare reading of Section 31 of the I&B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern.
66. The resolution plan submitted by the successful resolution applicant is required to contain various provisions viz. provision for payment of insolvency resolution process costs, provision for payment of debts of operational creditors, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the corporate debtor under Section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, which also shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1 to clause (b) of sub-section (2) of Section 30 of the I&B Code clarifies for the removal of doubts that a distribution in accordance with the provisions of the said clause shall be fair and equitable to such creditors. The resolution plan is also required to provide for the management of the affairs of the corporate debtor after approval of the resolution plan and also the implementation and supervision of the resolution plan. Clause (e) of sub-section (2) of Section 30 of the I&B Code also casts a duty on RP to examine that the resolution plan does not contravene any of the provisions of the law for the time being in force.
67. Perusal of Section 29 of the I&B Code read with Regulation 36 of the Regulations would reveal that it requires RP to prepare an information memorandum containing various details of the corporate debtor so that the resolution applicant submitting a plan is aware of the assets and liabilities of the corporate debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by the Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the corporate debtor towards them are required to be contained in the information memorandum.
68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is that he should start with fresh slate on the basis of the resolution plan approved.
69. This aspect has been aptly explained by this Court in Essar Steel (India) Ltd. (CoC) [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] : (SCC p. 616, para 107) "107. For the same reason, the impugned Nclat judgment in Standard Chartered Bank v. Satish Kumar Gupta [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the adjudicating authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, Nclat judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] must also be set aside on this count."
70. In view of this legal position, we could have very well stopped here and held that the observation made by Nclat in the appeal filed by EARC to the effect that EARC was entitled to take recourse to such remedies as are available to it in law, is impermissible in law.
71. As held by this Court in CIT v. Monnet Ispat & Energy Ltd. [CIT v. Monnet Ispat & Energy Ltd., (2018) 18 SCC 786 : (2019) 3 SCC (Civ) 252] , in view of the provisions of Section 238 of the I&B Code, the provisions thereof will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being in force or any instrument having effect by virtue of any such law. As such, the observations made by Nclat to the aforesaid effect, if permitted to remain, would frustrate the very purpose for which the I&B Code is enacted.
72. However, in civil appeal arising out of Special Leave Petition (Civil) No. 11232 of 2020, Writ Petition (Civil) No. 1177 of 2020 and civil appeals arising out of Special Leave Petitions (Civil) Nos. 7147-50 of 2020, the issue with regard to the statutory claims of the State Government and the Central Government in respect of the period prior to the approval of resolution plan by NCLT, will have to be considered.
73. Vide Section 7 of Act 26 of 2019 [vide S.O. 2953(E), dated 16-8-2019 with effect from 16-8-2019], the following words have been inserted in Section 31 of the I&B Code:
"including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,".
76. To answer the said question, we will have to consider, as to whether the said amendment is clarificatory/declaratory in nature or a substantive one. If it is held that it is declaratory or clarificatory in nature, it will have to be held that such an amendment is retrospective in nature and exists on the statute book since inception. However, if the answer is otherwise, the amendment will have to be held to be prospective in nature, having force from the date on which the amendment is effected in the statute.
77. It will be relevant to refer to the "Statement of Objects and Reasons" (hereafter referred to as "SOR") of the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, which read thus:
"Statement of Objects and Reasons.--The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order or priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India.
2.The Preamble to the Code lays down the objects of the Code to include "the insolvency resolution" in a time-bound manner for maximisation of value of assets in order to balance the interests of all the stakeholders. Concerns have been raised that in some cases extensive litigation is causing undue delays, which may hamper the value maximisation. There is a need to ensure that all creditors are treated fairly, without unduly burdening the adjudicating authority whose role is to ensure that the resolution plan complies with the provisions of the Code. Various stakeholders have suggested that if the creditors were treated on an equal footing, when they have different pre-insolvency entitlements, it would adversely impact the cost and availability of credit. Further, views have also been obtained so as to bring clarity on the voting pattern of financial creditors represented by the authorised representative.
3. In view of the aforesaid difficulties and in order to fill the critical gaps in the corporate insolvency framework, it has become necessary to amend certain provisions of the Insolvency and Bankruptcy Code. The Insolvency and Bankruptcy Code (Amendment) Bill, 2019, inter alia, provides for the following, namely--
"(a)-(e)***
(f) to amend sub-section (1) of Section 31 of the Code to clarify that the resolution plan approved by the adjudicating authority shall also be binding on the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, including tax authorities;" "
(emphasis supplied)
82. This Court in Union of India v. Martin Lottery Agencies Ltd. [Union of India v. Martin Lottery Agencies Ltd., (2009) 12 SCC 209] , in para 38 has relied on the aforesaid observations made in the judgment of K.P. Varghese [K.P. Varghese v. CIT, (1981) 4 SCC 173 : 1981 SCC (Tax) 293] .
86. In Zile Singh v. State of Haryana [Zile Singh v. State of Haryana, (2004) 8 SCC 1] , this Court had an occasion to consider the provisions of Section 13-A of the Haryana Municipal Act, 1973 which, prior to amendment, read thus:
"13-A. Disqualification for membership.--(1) A person shall be disqualified for being chosen as and for being a member of a municipality--
***
(c) if he has more than two living children:
Provided that a person having more than two children on or after the expiry of one year of the commencement of this Act, shall not be deemed to be disqualified."
(emphasis supplied)
87. The faulty drafting in the provision was capable of being interpreted that the legislative embargo imposed on a person from procreating and giving birth to a third child in the context of holding the office of a member of a municipality remained in operation for a period of one year only and thereafter it was lifted. It could be interpreted that on the date on which Section 13-A was brought on the statute book i.e. dated 5-4-1994, even if a person became disqualified, the disqualification ceased to operate and he became qualified once again to contest the election and hold the office of member of a municipality on the expiry of one year from 5-4-1994. After realising the error, Section 13-A came to be amended as under:
"2. In the proviso to clause (c) of sub-section (1) of Section 13-A of the Haryana Municipal Act, 1973 (hereinafter called the principal Act), for the word ''after', the word ''up to' shall be substituted."
(emphasis supplied)
88. This Court while observing, that the amendment was clarificatory in nature, held thus : (Zile Singh case [Zile Singh v. State of Haryana, (2004) 8 SCC 1] , SCC pp. 9-12, paras 14-22) "14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69).
15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant : (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. (p. 392)
16. Where a statute is passed for the purpose of supplying an obvious omission in a former statute or to "explain" a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule against retrospectivity is inapplicable to such legislations as are explanatory and declaratory in nature. A classic illustration is the case of Attorney General v. Pougett [Attorney General v. Pougett, (1816) 2 Price 381 : 146 ER 130] (Price at p. 392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a duty was imposed upon hides of 9s 4d, but the Act omitted to state that it was to be 9s 4d per cwt., and to remedy this omission another Customs Act (53 Geo. 3, c. 105) was passed later in the same year. Between the passing of these two Acts some hides were exported, and it was contended that they were not liable to pay the duty of 9s 4d per cwt., but Thomson, C.B., in giving judgment for the Attorney General, said : (ER p. 134) ''The duty in this instance was, in fact, imposed by the first Act; but the gross mistake of the omission of the weight, for which the sum expressed was to have been payable, occasioned the amendment made by the subsequent Act : but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act;' (Price at p. 392)
17. Maxwell states in his work on Interpretation of Statutes (12th Edn.) that the rule against retrospective operation is a presumption only, and as such it ''may be overcome, not only by express words in the Act but also by circumstances sufficiently strong to displace it' (p. 225). If the dominant intention of the legislature can be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the "inhibition of the rule" is a matter of degree which would "vary secundum materiam" (p. 226). Sometimes, where the sense of the statute demands it or where there has been an obvious mistake in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231).
18. In a recent decision of this Court in National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India [National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India, (2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as : (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent.
19. The Constitution Bench in Shyam Sunder v. Ram Kumar [Shyam Sunderv. Ram Kumar, (2001) 8 SCC 24] has held : (SCC p. 49, para 39) ''39. ... Ordinarily when an enactment declares the previous law, it requires to be given retroactive effect. The function of a declaratory statute is to supply an omission or to explain a previous statute and when such an Act is passed, it comes into effect when the previous enactment was passed. The legislative power to enact law includes the power to declare what was the previous law and when such a declaratory Act is passed, invariably it has been held to be retrospective. Mere absence of use of the word "declaration" in an Act explaining what was the law before may not appear to be a declaratory Act but if the court finds an Act as declaratory or explanatory, it has to be construed as retrospective.' (p. 2487).
20. In Bengal Immunity Co. Ltd. v. State of Bihar [Bengal Immunity Co. Ltd. v. State of Bihar, (1955) 2 SCR 603 : AIR 1955 SC 661] , Heydon case [Heydon case, (1584) 3 Co Rep 7a : 76 ER 637] was cited with approval. Their Lordships have said : (Bengal Immunity case [Bengal Immunity Co. Ltd. v. State of Bihar, (1955) 2 SCR 603 : AIR 1955 SC 661] , AIR p. 674, para 22) ''22. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon case [Heydon case, (1584) 3 Co Rep 7a : 76 ER 637] was decided that--
"... for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered--
1st. What was the common law before the making of the Act.
2nd. What was the mischief and defect for which the common law did not provide.
3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico." '
21. In Allied Motors (P) Ltd. v. CIT [Allied Motors (P) Ltd. v. CIT, (1997) 3 SCC 472] certain unintended consequences flowed from a provision enacted by Parliament. There was an obvious omission. In order to cure the defect, a proviso was sought to be introduced through an amendment. The Court held that literal construction was liable to be avoided if it defeated the manifest object and purpose of the Act. The rule of reasonable interpretation should apply.
''A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.' [Allied Motors (P) Ltd. case [Allied Motors (P) Ltd. v. CIT, (1997) 3 SCC 472] , SCC pp. 479-80, para 13]
22. The State Legislature of Haryana intended to impose a disqualification with effect from 5-4-1995 and that was done. Any person having more than two living children was disqualified on and from that day for being a member of a municipality. However, while enacting a proviso by way of an exception carving out a fact situation from the operation of the newly introduced disqualification the draftsman's folly caused the creation of trouble. A simplistic reading of the text of the proviso spelled out a consequence which the legislature had never intended and could not have intended. It is true that the Second Amendment does not expressly give the amendment a retrospective operation. The absence of a provision expressly giving a retrospective operation to the legislation is not determinative of its prospectivity or retrospectivity. Intrinsic evidence may be available to show that the amendment was necessarily intended to have retrospective effect and if the Court can unhesitatingly conclude in favour of retrospectivity, the Court would not hesitate in giving the Act that operation unless prevented from doing so by any mandate contained in law or an established principle of interpretation of statutes."
(emphasis supplied)
89. It could thus be seen that what is material is to ascertain the legislative intent. If legislature by an amendment supplies an obvious omission in a former statute or explains a former statute, the subsequent statute has a relation back to the time when the prior Act was passed.
90. The law laid down in Zile Singh [Zile Singh v. State of Haryana, (2004) 8 SCC 1] has been subsequently followed in various judgments of this Court, including in CIT v. Gold Coin Health Food (P) Ltd. [CIT v. Gold Coin Health Food (P) Ltd., (2008) 9 SCC 622] (three-Judge Bench).
91. This Court recently in SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458] had an occasion to consider the question as to whether the amendment to sub-section (3) of Section 14 of the I&B Code by Amendment Act 26 of 2018 was clarificatory in nature or not. By the said amendment, sub-section (3) of Section 14 of the I&B Code was substituted to provide that the provisions of sub-section (1) of Section 14 shall not apply to a surety in a contract of guarantee for corporate debtor. Considering the said issue, this Court observed thus : (SCC pp. 417-19, paras 30-33) "30. We now come to the argument that the amendment of 2018, which makes it clear that Section 14(3), is now substituted to read that the provisions of sub-section (1) of Section 14 shall not apply to a surety in a contract of guarantee for corporate debtor. The amended section reads as follows:
''14. Moratorium.--(1)-(2) * * * (3) The provisions of sub-section (1) shall not apply to--
(a) such transactions as may be notified by the Central Government in consultation with any financial sector regulator;
(b) a surety in a contract of guarantee to a corporate debtor.'
31. The Insolvency Law Committee, appointed by the Ministry of Corporate Affairs, by its Report dated 26-3-2018, made certain key recommendations, one of which was:
''(iv) to clear the confusion regarding treatment of assets of guarantors of the corporate debtor vis-à-vis the moratorium on the assets of the corporate debtor, it has been recommended to clarify by way of an explanation that all assets of such guarantors to the corporate debtor shall be outside scope of moratorium imposed under the Code;'
32. The Committee insofar as the moratorium under Section 14 is concerned, went on to find:
''5.5. Section 14 provides for a moratorium or a stay on institution or continuation of proceeding, suits, etc. against the corporate debtor and its assets. There have been contradicting views on the scope of moratorium regarding its application to third parties affected by the debt of the corporate debtor, like guarantors or sureties. While some courts have taken the view that Section 14 may be interpreted literally to mean that it only restricts actions against the assets of the corporate debtor, a few others have taken an interpretation that the stay applies on enforcement of guarantee as well, if a CIRP is going on against the corporate debtor.
*** 5.7. The Allahabad High Court subsequently took a differing view in Sanjeev Shriya v. SBI [Sanjeev Shriya v. SBI, 2017 SCC OnLine All 2717 : (2018) 2 All LJ 769 : (2017) 9 ADJ 723] , by applying moratorium to enforcement of guarantee against personal guarantor to the debt. The rationale being that if a CIRP is going on against the corporate debtor, then the debt owed by the corporate debtor is not final till the resolution plan is approved, and thus the liability of the surety would also be unclear. The Court took the view that until debt of the corporate debtor is crystallised, the guarantor's liability may not be triggered. The Committee deliberated and noted that this would mean that surety's liabilities are put on hold if a CIRP is going on against the corporate debtor, and such an interpretation may lead to the contracts of guarantee being infructuous, and not serving the purpose for which they have been entered into.
5.8. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, 2018 SCC OnLine NCLAT 384] , Nclat took a broad interpretation of Section 14 and held that it would bar proceedings or actions against sureties. While doing so, it did not refer to any of the above judgments but instead held that proceedings against guarantors would affect the CIRP and may thus be barred by moratorium. The Committee felt that such a broad interpretation of the moratorium may curtail significant rights of the creditor which are intrinsic to a contract of guarantee.
5.9. A contract of guarantee is between the creditor, the principal debtor and the surety, whereunder the creditor has a remedy in relation to his debt against both the principal debtor and the surety (National Project Construction Corpn. Ltd. v. Sadhu and Co. [National Project Construction Corpn. Ltd. v. Sadhu and Co., 1989 SCC OnLine P&H 1069 : AIR 1990 P&H 300] ). The surety here may be a corporate or a natural person and the liability of such person goes as far as the liability of the principal debtor. As per Section 128 of the Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor and the creditor may go against either the principal debtor, or the surety, or both, in no particular sequence (Chokalinga Chettiarv. Dandayuthapani Chettiar [Chokalinga Chettiar v. Dandayuthapani Chettiar, 1928 SCC OnLine Mad 236 : AIR 1928 Mad 1262] ). Though this may be limited by the terms of the contract of guarantee, the general principle of such contracts is that the liability of the principal debtor and the surety is co-extensive and is joint and several (Bank of Bihar Ltd. v. Damodar Prasad [Bank of Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297] ). The Committee noted that this characteristic of such contracts i.e. of having remedy against both the surety and the corporate debtor, without the obligation to exhaust the remedy against one of the parties before proceeding against the other, is of utmost importance for the creditor and is the hallmark of a guarantee contract, and the availability of such remedy is in most cases the basis on which the loan may have been extended.
5.10. The Committee further noted that a literal interpretation of Section 14 is prudent, and a broader interpretation may not be necessary in the above context. The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of third parties like sureties. Additionally, enforcement of guarantee may not have a significant impact on the debt of the corporate debtor as the right of the creditor against the principal debtor is merely shifted to the surety, to the extent of payment by the surety. Thus, contractual principles of guarantee require being respected even during a moratorium and an alternate interpretation may not have been the intention of the Code, as is clear from a plain reading of Section 14.
5.11. Further, since many guarantees for loans of corporates are given by its promoters in the form of personal guarantees, if there is a stay on actions against their assets during a CIRP, such promoters (who are also corporate applicants) may file frivolous applications to merely take advantage of the stay and guard their assets. In the judgments analysed in this relation, many have been filed by the corporate applicant under Section 10 of the Code and this may corroborate the above apprehension of abuse of the moratorium provision. The Committee concluded that Section 14 does not intend to bar actions against assets of guarantors to the debts of the corporate debtor and recommended that an explanation to clarify this may be inserted in Section 14 of the Code. The scope of the moratorium may be restricted to the assets of the corporate debtor only.'
33. The Report of the said Committee makes it clear that the object of the amendment was to clarify and set at rest what the Committee thought was an overbroad interpretation of Section 14. That such clarificatory amendment is retrospective in nature, would be clear from the following judgments:"
(emphasis in original)
94. We have no hesitation to say that the words "other stakeholders" would squarely cover the Central Government, any State Government or any local authorities. The legislature noticing that on account of obvious omission certain tax authorities were not abiding by the mandate of the I&B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation.
95. There is another reason which persuades us to take the said view. Clause (10) of Section 3 of the I&B Code defines "creditor" thus:
"3. (10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder;"
130. Even otherwise, if for the sake of argument, it is held that EARC was entitled to be treated as a "financial creditor" and entitled for a participation in CoC, still its share was about 9% and as such, the resolution plan of Gmspl would have been passed by a majority of 80%, which is much above the statutory requirement.
132. Insofar as the observation made with regard to claim of the Jharkhand Government is concerned, it is to be noted that the State of Jharkhand has not even appealed against the order passed by NCLT. Insofar as the claims of labour and workmen are concerned, RP has specifically stated before Nclat, that whatever claims were received from the workmen were duly considered in the resolution plan. Despite that, observing that a liberty is available to the workmen to raise their claims before a civil court or Labour Court, in our view, is totally in conflict with the provisions of the I&B Code. The same would equally apply to the observation made in the appeal of Mr Deepak Singh claiming to be "operational creditor".
16. We find that the controversy involved in the present writ petitions is squarely covered by the judgement of the Hon'ble Supreme Court in the case of Ghanshyam Mishra (supra) and therefore these writ petitions deserve to be partly allowed. However, we clarify that we are not adjudicating the question of unjust enrichment as raised by the learned Addl. Advocate General inasmuch as it was neither the issue before the Assessing Authority while passing the impugned assessment orders or the impugned notices nor such disputed question of facts can be adjudicated in writ petitions filed under Article 226 of the Constitution of India. Therefore, the question of unjust enrichment is left open.
17. For all the reasons stated above, all these writ petitions are partly allowed to the extent that the demands created under the impugned assessment orders and the demands as may be created or have been created pursuant to the impugned notices, shall not be recovered from the petitioners as the dues would stand extinguished in view of the law laid by Hon'ble Supreme Court in the case of Ghanshyam Mishra (supra) subject to question of unjust enrichment which we have left open.
Dated: 4th July, 2022.
o.k.