Delhi High Court - Orders
M/S Ramsarup Industries Ltd vs Commissioner Of Customs ... on 4 December, 2023
Author: Yashwant Varma
Bench: Yashwant Varma
$~21
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 11565/2023
M/S RAMSARUP INDUSTRIES LTD. ..... Petitioner
Through: Mr. Dayan Krishnan, Sr. Adv.
with Mr. Alok Yadav, Mr.
Rohan Talwar & Mr. Prathak
Agarwal, Advs.
versus
COMMISSIONER OF CUSTOMS
(ADJUDICATION) ..... Respondent
Through: Ms. Sonu Bhatnagar, SC.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
ORDER
% 04.12.2023 CM APPL. 62420/2023 (63 Days Delay in Short Affidavit) Bearing in mind the disclosures made in the application, the delay of 63 days in filing the short affidavit on behalf of the respondent is condoned.
The application shall stand disposed of.
W.P.(C) 11565/2023 & CM APPL. 45045/2023 (Stay)
1. The petitioner impugns the order dated 13 June 2023 passed by the Commissioner of Customs (Adjudication) and also the consequential duty demand of Rs. 31,91,86,662/- which has come to be raised. The impugned order and the consequential duty demand are assailed principally on the basis of Section 31 of the Insolvency and Bankruptcy Code, 2016 [―IBC‖]. For the purposes of evaluating the challenge as raised, we deem it apposite to notice the following essential facts.
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2. The petitioner is stated to have been admitted to the Corporate Insolvency Resolution Process [―CIRP‖] on 08 January 2018 upon an application being filed under Section 10 of the IBC. It is further borne out from the record that a Resolution Plan was submitted by a consortium comprising of Shyam SEL & Power Ltd. and SS Naturals Pvt. Ltd. which was approved by the National Company Law Tribunal [―NCLT‖], Kolkata Bench on 04 September 2019. The Resolution Plan was accorded approval by the National Company Law Appellate Tribunal [―NCLAT‖] on 04 March 2021 and thereafter by the Supreme Court in terms of its order dated 04 May 2021 passed in Civil Appeal No.1142/2021.
3. Insofar as the impugned duty demand is concerned, it admittedly emanates from a period prior to the CIRP and relates to 17 Bills of Entries executed during 29 December 2006 to 29 October 2009. The petitioner explains that the impugned duty is an outcome of impositions proposed by four customs authorities, of which claims of two were placed before the Resolution Professional during the course of the CIRP.
4. It is pointed out by Mr. Krishnan, learned senior counsel appearing in support of the writ petition, that the Commissioner of Customs (Port), Kolkata lodged a claim of Rs.65,11,23,897/- as payable towards the EPCG licenses. The said claim was partially admitted and as per the disclosures made by the writ petitioner, a sum of Rs.32,45,410/- which had been duly factored in the Resolution Plan was distributed to the said authority on 17 May 2022.
5. The second demand related to a claim raised by the Office of the Commissioner of Customers (Preventive), West Bengal Zone, who had filed a claim on 05 September 2018 which came to be partially This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:57 admitted in the Resolution Plan and as a consequence of which Rs.19,16,593/- came to be disbursed to that authority on 16 May 2020.
6. Mr. Krishnan has also invited our attention to Civil Appeal No.3543/2020 instituted by the Commissioner of Customs (Preventive) West Bengal, which had sought permission to auction certain goods imported by the petitioner and warehoused at ICD, Durgapur. The Supreme Court vide its order dated 19 September 2022 dismissed the Civil Appeal. It is stated that in compliance with the order passed by the Supreme Court, the goods were released vide order dated 13 April 2023 issued by the Deputy Commissioner of Customs.
7. Notwithstanding the above, the petitioner is faced with a decision taken by the respondent who assert that those goods would have to be dealt with in accordance with Section 48 of the Customs Act, 1962 ['the Act']. Insofar as the other two authorities, namely, the Principal Commissioner/Commissioner Customs Commissionerate Air Cargo Complex, Kolkata and Principal-
Commissioner/Commissioner Customs, Customs-House Mundra, it is pointed out by Mr. Krishnan that no claim was laid by those authorities before the Resolution Professional.
8. Our attention was also drawn to Clause 4(ii) of the Resolution Plan which reads as follows: -
―(ii) Accordingly, all Claims or demands made by, or liabilities or obligations owed or payable to or assessed by, the Governmental Authorities including but not limited to the central government, the state governments, any regulatory or local authority or body or any agency or instrumentality thereof, including all such dues, duties, penalties, fees, interest, fines, levies, cesses, assessments or additions or any other charges or payments whatsoever (including without limitation, the Claims of Operational Creditor, the Tax liabilities, direct and indirect and any liabilities in relation to any This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:58 consent, permission, privilege, entitlement, exemption, benefit, license or approval granted to the Company or in relation to the Company, whether or not such consent, permission, privilege, entitlement, exemption, benefit, license or approval is subsisting, lapsed or expired), whether admitted or not, due or contingent, asserted or unasserted, crystallized or uncrystallised, known or unknown, secured or unsecured, disputed or undisputed, present or future, whether or not set out in the Provisional Balance Sheet, the balance sheets of the Corporate Debtor or the profit and loss account statements of the Corporate Debtor or the List of Creditors, in relation to any period prior to the Effective Date or arising on account of the acquisition of control by the Resolution Applicant over the Company pursuant to this Resolution Plan, will be written off in full and will be deemed to be permanently extinguished by virtue of the order of the Adjudicating Authority approving this Resolution Plan and the Corporate Debtor or the Resolution Applicant shall at no point of time be, directly or indirectly, held responsible or liable in relation thereto. It is also proposed that no interest or penalty should be levied on the crystallised statutory liabilities of the Company existing prior to the Effective Date.‖
9. The petitioner assails the order passed by the respondent contending that since those demands undisputedly pertain to the import of capital goods under EPCG licenses pertaining to the period 2006-2009 and the claims of alleged short payment of duty arising therefrom, they would clearly stand extinguished by virtue of Section 31 of the IBC once the Resolution Plan came to be approved.
10. In our considered opinion, the challenge as raised must succeed bearing in mind the imperative mandate of Section 31 of the IBC. Section 31 of the IBC reads as follows:
―31.Approval of Resolution Plan--(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [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,] guarantors and other stakeholders involved in the resolution plan:
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:58 [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),--
(a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and
(b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.
[(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.]‖
11. Undisputedly, the Supreme Court in ABG Shipyard Liquidator vs. Central Board of Indirect Taxes & Customs [(2023) 1 SCC 472] has unequivocally held that the provisions of the IBC would override and have precedence over the Act. This is evident from the following observations as rendered in that decision: -
―40. We may note that the IBC, being the more recent statute, clearly overrides the Customs Act. This is clearly made out by a reading of Section 142-A of the Customs Act. The aforesaid provision notes that the Customs Authorities would have first charge on the assets of an assessee under the Customs Act, except with respect to cases under Section 529-A of the Companies Act, 1956; Recovery of Debts and Bankruptcy Act, 1993; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the IBC, 2016. Accordingly, such an exception created under the Customs Act is duly acknowledged under Section 238 of the IBC as well.‖
12. Insofar as the extinguishment of claims is concerned, the said This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:58 issue too is no longer res integra and stands authoritatively answered by the Supreme Court in Essar Steel India Ltd. Committee of Creditors vs. Satish Kumar Gupta [(2020) 8 SCC 531] and Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Pvt. Ltd. [(2021) 9 SCC 657].
13. We deem it apposite to extract the following passages from the decision of Supreme Court in Essar Steel:-
―107. For the same reason, the impugned NCLAT judgment 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 must also be set aside on this count.‖
14. The aforesaid position in law came to be reiterated by the Supreme Court in Ghanashyam Mishra in the following terms: -
―93. As discussed hereinabove, one of the principal objects of the I&B Code is providing for revival of the corporate debtor and to make it a going concern. The I&B Code is a complete Code in itself. Upon admission of petition under Section 7 there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure that while paying part This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:58 of the dues of financial creditors as well as operational creditors and other stakeholders, the corporate debtor is revived and is made an on-going concern. After CoC approves the plan, the adjudicating authority is required to arrive at a subjective satisfaction that the plan conforms to the requirements as are provided in sub-section (2) of Section 30 of the I&B Code. Only thereafter, the adjudicating authority can grant its approval to the plan. It is at this stage that the plan becomes binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The legislative intent behind this is to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans would go haywire and the plan would be unworkable.
***** 102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued.‖
15. In view of the aforesaid, we find ourselves unable to sustain the impugned order.
16. The writ petition is accordingly allowed. The impugned order dated 13 June 2023 is hereby quashed.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
DECEMBER 04, 2023 neha This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/12/2023 at 20:33:58