Karnataka High Court
M/S Srei Equipment Finance Ltd vs Deputy Commissioner Of Commercial ... on 11 September, 2024
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
-1-
NC: 2024:KHC:37199
WP No. 19460 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF SEPTEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 19460 OF 2024 (T-RES)
BETWEEN:
M/S SREI EQUIPMENT FINANCE LTD.,
PLOT NO Y-10, BLOCK EP,
SECTOR V, SALT LAKE CITY
KOLKATA 700046
A COMPANY REGISTERED UNDER THE COMPANIES
ACT 1956
REPRESENTED BY ITS AVP,
MR TAMOJOY DASGUPTA
...PETITIONER
(BY SMT. NIMISHA KUMAR, ADVOCATE FOR
SRI. NITIN RAMESH., ADVOCATE)
AND:
Digitally 1. DEPUTY COMMISSIONER OF COMMERCIAL TAXES,
signed by
ANAND N AUDIT 1.8,
Location: DGSTO-1,
HIGH
COURT OF 5TH FLOOR, BMTC BUILDING,
KARNATAKA
YESHWANTPURA,
BANGALORE 560002
2. DEPUTY COMMISSIONER OF COMMERCIAL TAXES,
LGSTO 111
DGSTO-3,
1ST FLOOR, BMTC BUILDING,
JAYANAGAR 4TH BLOCK,
BANGALORE 560011
-2-
NC: 2024:KHC:37199
WP No. 19460 of 2024
3. DEPUTY COMMISSIONER OF COMMERCIAL TAXES,
AUDIT 4.5
DGSTO-04, VTK2
BMTC BUILDING, 6TH FLOOR,
80 FEE ROAD, 6TH BLOCK,
KORAMANGALA
BANGALORE 560047
4. DEPUTY COMMISSIONER OF COMMERCIAL TAXES,
AUDIT 43.3
DGSTO-3,
2ND FLOOR, ROOM NO 224
TTMC B BLOCK, BMTC BUILDING,
SHANTHINAGAR
BANGALORE 560027
...RESPONDENTS
(BY SRI. SRI. HEMA KUMAR K, AGA)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
ORDER DTD 29.04.2024 BEARING REF NO. ZD2904240752664
ISSUED BY THE R-2 PRODUCED HEREWITH AS ANNEXURE-N
AND ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, the petitioner seeks the following reliefs:
"i) Issue a writ, order or direction in the nature of CERTIORARI or such writ or order to quash the order dated 29/4/24 bearing Ref. -3-
NC: 2024:KHC:37199 WP No. 19460 of 2024 no.ZD2904240752664 issued by the 2nd Respondent produced herewith as Annexure-N;
ii) Issue a writ, order or direction in the nature of certiorari or such writ or order to quash the notice for intimation liability dated 25/5/24 bearing File No.DCCT(A)4.5/DGSTO-04/Audit/No.161/2023- 24 issued by the 3rd Respondent vide Annexure- S."
2. Heard learned counsels for the parties and perused the material on record.
3. A perusal of the material on record will indicate that on 08.10.2021, the National Company Law Tribunal [NCLT] initiated Corporate Insolvency Resolution Process [CIRP] against the petitioner - Company under Section 227 of the Insolvency and Bankruptcy Code [for short, 'the IBC'] r/w Section 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules 2019 [for short, 'the said Rules of 2019'] and an order of moratorium under Section 14 of IBC was issued. Subsequently, Insolvency Resolution Professional [IRP] issued a public advertisement calling for creditors to submit their claims on or before 21.10.2021. In the meanwhile, the respondent -4- NC: 2024:KHC:37199 WP No. 19460 of 2024 No.1 issued a notice dated 14.07.2022 to the petitioner for the purpose of conducting audit under Section 65 of the CGST Act, 2017 which the petitioner attended between August 2022 to June 2023. On 16.06.2023, the petitioner submitted a response via E- mail to the respondent No.1 informing them about the insolvency proceedings and the order of the NCLT imposing moratorium. Subsequently, on 11.08.2023, the National Asset Reconstruction Company Limited [NARCL] submitted a Resolution Plan which was approved by the NCLT on 11.08.2023. Subsequent to the approval of Resolution Plan by the NCLT, the respondent No.1 issued an Audit Observation Report for the financial year 2018-19 in relation to the petitioner raising several observations and making some claims in relation of input tax credit, late filing of returns etc. The petitioner submitted a detailed reply on 12.12.2023 refuting the various claims and allegations made by the respondent No.1 as well as informing him about the approval of the Resolution Plan by the NCLT. Despite this, the respondent No.1 ignored the NCLT order approving the Resolution Plan dated 11.08.2023 and proceeded to issue an audit report on 15.12.2023, which was followed by an intimation under Section 73(5) of the KGST Act, 2017 dated 22.12.2023 as well as the Show Cause Notice under -5- NC: 2024:KHC:37199 WP No. 19460 of 2024 Section 73(1) of the KGST Act, 2017 to which also the petitioner submitted a detailed reply on 24.01.2024. In pursuance of the same, the respondent No.2 passed the impugned order dated 29.04.2024 under Section 73 of the KGST Act, 2017. Subsequently, the respondent No.3 issued one more intimation under Section 73(5) of the KGST Act to the petitioner in relation to the financial year 2019-20, which have not been completed even till today. Aggrieved by the impugned order dated 29.04.2024 in relation to the financial year 2018-19 and initiation of proceedings in relation to the financial year 2019-20, the petitioner is before this Court by way of the present petition.
4. In addition to reiterating the various contentions urged and referring to the material on record, the learned counsel for the petitioner invited my attention to the judgment of the Apex Court in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited1 in order to point out that upon approval of a Resolution Plan by the NCLT in relation to the petitioner - Company, all prior claims by the respondent as against the petitioner as well as further proceedings 1 (2021) 9 Supreme Court Cases 657 -6- NC: 2024:KHC:37199 WP No. 19460 of 2024 pursuant to the same, including the impugned order in relation to financial year 2018-19 and proceedings in relation to 2019-20 get extinguished and the continuation of the same would be without jurisdiction or authority of law and the same deserves to be quashed.
5. It is also pointed out that under identical circumstances in relation to the proceedings where a moratorium was imposed under Section 14 of the IBC, this Court in the case of Associate Décor Limited Vs. Deputy Commissioner of Commercial Taxes2 came to the conclusion that all proceedings need to be kept in abeyance till lifting of the moratorium by following the judgment in Ghanashyam Mishra's case (supra). It is therefore submitted that the impugned order and proceedings deserve to be quashed.
6. Per contra, learned Additional Government Advocate submits that there is no merit in the petition and the same is liable to be quashed.
7. As rightly contended by the learned counsel for the petitioner, upon approval of the IRP by the NCLT, all prior claims 2 W.P.No.17303/2021 (T-RES) decided on 16.12.2021 -7- NC: 2024:KHC:37199 WP No. 19460 of 2024 by the respondents, including the impugned order and proceedings would stand extinguished as held in Ghanashyam Mishra's case (supra) wherein, the Apex Court held as under:
"102. In the result, we answer the questions framed by us as under:
102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.
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 -8- NC: 2024:KHC:37199 WP No. 19460 of 2024 the date on which the adjudicating authority grants its approval under Section 31 could be continued.
103. In the light of what has been held by us hereinabove, we now proceed to decide individual matters."
So also in Associate Decor Limited case (supra), this Court has taken a view that once moratorium is imposed by the NCLT, proceedings initiated by the respondent under the KGST Act would necessarily will have to be kept in abeyance.
8. In the instant case, it is a matter of record and an undisputed fact that the claim of the respondents are in relation to the petitioner - Company for the financial years 2018-19 and 2019- 20 and the impugned order dated 29.04.2024 in relation to the financial year 2018-19 and the impugned proceedings in relation to financial year 2019-20 are clearly without jurisdiction or authority of law in the light of the undisputed fact that the Resolution Plan has already been approved by the NCLT and the judgments referred to supra. Under these circumstances, I am of the view that the impugned order and the proceedings deserve to be quashed. -9-
NC: 2024:KHC:37199 WP No. 19460 of 2024
9. In the result, the following:
ORDER A. The writ petition is hereby allowed. B. The impugned order at Annexure-N dated 29.04.2024, the notice for intimation at Annexure-S dated 25.05.2024 and all further proceedings pursuant thereto are hereby quashed.
Sd/-
(S.R.KRISHNA KUMAR) JUDGE RB