Karnataka High Court
M/S. Olive Lifesciences Private ... vs Union Of India on 19 September, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 04.09.2025
Pronounced on : 19.09.2025 R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF SEPTEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.15951 OF 2021 (T - RES)
C/W
WRIT PETITION No.15459 OF 2021 (T - RES)
IN WRIT PETITION No.15951 OF 2021
BETWEEN:
M/S. OLIVE LIFESCIENCES PRIVATE LIMITED
NO. 38/2, SPICE VALLEY,
JAKKASANDRA VILLAGE,
NELAMANGALA,
BENGALURU - 562 123,
REPRESENTED BY ITS DIRECTOR,
JUIE HILLAL,
AGED ABOUT 45 YEARS,
D/O. HILAL MUHAMMED.
... PETITIONER
(BY SMT.VINITHA M., ADVOCATE)
2
AND:
1 . UNION OF INDIA
THROUGH THE SECRETARY,
MINISTRY OF FINANCE,
(DEPARTMENT OF REVENUE),
NO.137, NORTH BLOCK,
NEW DELHI - 110 001.
2 . THE COMMISSIONER OF STATE TAX
VANIJYA THERIGE,
1ST MAIN ROAD,
GANDHINAGAR,
BENGALURU - 560 009.
3 . THE DY / ASST. COMMISSIONER OF
STATE TAXES (AUDIT) 5.8
DIVISIONAL GOODS AND
SERVICE TAX OFFICE-5,
VANIJYA THERIGE KARYALAYA-2,
B BLOCK, 5TH FLOOR, KORAMANGALA,
BENGALURU - 560 047.
... RESPONDENTS
(BY SMT.PRATIBHA R., CGC FOR R-1;
SRI K.HEMA KUMAR, AGA FOR R2 AND R3)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED CAS
ORDER NO.398342594, DATED 14.09.2020 IN ANNEXURE-A
PASSED BY THE R3; QUASH THE IMPUGNED DEMAND NOTICE
DATED 14.09.2020 BEARING DEMAND NO.135776584 (IN
ANNEXURE-B) ISSUED BY THE R3; AWARD COSTS OF AN
INCIDENTAL TO THIS APPLICATION BE PAID BY THE
RESPONDENTS AND ETC.,
3
IN WRIT PETITION No.15459 OF 2021
BETWEEN:
M/S. OLIVE LIFESCIENCES PRIVATE LIMITED
NO 38/2, SPICE VALLEY, JAKKASANDRA VILLAGE
NELAMANGALA
BENGALURU - 562 123
REP BY ITS DIRECTOR
JUIE HILLAL, AGED ABOUT 45 YEARS
D/O HILAL MUHAMMED.
... PETITIONER
(BY SMT.VINITHA M., ADVOCATE)
AND:
1. UNION OF INDIA
THOUGH THE SECRETARY
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
NO.137, NORTH BLOCK,
NEW DELHI - 110 001.
2. THE COMMISSIONER OF CENTRAL TAX
NORTH-WEST GST COMMISSIONERATE
2ND FLOOR, SOUTH WING,
BMTC BUS STAND COMPLEX
SHIVAJINAGAR
BENGALURU - 560 051.
3. THE SUPERINTENDENT OF CENTRAL EXCISE
CNWD3, RAGNE
NORTH-WEST COMMISSIONERATE
2ND FLOOR, SOUTH WING
BMTC BUS STAND COMPLEX
SHIVAJINAGAR
4
BENGALURU - 560 051.
... RESPONDENTS
(BY SMT.PRATHIBA R., CGC FOR R1;
SRI JEEVAN J.NEERALGI, ADVOCATE FOR R2 AND R3)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO ISSUE DIRECTION UNDER
ARTICLE 226 OF THE CONSTITUTION OF INDIA, TO QUASH THE
IMPUGNED SHOW CAUSE NOTICE IN ANNEXURE-F DATED
16.03.2018 BEARING REF.NO.C.NO.V/15/21/165/2017 ADJN
BNW/1301/2018 ISSUED BY THE R2; QUASH THE IMPUGNED
ORDER SL NO.14/2021-22-COM-BNW/2384/2021 DT 15.06.2021 IN
ANNEXURE-N PASSED BY THE R2; QUASH THE IMPUGNED LETTER
DT 22.07.2021 BEARING O.C.NO.13/2021-2022 IN ANNEXURE-P
ISSUED BY THE R3 AND ETC.,
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 04.09.2025, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
In these petitions, in which petitioner is common as also, few
of the respondents, the issue is common. Therefore, the two are
taken up together and considered by this common order.
2. The petitioner is before this Court calling in question Sales
Tax proposition notice, proposing to demand interest under the
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Central Sales Tax Act and confirming the said demand, pursuant to
an ex-parte assessment order, again under the Central Sales Tax
Act.
3. Facts, in brief, germane are as follows: -
The petitioner is a Company incorporated and registered
under the Companies Act, 1956. It is engaged in the business of
manufacturing consumer products such as I-Coffee, I-Pulse and
I-Charge, on which Central Sales Tax and Central Excise Duty was
payable and was being paid. In Writ Petition No.15951 of 2021, the
petitioner effects inter-state sales under the provisions of the
Central Sales Tax Act (hereinafter referred to as 'the Act' for short).
Likewise, the petitioner also effects export sales under the
provisions of the Act which are subject to production of two
different forms - C-form for the inter-state and H-form for export.
During the course of assessment, the 3rd respondent confirms a tax
demand of ₹88,61,606/- being the differential tax liability on
account of non-production of both forms in terms of the provisions
of the Act.
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4. Likewise, in Writ Petition No.15459 of 2021, the excise
duty had been paid by the petitioner in terms of a notification
issued under the Act. The petitioner intimated the 3rd respondent
about the classification and claimed benefit at a lower rate.
Pursuant to the aforesaid act, the petitioner was subjected to
assessment and audit by the Central Excise for the period between
March, 2015 and July 2015 during which period, the products
manufactured by the petitioner were presented and the
classification of I-Coffee and I-Pulse come to be approved under the
Central Excise product classification.
5. When things stood thus, owing to certain financial
difficulties, the petitioner filed an application under Section 10 of
the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to
as 'the Code' for short) for commencement of Corporate Insolvency
Resolution Process ('CIRP'). The petitioner's application was filed
before the National Company Law Tribunal. This comes to be
admitted in Case No.CP(IB)No.63/BB/2017. On admission of the
application of the petitioner for CIRP, the Tribunal declared a
moratorium under Sections 13 and 14 of the Code from the date of
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admission of CIRP i.e., 22-09-2017, as obtaining under Section 14
of the Code. The averment in the petition is that moratorium
prohibits institution or continuation of suits and proceedings against
the petitioner, including execution of any judgment and decree of
any Court of law or order of the Tribunal, Arbitration or other
Authorities. It is the further averment that by virtue of moratorium
declared, the Central and the State Governments were prohibited
from instituting any proceedings against the petitioner.
6. The resolution professional who was appointed in CIRP
makes a public announcement regarding CIRP being initiated
against the petitioner and seeks claims from creditors of the
petitioner as obtaining under Section 15 of the Code read with
Regulation 6 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016. The resolution professional also serves a notice dated
16-02-2018 upon the revenue authorities seeking statement of
their claims due from the petitioner Company for the assessment
years up to the date of CIRP. It is then that the 2nd respondent in
Writ Petition No. 15459 of 2021 issues a show cause notice dated
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16-03-2018 proposing recovery of demand for the period from
March 2014 to June 2017 to the tune of ₹11.06 crores along with
penalty and interest. The Assistant Commissioner of Central Tax
also submitted his claim as per the show cause notice dated
16-03-2018, to the resolution professional on 21-03-2018.
7. The CIRP process continued and on 06-06-2018, one Ms.
Juie Hilal, a resolution applicant presented a resolution plan under
Section 30 of the Code to revive the Company. The resolution plan
comes to be approved by the Committee of Creditors on 09-06-
2018. The resolution plan so approved provided for financial
settlement of dues of financial creditors, operational creditors and
statutory/Government dues up to the date of commencement of
CIRP. On the score that the petitioner had to pay certain amounts,
a show cause notice dated 14-06-2018 is issued by the 2nd
respondent in Writ Petition No. 15951 of 2021 for the assessment
year 2015-16. However, it is pertinent to note that the revenue had
not presented its claim for the subject matter in this petition. In so
far as the show cause notice dated 16-03-2018 is concerned, the
resolution professional, as the authorized representative of the
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Company, issued a reply notice dated 12-03-2019 contending that
the Revenue Authorities are prohibited from initiating any
proceedings against the petitioner in light of the moratorium under
Section 14 of the Code still being in subsistence. On 09-07-2019
the resolution plan was approved by the National Company Law
Tribunal and thus became binding on all the stakeholders.
8. In both these petitions after the aforesaid process on two
dates i.e., 14-09-2020 and 15-06-2021 ex-parte assessment orders
are passed and an order in original confirming the demand for the
period from March 2014 to June 2017 with penalty and interest is
saddled upon the petitioner. It is these ex-parte assessment orders
and the notices issued preceding the said assessment orders and
the orders in original are called in question in these cases at hand.
9. Head Smt. M. Vinitha, learned counsel appearing for the
petitioner, Smt. R. Pratibha, learned Central Government Counsel
appearing for respondent No.1 in both the writ petitions;
Sri K. Hema Kumar, learned Additional Government Advocate
appearing for respondents 2 and 3 in Writ Petition No.15951 of
10
2021 and Sri Jeevan J. Neeralgi, learned counsel appearing for
respondents 2 and 3 in W.P.No.15459 of 2021.
10. The learned counsel appearing for the petitioner would
contend that the object of the Code is to ensure speedy resolution
and revival of the corporate debtor by handing it over to a
resolution applicant who would be an interested promoter of a
going concern. The corporate debtor is revived after settlement of
all dues to its creditors prior to commencement of CIRP. All dues
are identified and would be settled, as per the resolution plan
approved by the Committee of Creditors and the Tribunal.
Remaining dues of creditors including Central or the State
Governments which remain unpaid would stand extinguished and
no proceedings in respect of such claims can be entertained. The
show cause notices issued ought not to have been issued since
moratorium was declared and no proceedings can be initiated after
the declaration of moratorium under Section 14 of the Code.
Therefore, all the proceedings taken up after the declaration of
moratorium excluding the statutory dues or demand, are contrary
to law. The learned counsel submits that the Central and the State
11
Governments are included under the ambit of operational creditors
and are prohibited from recovering claimed or unclaimed dues
beyond the amounts settled in the approved resolution plan. The
learned counsel places reliance upon certain judgments of the Apex
Court which would all bear consideration in the course of the order.
11. The respondent/revenue has filed its statement of
objections and would contend that approval of the resolution plan
by the Tribunal in terms of its order dated 09-07-2019 does not
prohibit or restrict revenue authorities from the determination of
duty involved and efforts to be taken to recover the amount
thereon. When the amounts are found to be due after
determination of excise duty, the revenue authorities are bound to
issue show cause notice before proceeding to determine any duty
payable. There were no proceedings instituted in furtherance of the
show cause notice. The order in original was made on 15-06-2021,
after the moratorium ceased to have effect in terms of the order
dated 09-07-2019, as the Tribunal on that date approved the
resolution plan. The learned counsel would seek to place reliance
on Section 31 of the Code to contend that moratorium under
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Section 14 of the Code will cease to have effect after the resolution
plan under Section 30 is approved by the Tribunal. The dues cannot
be treated as dues for the period of insolvency. Therefore, defends
action of notice and consequential demands made.
12. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record.
13. The afore-narrated facts are a matter of record. Before
embarking upon consideration of the issue, I deem it appropriate to
notice the statutory framework. The entire fulcrum of the lis
revolves round the provisions of the Code. The provisions that are
germane to be noticed are Sections 10, 13, 14, 30 and 31. They
read as follows:
"10. Initiation of corporate insolvency resolution
process by corporate applicant.--(1) Where a corporate
debtor has committed a default, a corporate applicant
thereof may file an application for initiating corporate
insolvency resolution process with the Adjudicating
Authority.
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(2) The application under sub-section (1) shall be filed in
such form, containing such particulars and in such manner and
accompanied with such fee as may be prescribed.
(3) The corporate applicant shall, along with the
application, furnish--
(a) the information relating to its books of account and
such other documents for such period as may be
specified;
(b) the information relating to the resolution professional
proposed to be appointed as an interim resolution
professional; and
(c) the special resolution passed by shareholders of the
corporate debtor or the resolution passed by at least
three-fourth of the total number of partners of the
corporate debtor, as the case may be, approving filing
of the application.
(4) The Adjudicating Authority shall, within a period of
fourteen days of the receipt of the application, by an order--
(a) admit the application, if it is complete and no
disciplinary proceeding is pending against the
proposed resolution professional]; or
(b) reject the application, if it is incomplete or any
disciplinary proceeding is pending against the
proposed resolution professional:
Provided that Adjudicating Authority shall, before
rejecting an application, give a notice to the applicant to rectify
the defects in his application within seven days from the date of
receipt of such notice from the Adjudicating Authority.
(5) The corporate insolvency resolution process shall
commence from the date of admission of the application under
sub-section (4) of this section.
... ... ...
14
13. Declaration of moratorium and public
announcement.--(1) The Adjudicating Authority, after
admission of the application under Section 7 or Section 9
or Section 10, shall, by an order--
(a) declare a moratorium for the purposes referred
to in Section 14;
(b) cause a public announcement of the initiation of
corporate insolvency resolution process and call
for the submission of claims under Section 15;
and
(c) appoint an interim resolution professional in the
manner as laid down in Section 16.
(2) The public announcement referred to in
clause (b) of sub-section (1) shall be made
immediately after the appointment of the interim
resolution professional.
... ... ...
14. Moratorium.--(1) Subject to provisions of sub-
sections (2) and (3), on the insolvency commencement
date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely--
(a) the institution of suits or continuation of pending
suits or proceedings against the corporate
debtor including execution of any judgment,
decree or order in any court of law, tribunal,
arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of
by the corporate debtor any of its assets or any legal
right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any
security interest created by the corporate debtor in
respect of its property including any action under
the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
(54 of 2002);
15
(d) the recovery of any property by an owner or lessor
where such property is occupied by or in the
possession of the corporate debtor.
Explanation.--For the purposes of this sub-section, it is
hereby clarified that notwithstanding anything contained in any
other law for the time being in force, a license, permit,
registration, quota, concession, clearances or a similar grant or
right given by the Central Government, State Government, local
authority, sectoral regulator or any other authority constituted
under any other law for the time being in force, shall not be
suspended or terminated on the grounds of insolvency, subject
to the condition that there is no default in payment of current
dues arising for the use or continuation of the license, permit,
registration, quota, concession, clearances or a similar grant or
right during the moratorium period.
(2) The supply of essential goods or services to the
corporate debtor as may be specified shall not be terminated or
suspended or interrupted during moratorium period.
(2-A) Where the interim resolution professional or
resolution professional, as the case may be, considers the
supply of goods or services critical to protect and preserve the
value of the corporate debtor and manage the operations of
such corporate debtor as a going concern, then the supply of
such goods or services shall not be terminated, suspended or
interrupted during the period of moratorium, except where such
corporate debtor has not paid dues arising from such supply
during the moratorium period or in such circumstances as may
be specified.
(3) The provisions of sub-section (1) shall not apply to--
(a) such transactions, agreements or other arrangements
as may be notified by the Central Government in
consultation with any financial sector regulator or any
other authority;
(b) a surety in a contract of guarantee to a corporate debtor.
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(4) The order of moratorium shall have effect from
the date of such order till the completion of the corporate
insolvency resolution process:
Provided that where at any time during the
corporate insolvency resolution process period, if the
Adjudicating Authority approves the resolution plan
under sub-section (1) of Section 31 or passes an order for
liquidation of corporate debtor under Section 33, the
moratorium shall cease to have effect from the date of
such approval or liquidation order, as the case may be.
30. Submission of resolution plan.--(1) A resolution
applicant may submit a resolution plan along with an affidavit
stating that he is eligible under Section 29-A to the resolution
professional prepared on the basis of the information
memorandum.
(2) The resolution professional shall examine each
resolution plan received by him to confirm that each resolution
plan--
(a) provides for the payment of insolvency resolution
process costs in a manner specified by the Board in
priority to the payment of other debts of the corporate
debtor;
(b) provides for the payment of debts of operational
creditors in such manner as may be specified by the
Board which shall not be less than--
(i) the amount to be paid to such creditors in the
event of a liquidation of the corporate debtor
under Section 53; or
(ii) 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, and provides for the payment of
debts of financial creditors, who do not vote in favour of
17
the resolution plan, in such manner as may be specified
by the Board, which 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.--For the removal of doubts, it is
hereby clarified that a distribution in accordance with the
provisions of this clause shall be fair and equitable to
such creditors.
Explanation 2.--For the purposes of this clause, it
is hereby declared that on and from the date of
commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019, the provisions of this clause
shall also apply to the corporate insolvency resolution
process of a corporate debtor--
(i) where a resolution plan has not been
approved or rejected by the Adjudicating
Authority;
(ii) where an appeal has been preferred under
Section 61 or Section 62 or such an appeal is
not time barred under any provision of law for
the time being in force; or
(iii) where a legal proceeding has been initiated in
any court against the decision of the
Adjudicating Authority in respect of a
resolution plan;
(c) provides for the management of the affairs of the
corporate debtor after approval of the resolution plan;
(d) the implementation and supervision of the resolution
plan;
(e) does not contravene any of the provisions of the law
for the time being in force;
(f) conforms to such other requirements as may be
specified by the Board.
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Explanation.--For the purposes of clause (e), if any
approval of shareholders is required under the Companies Act,
2013 (18 of 2013) or any other law for the time being in force
for the implementation of actions under the resolution plan,
such approval shall be deemed to have been given and it shall
not be a contravention of that Act or law.]
(3) The resolution professional shall present to the
committee of creditors for its approval such resolution plans
which confirm the conditions referred to in sub-section (2).
(4) The committee of creditors may approve a resolution
plan by a vote of not less than sixty-six per cent of voting share
of the financial creditors, after considering its feasibility and
viability the manner of distribution proposed, which may take
into account the order of priority amongst creditors as laid down
in sub-section (1) of Section 53,including the priority and value
of the security interest of a secured creditor, and such other
requirements as may be specified by the Board:
Provided that the committee of creditors shall not
approve a resolution plan, submitted before the commencement
of the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2017 (Ord. 7 of 2017), where the resolution
applicant is ineligible under Section 29-A and may require the
resolution professional to invite a fresh resolution plan where no
other resolution plan is available with it:
Provided further that where the resolution applicant
referred to in the first proviso is ineligible under clause (c) of
Section 29-A, the resolution applicant shall be allowed by the
committee of creditors such period, not exceeding thirty days,
to make payment of overdue amounts in accordance with the
proviso to clause (c) of Section 29-A:
Provided also that nothing in the second proviso shall be
construed as extension of period for the purposes of the proviso
to sub-section (3) of Section 12, and the corporate insolvency
resolution process shall be completed within the period specified
in that sub-section.
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Provided also that the eligibility criteria in Section 29-A as
amended by the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution
applicant who has not submitted resolution plan as on the date
of commencement of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018."
(5) The resolution applicant may attend the meeting of
the committee of creditors in which the resolution plan of the
applicant is considered:
Provided that the resolution applicant shall not have a
right to vote at the meeting of the committee of creditors unless
such resolution applicant is also a financial creditor.
(6) The resolution professional shall submit the resolution
plan as approved by the committee of creditors to the
Adjudicating Authority.
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:
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.
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(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."
(Emphasis supplied)
The ailing Company, owing to financial difficulties, filed an
application under Section 10 of the Code before the National
Company Law Tribunal for an insolvency process called the CIRP.
The moment CIRP is admitted Sections 13 and 14 spring into
action. Sections 13 and 14 deal with declaration of moratorium of
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those corporate entities who have sought for CIRP. Section 31 deals
with approval of resolution plan and what happens thereafter. The
demand of the revenue in the cases at hand is under the provisions
of the Sales Tax Act. The genesis of the issue, therefore, will have
to be noticed from the date on which the petitioner files an
application before the Tribunal under Section 10 of the Code. On
the application, the Tribunal passes an order admitting the
corporate debtor for a CIRP. The order reads as follows:
"ORDER
This Petition is filed by Corporate Applicant Olive
Lifesciences Private Limited under Section 10 of Insolvency and
Bankruptcy Code, 2016 read with Rule 7 of Insolvency and
Bankruptcy (Application to Adjudicating Authority) Rules, 2016
for initiation of Corporate Insolvency Resolution Process.
The Corporate Applicant M/s. Olive Lifesciences Private
Limited in the petition states that it was incorporated on 18th
September, 2007 having CIN No. U24230KA2007PTC043892.
The Registered office of the Corporate Applicant is situated at
No.2203, 1st Floor, Pragathi, 16th D Cross, 8th main, D Block,
Sahakarnagar, Bengaluru-560092. The latest authorised share
capital is Rs.58,95,00,000/-. The issued, subscribed and paid-up
share capital is Rs.33,95,01,000/-, The Audited balance sheet of
31st March, 2017 is marked as Annexure-V.
The Board of Directors of the Corporate Applicant in their
meeting held on 20th July, 2017 authorised all Directors of the
Company, to file necessary application for initiating the
Corporate Insolvency Resolution Process under Insolvency and
Bankruptcy Code, 2016 (Page 31 of the application) and
accordingly C.A.Anzar, the Director of the Company has filed
this Petition.
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The Corporate Applicant provided details of financial and
operational creditors. A perusal of the details reveal that the
Corporate Applicant is in default for more than 4 years. The
total sum due to Financial Creditors is Rs.31,49,60,313/- and
Operational Creditors is Rs.29,74,72,147.086. The Corporate
Applicant further disclosed the details of security against the
loan of the corporate applicant is fully and partially secured
along with details of the date of creation and estimated value
etc.,
The Corporate Applicant has also provided the copies of
audited financial statement for the year 2017, list of assets and
liabilities, details of financial and operational creditors. The
Corporate Applicant disclosed the names and addresses of
members with details of their shareholdings and affidavit in
support of the petition.
We have heard the counsel for Petitioner. This Petition is
filed under Section 10 of Insolvency and Bankruptcy Code,
2016. The Petitioner is Corporate Applicant. The contention of
counsel of the Petitioner Company is that, the company has
committed default and that the petition is to initiate a corporate
insolvency resolution process. We considered to issue notices to
the financial creditors of the Petitioner Company. Counsel for
Petitioner was directed to issue notices. The Counsel for HDFC
Bank and Axis Bank reported that the banks have no objection if
the petition is admitted and for initiating Insolvency Resolution
Process by the corporate applicant.
The Corporate Applicant has named Mr. Gigi Joseph K J,
Registration No. IBBІЛРА-002/IP-N00163/2017-2018/10432,
residing at 463, 10th Main, 13th Cross, Wilson Garden,
Bangalore-560027, Email:[email protected] as Interim Resolution
Professional and the said Interim Resolution Professional in his
letter has expressed his willingness for the appointment and
also certified that there are no disciplinary proceedings pending
against him.
Hence, This Bench admits this petition under
Section 10 of Insolvency and Bankruptcy Code, 2016
declaring moratorium with the following directions:
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i. That this Bench hereby prohibits the institution of
suits or continuation of pending suits or
proceedings against the corporate debtor including
execution of any judgement, decree or order in any
court of law, tribunal, arbitration panel or other
authority; transferring, encumbering, alienating or
disposing of by the corporate debtor any of its assets or
any legal right or beneficial interest therein; any action to
foreclose, recover or enforce any security interest created
by the corporate debtor in respect of its property
including any action under Securitization and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002; the recovery of any property
by an owner or lessor where such property is occupied by
or in the possession of the corporate debtor.
ii. That the supply of essential goods or services to the
corporate debtor, if continuing, stall not be terminated or
suspended or interrupted during moratorium period.
iii. That the provisions of sub-section (1) of Section 14 shall
not apply to such transactions as may be notified by the
Central Government in consultation with any financial
sector regulator.
IV. That the order of moratorium shall have effect from 22nd
September, 2017 till the completion of the corporate
insolvency resolution process or until this Bench approves
the resolution plan under sub-section (1) of Section 31 or
passes an order for liquidation of corporate debtor under
Section 33, whichever is earlier.
V. That the public announcement of the corporate insolvency
resolution process shall be made immediately as specified
under section 13 of the code.
vi. That this Bench hereby appoints Mr. Gigi Joseph K
J, Registration No. IBBI/IPA-002/IP-
N00163/2017-2018/10432, residing at 463, 10th
Main, 13th Cross, Wilson Garden, Bangalore-
560027, Email: Email:[email protected] as Interim
Resolution Professional to carry the functions as
24
mentioned under the Insolvency & Bankruptcy
Code.
Accordingly, this Petition is admitted."
(Emphasis added)
The moment the application is admitted, an interim resolution
professional is appointed. In the case at hand, one Mr. Gigi Joseph
was appointed as the interim resolution professional. The interim
resolution professional then makes a public announcement dated
26-09-2017 to all creditors of the petitioner in all leading
newspapers in consonance with Section 15 of the Code read with
Regulation 6 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016. The public announcement notices are appended to the
petitions. In the interregnum, one Mr. Anand Ramachandra Bhat is
appointed as the resolution professional. The resolution professional
then serves a notice dated 16-02-2018 on the revenue authorities
seeking statement of their claim by the petitioner Company upto
the date of CIRP. The communication reads as follows:
25
"NOTICE FOR THE ATTENTION OF CREDITORS OF OLIVE
LIFESCIENCES P LTD
Service tax commissionarate-2
HAL Airport Road,
Domlur, TTMC, BMTC Bus Stand
Bengaluru-560071
As you are aware, M/s Olive Lifesciences Private
Limited is undergoing corporate insolvency resolution
process vide order No. CP (IB).No.63/BB/17 dated 22nd
September 2017 passed by Hon'ble National Company
Law Tribunal, Bangalore.
Accordingly, public announcement was made by the
then Interim Resolution Professional on 26th September
2017 requiring creditors to submit their claims in proper
form as required under the Insolvency and Bankruptcy
Code along with documents substantiating such claim.
In case you have not submitted your claims, you
may submit your claims in appropriate forms (Form no. B
for operational creditor, Form C for financial creditors and
form D for employees) along with documentation
substantiating the claims. These forms can be
downloaded from www.ibbi.gov.in.
You may submit your claims by 26th February 2018
either physically or through e-mail to Mr. Anand
Ramachandran Bhat, Resolution Professional for olive
Lifesciences Pvt Ltd, No.81, 8th Main, 8th Cross,
Serpentine Road, Kumara park west, Bangalore-560020,
Relevant particulars are stated below:
1 Name of the corporate debtor M/s Olive Life sciences Pvt
(CD) Ltd
2 Corporate identity of CD U24230KA2007PTC043892
3 Registered office of CD No. 2203, 1st Floor,
Pragathi, 16 D Block, 8th
th
Main, D Block, MCECHS
Layout, Sahakar Nagar,
26
Bangalore - 560092
4 Insolvency commencement date 22nd September, 2017
5 Insolvency closure 21st March, 2018
date(estimated)
6 Contact details of Resolution Name: Anand Ramachandra
Professional and your claims Bhat
should be submitted to.
Address: No.81, 8th Main,
8th Cross, Serpentine Road,
Kumara Park West
Bangalore - 560 020
Reg. No.-IBBI/IPA-001/IP-
P00467/2017-18/10810
7 Last date for submission of claim 26th February 2018
Kindly note that submission of false or misleading claims/proof
of claims shall attract penalties.
In case you have already submitted your claims, you may
ignore this notice.
Thanking You,
For Olive Lifesciences Pvt Ltd.,
Sd/-
Anand Ramachandra Bhat
Resolution Professional for Olive Lifesciences Pvt Ltd
Reg. No.-IBBI/IPA-001/IP-P00467/2017-18/10810"
(Emphasis added)
What comes back is a show cause notice on 16-03-2018 seeking to
project certain demand against the company for the period from
2014 to 2017. The reason for imposition of demand is as follows:
".... .... ....
27
The assessee has suppressed the information about the
true nature of the said products from the department by
mis-classifying with an intention to pay duty at lesser
rate instead of full rate of duty, proving their intention to
evade payment of duty. Had the department not initiated
the verification on the issue the fact of mis-classification
and payment at concessional rate of duty would have
gone un-noticed. Despite knowing the facts that the said
products are in health promoter drinks, the assessee has
classified under Fruit juice based drinks and coffee
premix which attract lesser rate of duty, with a intent of
evading payment of central excise duty. Hence, it appears
that during the period specified above, the assessees has
misclassified the said three excisable goods resulting in
short payment of duty. Therefore, the aforementioned
Central Excise duty of Rs. 11,06,20,310/- for the period
from 1.3.2014 to 30.06.2017 (as detailed in Annexure-
A), is recoverable from them under Section 11A (4) of the
Central Excise Act, 1944 by invoking the extended period
of limitation. Further, they are also liable to pay interest
as applicable on the duty demanded under Section
Central Excise Act.
14. As the assessees have willfully suppressed and mis-
declared the relevant facts from the department with an
intention to evade payment of duty and have
contravened the provisions of aforementioned rules, they
have thereby rendered themselves for penalty under
Section 11 AC (1)(c) of the Central Excise Act, 1944. It
further appears that the said excisable goods cleared on
short payment of duty are liable to confiscation under
Rule 25 of Central Excise Rules, 2002 and are liable for
penalty under Rule 25 of Central Excise Rules, 2002.
15. Whereas, it appears that Shri C.A. Anzar, Managing
Director, M/s. Olive Life Sciences Private Ltd, Bangalore
has major role in the above said Modus operandi with
sole intention of evading payment of Central Excise duty
by suppressing & misrepresenting the facts of nature and
characteristics of the subject excisable goods. By the act
28
of mis-classifying lesser duty has been paid and that he
had full knowledge that the said goods cleared by them
are liable to confiscation under Rule 25 of Central Excise
Rules, 2002. For the deliberate intention/ act for the
offence committed, Shri C.A.Anzar, Managing Director is
liable to be personally penalized under Rule 26 of Central
Excise Rules, 2002.
16. Now, therefore, M/s.Olive Life Sciences Private Ltd,
#38/2, Spice Valley Jakkasandra Village, Nelamangala,
Bangalore - 562123, are hereby required to show cause to the
Commissioner of Central Taxes, GST, North-West
Commissionerate, BMTC Building, Shivajinagar, Bangalore-
560051, as to why:
a) the classification adopted by the assessee in respect of
the excisable, goods I-Coffee (CETH 21011200) and I-
Pulse & I-Charge ( under CETH 22029020) should not be
rejected and the said goods should not be re-classified
under CETH 21069099 of CETA;
b) an amount of Rs. 11,06,20,310/-/- (Rupees Eleven
crores, Six lakhs, Twenty Six thousand and Three
hundred and Ten only) being the differential Central
Excise duty payable on the said excisable goods cleared
during the period from 01.3.2014 to 30.6.2017, should
not be demanded and recovered from them under Section
11A(4) of the Central Excise Act, 1944;
c) an amount of Rs 1,50,06,172 /- paid on the said goods
cleared during the period from 01.3.2014 to 30.6.2017
should not be appropriated against the amount demanded
at sl no. b) above;
d) Interest should not be demanded and recovered on the
duty demanded at sl no. (b) above from them under
Section 11AA of the Central Excise Act, 1944;
e) Penalty should not be imposed on them under Section
11AC (1)(c) of Central Excise Act, 1944;
29
f) Penalty should not be imposed on them under Rule 25 of
Central Excise Rules, 2002."
(sic)
(Emphasis added)
Similar demand is also made by the 2nd respondent vide show
cause notice dated 14-06-2018 in Writ Petition No.15951 of 2021.
During the pendency of these demands, the Tribunal passes an
order approving the resolution plan submitted by one Mrs. Juie
Hilal. The relevant portion of the order dated 09-07-2019 reads as
follows:
".... .... ....
8. In the result, by exercising the powers U/s 31(1) IBC, 2016,
I.A No. 116 of 2019 & C.P.(IB)No.63/BB/2017 are disposed of
with the following directions:
(1) It is hereby approved the Resolution Plan
dated 6th June, 2018 submitted by Mrs.Juie
Hilal for the Corporate Debtor as approved
by the CoC by e-voting held on 9th June,
2018 with 100% of voting share Crores by
declaring that the Resolution Plan will be
binding on the Corporate Debtor and its
employees, members, creditors, guarantors,
and other stakeholders involved in the
resolution plan.
(2) The moratorium imposed vide order dated
15.12.2017 passed in the CP shall cease to have
affect from the date of communication of the
order.
30
(3) The Resolution Professional is directed to
handover the management control all the assets,
documents/records in physical and/or digital form
on an as is where is basis to the Resolution
Applicant immediately, and the Resolution
Professional will ceased to be resolution
professional.
(4) The Resolution Professional shall forward all
records relating to the conduct of the CIRP and
the resolution plan to the Board to be recorded on
its database.
(5) 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
the 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:
(6) 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.
(7) The Resolution Applicant is at liberty to file any
miscellaneous application seeking for clarification,
if any, in the implementation of the terms and
conditions to the Resolution Plan.
(8) No order as to costs."
(Emphasis added)
31
But, the demand by the revenue is pursued, progressed and results
in issuance of an order in original. The order in original reads as
follows:
"ORDER
(i) I hold that the classification adopted by M/s.Olive Life
Sciences Private Ltd, situated at #38/2, Spice Valley,
Jakkasandra Village, Nelamangala, Bangalore-562123, in
respect of excisable goods viz., I-Coffee under chapter
subheading 21011200, 1-Pulse under chapter subheading
22029020 and I-Charge under chapter subheading
22029020, is hereby rejected. I also hold that the said
goods have to be classified under chapter subheading
21069099 of the Central Excise Tariff Act, 1985;
(ii) I confirm the demand of Rs.11,06,20,310/- (Rupees
eleven crores, six lakhs, twenty six thousand, three
hundred and ten only) from them, being the differential
central excise duty payable by them on the manufacture
and clearance of the said excisable goods during the
period from 01.03.2014 to 30.06.2017, in terms of
Section 11A(4) of the Central Excise Act, 1944;
(iii) I reject the proposal to appropriate an amount of
Rs.1,50,06,172/- made in the show cause notice dated
16.03.2018, as discussed in Para 32 above;
iv) I confirm the demand of interest form them on the
amount of duty confirmed at (ii) above, in terms of
Section 11AA of the Central Excise Act, 1944;
v) I impose a penalty of Rs.11,06,20,310/- (Rupees eleven
crores, six lakhs, twenty six thousand, three hundred and
ten only), on them in terms of Section 11AC(1)(c) of the
Central Excise Act, 1944. If the amount confirmed at (ii)
above and interest confirmed as at (iv) above is paid by
them within a period of thirty days of the date of receipt
of this Order, the penalty payable shall be twenty-five
percent of Rs. 11,06,20,310/-, provided such reduced
32
penalty is also paid within thirty days of the date of
receipt of this Order.
vi) I order for confiscation of 4,64,507 kgs./ltrs of excisable
goods viz., I-Coffee, 1-pulse and I-Charge, valued at
Rs.100,63,57,925/-, manufactured and cleared without
payment of appropriate central excise duty, by M/s.Olive
Life Sciences Private Ltd, situated at #38/2, Spice Valley,
Jakkasandra Village, Nelamangala, Bangalore-562123,
during the period from 01.03.2014 to 30.06.2017, under
Rule 25 of the Central Excise Rules, 2002, and as the said
goods, though liable for confiscation, are not available for
confiscation, I impose a redemption fine of
Rs.1,00,00,000/- (Rupees one crore only) under Section
34 of the Central Excise Act, 1994;
(vii) I impose a penalty of Rs.10,00,000/- (Rupees ten lakhs
only) on Shri.C.A.Anzar, Managing Director, M/s.Olive Life
Sciences Pvt. Ltd., No.38/2, Spice Valley, Jakkasandra
Village, Nelamangala, Bangalore-562123, in terms of Rule
26 of Central Excise Rules, 2002.
Sd/-05/06/21
(DHARM SINGH)
Commissioner"
(sic)
Identical orders are passed in the companion petition varying the
amount. It is this that has driven the petitioner to this Court in the
subject petitions.
14. The issue now would be, whether the revenue could have
processed the demand on a corporate debtor, pursuant to
institution of CIRP and declaration of moratorium. The issue need
33
not detain this Court for long or delve deep into the matter. The
Apex Court in the case of GHANASHYAM MISHRA AND SONS
(P) LIMITED v. EDELWEISS ASSET RECONSTRUCTION
COMPANY LIMITED1, considering the entire spectrum of the issue
has held as follows:
".... .... ....
"96. Clauses (20) and (21) of Section 5 of the I&B Code
define "operational creditor" and "operational debt" respectively
as such:
"5. (20) "operational creditor" means a person to
whom an operational debt is owed and includes any person
to whom such debt has been legally assigned or
transferred;
(21) "operational debt" means a claim in respect
of the provision of goods or services including employment
or a debt in respect of the payment of dues arising under
any law for the time being in force and payable to the
Central Government, any State Government or any local
authority;"
97. "Creditor" therefore has been defined to mean "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". "Operational creditor" has been
defined to mean a person to whom an operational debt is owed
and includes any person to whom such debt has been legally
assigned or transferred. "Operational debt" has been defined to
mean a claim in respect of the provision of goods or services
including employment or a debt in respect of the payment of
dues arising under any law for the time being in force and
payable to the Central Government, any State Government or
any local authority.
1
(2021) 9 SCC 657
34
98. It is a cardinal principle of law that a statute
has to be read as a whole. Harmonious construction of
clause (10) of Section 3 of the I&B Code read with
clauses (20) and (21) of Section 5 thereof would reveal
that even a claim in respect of dues arising under any law
for the time being in force and payable to the Central
Government, any State Government or any local authority
would come within the ambit of "operational debt". The
Central Government, any State Government or any local
authority to whom an operational debt is owed would
come within the ambit of "operational creditor" as
defined under clause (20) of Section 5 of the I&B Code.
Consequently, a person to whom a debt is owed would be
covered by the definition of "creditor" as defined under
clause (10) of Section 3 of the I&B Code. As such, even
without the 2019 Amendment, the Central Government,
any State Government or any local authority to whom a
debt is owed, including the statutory dues, would be
covered by the term "creditor" and in any case, by the
term "other stakeholders" as provided in sub-section (1)
of Section 31 of the I&B Code."
... ... ...
Conclusion
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.
35
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 the date on which the adjudicating authority grants its
approval under Section 31 could be continued."
(Emphasis supplied)
Following the said judgment of GHANASHYAM MISHRA supra, a
Division Bench of this Court in UNION OF INDIA v. RUCHI SOYA
INDUSTRIES2, has held as follows:
".... .... ....
77. The provisions of section 238 of the IBC states
that the provisions of the IBC shall have effect,
notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or
any instrument having effect by virtue of any such law.
Further, it is noted that crown debts do not take
precedence even over secured creditors, who are private
persons. This is clear on a reading of section 238 of the
IBC which provides for the overriding effect of the IBC
notwithstanding anything inconsistent contained in other
law for the time being in force or effect by any such law.
Therefore, if the Departments of Central or State
Governments do not file an application or participate in
the resolution process, their claims automatically get
extinguished having regard to the judgment of the
2
2021 SCC OnLine Kar.15698
36
honourable Supreme Court in the case of Ghanashyam
Mishra [2021] 91 GSTR 28 (SC); [2021] 227 Comp Cas
251 (SC); [2021] SCC OnLine SC 313."
(Emphasis supplied)
In terms of the aforesaid judgments what would emerge is, that the
claims of the sales tax authorities would stand extinguished since
they had not taken part in the resolution process and had not
submitted their claims in the resolution plan. Accordingly, no
demand can be made in respect of claims that extinguished.
Therefore, the demand notice that forms the fulcrum of lis in Writ
Petition No.15951 of 2021 and all further proceedings taken thereto
would all become contrary to the judgments quoted hereinabove
and, therefore, would lead to their obliteration.
15. In Writ Petition No.15459 of 2021 the proceedings taken
after CIRP is admitted and kicking in of Sections 13 and 14 of the
Code. Whether after declaration of moratorium the Revenue
Authority has power to assess quantum of duties and submit its
claims also need not detain this Court for long or delve deep into
the matter. The Apex Court in the case of ABG SHIPYARD
37
LIQUIDATOR v. CENTRAL BOARD OF INDIRECT TAXES AND
CUSTOMS3, holds as follows:
".... .... ....
"48. From the above discussion, we hold that the
respondent could only initiate assessment or
reassessment of the duties and other levies. They cannot
transgress such boundary and proceed to initiate
recovery in violation of Sections 14 or 33(5) of the IBC.
The interim resolution professional, resolution
professional or the liquidator, as the case may be, has an
obligation to ensure that assessment is legal and he has
been provided with sufficient power to question any
assessment, if he finds the same to be excessive.
... ... ...
57. On the basis of the above discussions, following are
our conclusions:
57.1. Once moratorium is imposed in terms of
Sections 14 or 33(5) of the IBC as the case may be, the
respondent authority only has a limited jurisdiction to
assess/determine the quantum of customs duty and
other levies. The respondent authority does not have the
power to initiate recovery of dues by means of sale/confiscation,
as provided under the Customs Act.
57.2. After such assessment, the respondent
authority has to submit its claims (concerning customs
dues/operational debt) in terms of the procedure laid
down, in strict compliance of the time periods prescribed
under the IBC, before the adjudicating authority.
57.3. In any case, the IRP/RP/liquidator can immediately
secure goods from the respondent authority to be dealt with
appropriately, in terms of the IBC."
(Emphasis supplied)
3
(2023) 1 SCC 472
38
What follows from the afore-quoted judgment of the Apex Court is
that the assessment of duties and other levies by the revenue
authorities after the declaration of moratorium is restricted to the
statement of claims required to be submitted to the resolution
professional.
It is apposite to refer to the judgment of the Apex Court in the case
of ESSAR STEEL INDIA LIMITED COMMITTEE OF CREDITORS
v. SATISH KUMAR GUPTA4, wherein it is held as follows:
".... .... ....
105. Section 31(1) of the Code makes it clear that
once a resolution plan is approved by the Committee of
Creditors it shall be binding on all stakeholders, including
guarantors. This is for the reason that this provision
ensures that the successful resolution applicant starts
running the business of the corporate debtor on a fresh
slate as it were. In SBI v. V. Ramakrishnan [SBI v. V.
Ramakrishnan, (2018) 17 SCC 394: (2019) 2 SCC (Civ) 458],
this Court relying upon Section 31 of the Code has held: (SCC p.
411, para 25)
"25. Section 31 of the Act was also strongly relied
upon by the respondents. This section only states that once
a resolution plan, as approved by the Committee of
Creditors, takes effect, it shall be binding on the corporate
debtor as well as the guarantor. This is for the reason that
otherwise, under Section 133 of the Contract Act, 1872, any
change made to the debt owed by the corporate debtor,
without the surety's consent, would relieve the guarantor
from payment. Section 31(1), in fact, makes it clear that
4
(2020) 8 SCC 531
39
the guarantor cannot escape payment as the resolution
plan, which has been approved, may well include provisions
as to payments to be made by such guarantor. This is
perhaps the reason that Annexure VI(e) to Form 6
contained in the Rules and Regulation 36(2) referred to
above, require information as to personal guarantees that
have been given in relation to the debts of the corporate
debtor. Far from supporting the stand of the respondents, it
is clear that in point of fact, Section 31 is one more factor in
favour of a personal guarantor having to pay for debts due
without any moratorium applying to save him."
106. Following this judgment in V. Ramakrishnan
case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394: (2019) 2
SCC (Civ) 458], it is difficult to accept Shri Rohatgi's argument
that that part of the resolution plan which states that the claims
of the guarantor on account of subrogation shall be
extinguished, cannot be applied to the guarantees furnished by
the erstwhile Directors of the corporate debtor. So far as the
present case is concerned, we hasten to add that we are saying
nothing which may affect the pending litigation on account of
invocation of these guarantees. However, NCLAT judgment being
contrary to Section 31(1) of the Code and this Court's judgment
in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17
SCC 394: (2019) 2 SCC (Civ) 458], is set aside.
107. For the same reason, the impugned NCLAT judgment
[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
40
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."
(Emphasis supplied)
The Apex Court holds that once resolution professional and the
prospective resolution applicant are in place, the business of the
corporate debtor will start on a fresh slate and, therefore, they
must be submitted and decided by the resolution professional. The
law now is clear that once a moratorium under Section 14 is
declared, the proceedings can happen only before the resolution
professional. If the claims are submitted before the resolution
professional it could become a part of the resolution plan. There is
no jurisdiction to parallelly initiate proceedings and raise a demand.
In the light of CIRP becoming moratorium kicking in resolution plan
acceptance up to the date of CIRP, all the claims are, therefore,
before the resolution professional. If there is no claim registered by
the State or the Centre, they would lose the right to demand from
the corporate debtor. In that light the petitions deserve to succeed
by obliteration of the impugned order.
41
16. For the aforesaid reasons, the following:
ORDER
(i) Writ Petitions are allowed.
(ii) The order dated 14-09-2020 passed by the 3rd respondent and the notice dated 14-09-2020 issued thereto impugned in Writ Petition No.15951 of 2021 stand quashed.
(iii) Show cause notice dated 16-03-2018 issued by the 2nd respondent and the order dated 15-06-2021 passed thereto and all further actions impugned in Writ Petition No.15459 of 2021 stand quashed.
Pending applications, if any, also stand disposed.
Sd/-
(M.NAGAPRASANNA) JUDGE bkp CT:MJ