2019 (10) TMI 1346 - Tri - Insolvency and Bankruptcy

Provisional attachment of the bank accounts - Section 83 of CGST Act 2017 - It is the case of applicant that the applicant is hard pressed to meet the operational costs of the applicant during the CIRP process and thus continued existence of the Applicant itself is in danger which is in violation of the going concern objective of the IBC - HELD THAT - It is settled that under section 18(f)(ii) of the Code IRP is duty bound to take control of corporate debtors assets (which are under its ownership) and section 238 of the code provides for over-ridding effect over provisions of any other law in force as also the case laws cited/relied upon by the Applicant further considering the fact that R-2 has already filed its claim as operational creditor with the IRP in respect of GST dues relating to pre CIRP period. It is just and equitable and in the interest of smooth completion of CIRP that the Bank Accounts frozen by R.2 are defreezed with immediate effect along with other prayers in the present IA. IA(No. 488 of 2019) is accordingly allowed with respect to its prayer clause(1) and (2). As regards deposit of post-CIRP period GST dues R-2 shall make proper and adequate arrangement for receipt of the said dues form IRP to be adjusted only against the liability of the current post CIRP period. In case R-2 requires any clarification with respect to this order he may approach this Forum for necessary directions. Application disposed off.

Summary

Issues Involved:
1. Unfreezing of Operator's Bank Accounts.
2. Transfer of Applicant's Assets to Applicant's Bank Accounts.
3. Payment of GST dues.
4. Compliance with Insolvency and Bankruptcy Code (IBC) provisions.
5. Handling of pre-CIRP and post-CIRP dues.

Issue-wise Detailed Analysis:

1. Unfreezing of Operator's Bank Accounts:
The Resolution Professional and Leo Meridian Employees Union filed applications under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to unfreeze the Operator's Bank Accounts held with Axis Bank, HDFC Bank, and IDFC Bank. The accounts were frozen by tax authorities due to unpaid tax liabilities. The Applicant argued that the freezing of these accounts hindered the Corporate Insolvency Resolution Process (CIRP) and jeopardized the going-concern objective of the IBC. The tribunal concluded that the IRP is empowered under Section 18(f)(ii) of the IBC to take control and custody of any asset, including those not in possession of the corporate debtor. The tribunal ordered the unfreezing of the Operator's Bank Accounts to facilitate the CIRP.

2. Transfer of Applicant's Assets to Applicant's Bank Accounts:
The Applicant sought the transfer of assets from the Operator's Bank Accounts to the Applicant's Bank Accounts to enable the IRP to take control and custody of the assets. The tribunal noted that the IRP is authorized to access the Applicant's assets with third parties and that the IBC provisions have precedence over other laws. The tribunal allowed the transfer of assets to the Applicant's Bank Accounts to ensure the smooth completion of the CIRP and to uphold the value maximization objective of the IBC.

3. Payment of GST Dues:
The tax authorities argued that the Corporate Debtor collected GST from clients but did not deposit it with the government, resulting in substantial unpaid GST dues. The tribunal acknowledged that the GST amounts collected by the Applicant were deposited into the bank account of the Operator. The tribunal emphasized that the IRP is liable to pay only the post-CIRP GST dues regularly, while the pre-CIRP dues must be claimed by the tax authorities through Form-B, as applicable to other operational creditors.

4. Compliance with Insolvency and Bankruptcy Code (IBC) Provisions:
The tribunal highlighted the overriding effect of Section 238 of the IBC over other laws and noted that the IRP is duty-bound to take control of the corporate debtor's assets under Section 18(f)(ii) of the IBC. The tribunal referenced case laws, including the decision in Encore Asset Reconstruction Company Private Limited vs. Ms. Charu Sandeep Desai, to support the IRP's authority to take control of assets. The tribunal also cited the Supreme Court's decision in Commissioner of Income Tax vs. Monnet Ispat & Energy Ltd, which upheld the moratorium under Section 14 of the IBC against tax liabilities.

5. Handling of Pre-CIRP and Post-CIRP Dues:
The tribunal clarified that any payment of pre-CIRP dues to a single operational creditor, such as the tax authorities, during the ongoing CIRP would violate Article 14 of the Constitution of India and the IBC code. The tribunal directed that the post-CIRP GST dues should be paid regularly by the IRP, while the pre-CIRP dues should be resolved along with other operational creditors' claims. The tribunal acknowledged that the tax authorities had already submitted their claim as an operational creditor in Form-B with the IRP.

Conclusion:
The tribunal allowed the unfreezing of the Operator's Bank Accounts and the transfer of assets to the Applicant's Bank Accounts to facilitate the CIRP. The tribunal emphasized the IRP's authority under the IBC to take control of the corporate debtor's assets and directed the tax authorities to claim their pre-CIRP dues through the appropriate process. The tribunal also addressed the handling of post-CIRP GST dues and provided directions for their payment. The applications filed by the Resolution Professional and Leo Meridian Employees Union were disposed of with the specified directions.