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2020 (9) TMI 262 - AT - Insolvency and BankruptcyImplementation of Resolution Plan - set off of losses under Income Tax Act - HELD THAT - The Resolution Plan have been implemented by 18.03.2019 and a lot of time has lapsed in getting final approval and landing into appeals before this Appellate Tribunal. The grey area in this case is that the setting up off losses under Income Tax Act 1961 is subject to scrutiny by the Income Tax Department and IBC 2016 lays down that the Resolution Plan should be in compliance with the law laid down. Hence there is a need for getting an affidavit from the Resolution Applicant that he will be successfully completing the Resolution Plan whether he gets this set off under Income Tax Act or not. Secondly the issue is payment of licence fee to the building owner where the CIRP has been carried out and business was running on a going concern basis for the period till CIRP was continued or they have handed over the building to the building owner whichever is earlier and the same is to be restricted to his Income Tax Returns so far filed. This costs needs to be included in CIRP costs. Application dismissed.
Issues involved:
1. Approval of Resolution Plan by Adjudicating Authority under I&B Code, 2016. 2. Allegations of sale of assets under the guise of Resolution Plan and non-payment of statutory dues. 3. Mass retrenchment of employees and compliance with due procedure of law. 4. Dispute over Licence Agreement dues and related party transactions. 5. Viability and feasibility of the approved Resolution Plan, including tax implications. 6. Discrimination between operational creditors and financial creditors. 7. Implementation of Resolution Plan and compliance with legal requirements. Issue 1: Approval of Resolution Plan The Appeals were filed under Sections 32 and 61(3) of the I&B Code, 2016 to set aside the order passed by the Adjudicating Authority approving the Resolution Plan. The Resolution Plan was effective from the date of the order and directed the Resolution Professional to notify the participants and the Resolution Applicant. Issue 2: Allegations of Sale of Assets and Non-payment of Dues One Appellant alleged that the Resolution Plan was a sale of assets disguised as a Resolution Plan, with no provision for payment of statutory dues for employees. The Respondent argued that the Resolution Plan was in line with the I&B Code and Supreme Court precedents, and that the Appellant had resigned before the CIRP initiation. Issue 3: Compliance with Due Procedure Concerns were raised about mass retrenchment of employees and the going concern concept under the I&B Code. The Resolution Applicant defended the Plan, stating compliance with legal provisions and re-employment of ex-employees. Issue 4: Dispute over Licence Agreement Dues Another Appellant, the factory owner, disputed non-payment of Licence Agreement dues during CIRP, raising issues of related party transactions. The Resolution Professional argued that the Appellants were related parties and disputed the claimed dues. Issue 5: Viability and Feasibility of Resolution Plan An Appellant, a Promoter and Director, raised concerns over the feasibility of the approved Resolution Plan, citing tax implications and concessions sought by the Resolution Applicant. The Appellate Tribunal emphasized compliance with laws and the need for an affidavit from the Resolution Applicant. Issue 6: Discrimination between Creditors An Operational Creditor claimed discrimination between operational and financial creditors in the Resolution Plan. The Resolution Applicant argued the Appellant's eligibility and the timing of the appeal post-implementation. Issue 7: Implementation and Compliance The Appellate Tribunal dismissed some Appeals while partially allowing others, emphasizing compliance with legal requirements and directing the Adjudicating Authority to ensure timely compliance. The Tribunal highlighted the need for transparency, legality, and adherence to the Resolution Plan's terms. This comprehensive analysis covers the key issues raised in the judgment, addressing concerns related to the Resolution Plan approval, statutory dues, compliance with legal procedures, related party transactions, viability of the Plan, creditor discrimination, and overall implementation and compliance requirements.
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