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2023 (11) TMI 202 - HC - Income TaxRevenue entitlement to recover dues for the period which precedes the date of approval of the RP by the NCLT under IBC - Extinguishment of liability as per the approved resolution plan - revenue claims that Section 238 of the 2016 Code does not impede its powers to pursue assessment or reassessment proceedings - HELD THAT:- In cases where no provision is made for claims lodged on behalf of the creditors, or there is failure to lodge a claim with the Resolution Professional, all such claims stand extinguished. This position in law obtains because of the provisions of Section 31 of the 2016 Code, which, inter alia, stipulates that once the RP is approved, it shall be binding on the corporate debtor and its employees, members, and creditors which includes the Central Government, State Government, Local Authority arising under any law for the time being in force, and also on authorities to whom statutory dues are owed. Furthermore, the provision also stipulates that the approved plan will be binding on guarantors and other stakeholders involved in forging the same. Therefore, the submission advanced on behalf of the revenue that it could continue with the assessment/reassessment process concerning the AYs in issue is entirely untenable. A successful applicant whose RP has been approved should not be put in a position where it is called upon to liquidate dues of creditors, including statutory creditors, which were not embedded in the RP. A successful applicant is, in law, provided with a “clean slate”; therefore, dues for the period prior to the date when the RP was approved cannot be recovered. The courts have recognized this principle in more than one case. Whether the provisions of the 2016 Code would override the provisions of the 1961 Act, where inconsistency is found between the two statutes? - When one examines the provisions of Section 238 of the 2016 Code, the underlying purpose of the provision comes through. Section 238 clearly states without any ambiguity that the provisions of the 2016 Code “shall” have effect, notwithstanding anything inconsistent contained in any other law for the time being in force, or any instrument having effect under any such law. Thus, where matters covered by the 2016 Code are concerned [including insolvency resolution of corporate persons] if provisions contained therein are inconsistent with other statutes, including the 1961 Act, it shall override such laws. If such an approach is not adopted, it will undermine the entire object and purpose with which the Legislature enacted the 2016 Code. As decided in Ghanshyam Mishra’s case [2021 (4) TMI 613 - SUPREME COURT] SC held since the subject matter of the proceedings related to claims made by the VAT authorities before the approval of the plan, no purpose would be served in relegating the writ petitioner/appellant to an alternative remedy. The Court made a specific observation which, applies to the instant cases as well: “A party cannot be made to run from one forum to another forum in respect of the proceedings and the claims, which are not permissible in law.” Thus the impugned notice and order are unsustainable in law and, hence, cannot be enforced.
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