TMI Blog2019 (3) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the Central Government, and State Government or any local authority’. ‘Operational Debt’ in normal course means a debt arising during the operation of the Company (‘Corporate Debtor’). The ‘goods’ and ‘services’ including employment are required to keep the Company (‘Corporate Debtor’) operational as a going concern. If the Company (‘Corporate Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including ‘Income Tax’, ‘Value Added Tax’ etc. come within the meaning of ‘Operational Debt’. For the said very reason, we also hold that ‘Income Tax Department of the Central Government’ and the ‘Sales Tax Department(s) of the State Government’ and ‘local authority’, who are entitled for dues arising out of the existing law are ‘Operational Creditor’ within the meaning of Section 5(20) of the ‘I&B Code’ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Corporate Debtor amounting to ₹ 338 Crores was settled for 1% of the crystallized demand to a maximum of ₹ 2.58 crores against the mandate of the Income Tax Act, 1961. In Company Appeal (AT) (Insolvency) No. 309 of 2018 6. The Sales Tax Department, State of Maharashtra has challenged the order dated 19th April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, in the Corporate Insolvency Resolution Process initiated against Raj Oil Mills Limited approving the Resolution Plan under Section 31 of the I B Code . 7. The main plea taken by the Appellant is that the Resolution Professional had not intimated during the Corporate Insolvency Resolution Process to attend the meeting of the Committee of Creditors and plan has been approved prejudicial to the rights of the Appellant. 8. Further, according to Appellant, the Sales Tax and Value Added Tax do not come within the meaning of Operational Debt and thereby, Sales Tax Department, State of Maharashtra cannot be treated to be an Operational Creditor . In Company Appeal (AT) (Insolvency) No. 559 of 2018 9. This ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is unexceptional and calls for no interference. 185. In our opinion, the Bank cannot claim priority over the dues of sales tax because statutory first charge had been created in favour of the State by Section 26-B which was inserted in the Kerala Act with effect from 1-4-1999 and the courts below did not commit any error from 1-4-1999 and the courts below did not commit any error by refusing to decree the suit for injunction filed by the Bank. In Company Appeal (AT) (Insolvency) No. 759 of 2018 12. This appeal has also been preferred by Sales Tax Department, State of Maharashtra against the order dated 22nd October, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, whereby the Resolution Plan submitted in the Corporate Insolvency Resolution Process initiated against Parte Casters Pvt. Ltd. - ( Corporate Debtor ) has been approved with 100% voting shares. 13. Apart from the plea taken by the Appellant in the aforesaid two appeals that State of Maharashtra is not an Operational Creditor and Value Added Tax is not an Operational Debt , it was also submitted that the Resolution Plan reduced the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. (1A) Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of 1964). ( 2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, they do not come within the meaning of Operational Debt . Referring to the decision of the Hon ble Supreme Court in Life Insurance Corporation of India vs D. J. Bahadur Ors.─ (1981) 1 SCC 315 , it was contended that the word or may be interpreted as and in certain extraordinary circumstances such as, in a situation where its use as a disjunctive could obviously not have been intended. Reliance has been placed on the decision of the Hon ble Supreme Court in Life Insurance Corporation of India vs D. J. Bahadur Ors.─ (1981) 1 SCC 315 . 21. Therefore, according to them, the word or before the sentence 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 should be read as and and it should be related to either supply of goods or for rendering services to the Corporate Debtor . It was submitted that as tax is not related to supply of goods or services rendered to the Corporate Debtor , they cannot be treated to be the Operational Debt . 22. For determination of the issue, it is relevant to notice the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junctive. This rule was thus applied to the interpretation of clause (c) of Section 3(1) of the U.P. (Temporary) Control of Rent and Eviction Act, 1974 in Babu Manmohan Das Shah v. Bishun Das [AIR 1967 SC 643 : (1967) 1 SCR 836] by Shelat, J.: The clause is couched in single and unambiguous language and in its plain meaning provides that it would be a good ground enabling a landlord to sue for eviction without the permission of the District Magistrate if the tenant has made or has permitted to be made without the landlord's consent in writing such construction which materially alters the accommodation or is likely substantially to diminish its value. The language of the clause makes it clear that the legislature wanted to lay down two alternatives which would furnish a ground to the landlord to sue without the District Magistrate's permission, that is, where the tenant has made such construction which would materially alter the accommodation or which would be likely to substantially diminish its value. The ordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial creditor and financial debt makes it clear that a financial debt is a debt together with interest, if any, which is disbursed against the consideration for time value of money. It may further be money that is borrowed or raised in any of the manners prescribed in Section 5(8) or otherwise, as Section 5(8) is an inclusive definition. On the other hand, an operational debt would include a claim in respect of the provision of goods or services, including employment, or a debt in respect of payment of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority. 28. From the plain reading of sub-section (21) of Section 5, we find that there is no ambiguity in the said provision and the legislature has not used the word and but chose the word or between goods or services including employment and before 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, and State Government or any local authority . 29. Operational Debt in normal course means a debt arising during the operation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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