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TMI Blog2019 (6) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... ion filed by IDBI Bank Ltd / Financial Creditor under section 7 of the 1B Code, 2016 against the Corporate Debtor / Lanco Infratech Limited on 07.08.2017 and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Subsequently this Tribunal passed a liquidation order dated 27.08.2018 against the Corporate Debtor. (b) That subsequent to the order of liquidation of the Corporate Debtor on 27.08.2018, the Applicant being a former employee of Corporate Debtor submitted his claim of salary and other benefits before the Liquidator (Respondent No. 1 herein) vide FORM-E application dated 14.09.2018 for an amount of Rs. 30, 12,837.56 (Rupees Thirty Lakhs Twelve Thousand Eight Hundred and Thirty Seven and Fifty Six Paise Only). It is averred the Applicant did not receive salary for the months of June, 2017 and July, 2017 and that he reserves right to claim the salary amounts which are payable by Liquidator to him. (c) That when Applicant received a notice dated 29.12.2018 from Commissioner of Income Tax, Hyderabad with regard to delay in payment of TDS, he sent an e-mail dated 18.01.2019 to Liquidator, enclosing the Assessment Order dated 12.12.2018 demandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prior to commencement of CIRP, the Corporate Debtor deducted TDS from the salary of the Applicant but could not deposit the same due to its financial constraints. Further contended that for the salaries paid by RP/Liquidator, he ensured that the TDS, PF and all other applicable statutory dues are deposited within the prescribed time period with the concerned authorities. (d) The non-deposit of TDS being complained of by the Applicant is for salaries paid to him for the period up to 31.08.2016 on which date he attained superannuation i.e. much prior to commencement of CIRP. (e) That the Corporate Debtor defaulted in +depositing TDS not only of the Applicant's but also in case of many other employees. The RP / Liquidator keeping in mind the fact that these are legitimate claims payable to the Income Tax Department he admitted these dues as operational claims against the Corporate Debtor. Thus, the amount required to be deposited as TDS is an Operational Debt. As per provisions contained in Section 35 of the Code the Liquidator proceeded to verify the claim of the income tax department and the amount of TDS deducted from employees' salaries having been found to be due a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, from the principal amount claimed, the Liquidator verified the claim for an amount of Rs. 23,32,884/- and the same was admitted. For the balance amount of Rs. 10,746/- the Liquidator requested for additional documents from the Applicant so as to suitably verify the claim and this amount at present is kept under verification. (i) The Liquidator thus prayed this Tribunal to dismiss the Application as premature and not maintainable. 4. I heard both sides. The Applicant is ex-employee of Corporate Debtor. He has filed this Application seeking a direction to the Liquidator and the Corporate Debtor under Liquidation to pay the outstanding TDS deducted from the salary of the Applicant amounting to Rs. 3,58,737/- and also issue Form -16 to the Applicant. 5. The case of Applicant, CIRP started against Corporate Debtor by order dated 07.08.2017 and liquidation proceedings started against Corporate Debtor by order dated 27.08.2018. The Applicant submitted claim before the Resolution Professional in respect of arrears of salary. The case of Applicant, he received notice from the IT Department with regard to delay in depositing TDS. He received notice for payment of tax including i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deposited and therefore Form-16 could not be issued. 8. Whatever tax due to the Government, the same to be paid out of the money realised from the sale of the assets of Corporate Debtor during Liquidation and it is to be paid in terms of water fall mechanism provided under Section 53 of IBC. Apart from this water fall mechanism, the tax payable to the IT Department is nothing but an operational debt as was held by NCLAT in Company Appeal (AT) No. 205 of 2017 in the matter of Pr. Director General of Income Tax (Admn. & TPS) versus M/S. Synergies Dooray Automotive Ltd. & Ors dated 02.08.2017. The IT Department can make a claim before the Liquidator with regard to the TDS collected from the Applicant to be treated as operational debt or in the alternative IT Department to make the claim before the Liquidator regarding TDS collected from the Applicant. In other words, IT Department has to submit the claim before the Liquidator in respect of the tax due (TDS) from the Applicant. 9. It is the Corporate Debtor Company which committed default in not depositing TDS. Therefore, the liability if any is to be discharged by the Corporate Debtor. The Corporate Debtor is under Liquidation. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of compounding fees on behalf of the Corporate Debtor before concerned authorities and file appropriate application in Criminal Case No.530366/2016 before Additional Chief Metropolitan Magistrate (Spl Acts) Hon'ble Tis Hazari Court, New Delhi to close the proceedings and include such expense in Liquidation costs; or alternatively permit the Applicant to pursue and prosecute the Criminal Case No. 530366/2016 pending before Additional Chief Metropolitan (Spl. Acts.) Hon'ble Tis Hazari Court, New Delhi and pay compounding fees as directed by Additional Chief Metropolitan Magistrate. Further the cost incurred by Applicant to be treated as part and parcel of the Liquidation costs and seek further direction to Liquidator to reimburse such fees to the Applicant. 2. The averments made in the Application in brief are: 1) That Lanco Infratech Limited (LITL) (hereinafter referred to as the " Corporate Debtor") is a listed Company engaged in the Engineering, Procurement and Construction (EPC) activity, is one of the country's level leading EPC player in the power sector and infrastructure sector and that due to various country level power sector and infrastructure sector probl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the demand. After verification of the data provided by the Income Tax Department, the Corporate Debtor noticed some errors in the dates, which it corrected and submitted vide letters dated 22.09.2015 and 20.10.2015 to the Income Tax Department and requested the said Department to drop the interest demand because of the fact that, as per the corrected data there was no delay on which the interest was already calculated and paid. It is the case of Corporate Debtor that the IT Department did not take the rectified data into consideration and did not consider the request of the Corporate Debtor to drop the interest demand but proceeded with show cause notice for prosecution even though there was no. offence in this regard. 7) That, the Corporate Debtor received a show cause notice dated 15.01.2016 and 09.0202016 u/s 279 from Commissioner of Income Tax, CITTDS(I), New Delhi alleging that Corporate Debtor had deducted TDS but had deposited the same into government account after due date from the date of deduction of such tax. 8) Despite the Corporate Debtor requesting for relief, the Assistant Commissioner of Income Tax (CCIT) (Respondent No.4 herein) filed prosecution case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 279 (2) of the Income Tax Act, 1961 was filed after twelve months period from the date of filing of prosecution complaint by Income Tax Department. The Applicant subsequently in his individual capacity made a Representation to the Principal Commissioner of Income tax on 29.11.2018 stating that Central Board of Director Taxes had revised the guidelines for compounding of offences and said guidelines do not prescribe any limitation for filing application for compounding. The Applicant further stated in the said Representation that the Hon'ble Apex Court in various judgements from time to time clarified that there is no limitation for filing compounding application and to consider the same. The said application is pending before the Income Tax authorities as on date. 12) It is averred, the Corporate Debtor is under Liquidation process as per orders passed by this Tribunal on 27.08.2018 and that Sri G. Venkatesh Babu / Applicant herein cannot represent the Corporate Debtor officially as well as in his personal capacity. Therefore, the Applicant avers that the only way to stop the ongoing prosecution process is to apply for compounding and pay the compounding fees and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not arise out of / in relation to the CIRP or liquidation of the Corporate Debtor. (2) Further, the Liquidator avers that Sections 33 (5), 35 (1) (k) R/w Section 60 (5) of the Code under which the Application is filed, have no applicability on the present facts and as such the Application deserves to be dismissed. (3) The Liquidator reiterates that Section 33 (5) of the Code provides that once an order of Liquidation is passed, no suit or other legal proceedings to be instituted by or against the Corporate Debtor. It is the case of Liquidator that the said Section has no application to the present case as the prosecution by the IT Department was already initiated prior to passing Liquidation order. Further, as per Section 35 (1) (k) of the Code, subject to the directions of the Adjudicating Authority, the Liquidator shall have the power and the duty to institute or defend any suit, prosecution or other legal proceedings, civil or criminal and does not give any right to the Applicant to seek relief of any nature. (4) It is averred the criminal prosecution was launched under the provisions of Section 276B of the IT Act. This provision attach itself personally to the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant herein denies the averment made by the Resolution Professional that the prosecution is prior to initiation of CIRP and that the Liquidator is obligated to deal with all aspects of the assets and liabilities of the Company. (4) The Applicant denies the averment made by Resolution professional that Section 33 (5) and 35 (1) (k) R/w Section 60 (5) of the Code have no applicability to this case. It is contended, after the commencement of liquidation, any procedure and relief sought would be with the permission and approval of this Tribunal. (5) The Liquidator being representative and guardian of the affairs of 2 nd Respondent Company, ought to have accepted the request of the Applicant in defending / pursuing the case against 3 rd and 4th Respondents but is acting contrary to the interest of the Company. (6) It is the case of Applicant that since the Corporate Debtor Company is under Liquidation process, he has no other remedy but to approach this Tribunal for justice. Thus Sections 33(5) and 35 (1) (k) R/w Section 60 (5) confers jurisdiction upon this Tribunal to adjudicate the Application and pass suitable orders. (7) It is again reiterated by Applicant that he is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring No. 530366/2016 pending before Additional Chief Metropolitan Magistrate (Special Acts) Tis Hazari Court, Delhi. He is seeking relief either to direct the Liquidator appointed for the Corporate Debtor Company, which is under Liquidation, to file an Application for compounding and in the alternative to permit the Applicant to pay compounding fee if any payable as imposed by Additional Chief Metropolitan Magistrate and the same may be reimbursed to him by the Liquidator. 6. The contention of Applicant, during Financial Year 2012-2013, the Corporate Debtor suffered with lack of sufficient cash flow and as a result there was delay in depositing TDS. After improvement in the finances, the Corporate Debtor remitted the TDS along with interest to the Department. However, a show cause notice was issued to the Corporate Debtor alleging default of Rs. 11,58,946/- which was stated to have been deposited after due date. It is the case of Applicant, he has submitted sufficient information to the Income Tax Department questioning the show cause notice and requested the Department to stop proceedings. The interest was calculated for the delay period and TDS was remitted. However, IT Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Applicant herein is attending the court in connection with prosecution launched against the Corporate Debtor, the expenses if any incurred for payment of compounding fee shall be made by the Liquidator. 9. The Applicant in the alternative is seeking a direction to the Liquidator to make a provisions for reimbursement of any compounding fee paid by the Applicant since it is the duty of the Liquidator during Liquidation to defend the Corporate Debtor and if Applicant pays compounding fee, the Liquidator has to reimburse the compounding fee to be paid by the Applicant and for this purpose the Liquidator is directed to make sufficient provision for payment on priority basis. Therefore, the Liquidator cannot avoid the liability on the ground proceedings were initiated against the Corporate Debtor prior to CIRP. The fact remains proceedings are still pending against the Corporate Debtor even during Liquidation. Therefore, responsibility lies on the Liquidator to pay the compounding fee if any levied by the court against Corporate Debtor basing on the Application filed for compounding. 10. In the result, the Application is allowed, directing the Liquidator to reimburse to the Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself is illegal, against provisions of the Code and after the CIRP period is over, the applicant is entitled to restitution and the Resolution Professional is bound to return the sum of to the applicant and the same cannot form part of the assets of the corporate debtor. 3. Reply on behalf of Respondent to the Application filed by M/S. Dynamics S.S.Engineering Co. Pvt Ltd. a. Respondent denied the averments made by the applicant. The present application has been filed alleging seeking stay on invocation of the Bank Guarantee No.80021FIBG150007 and a declaration that invocation of the Bank guarantee vide letter dated 24.04.2018 is illegal. b. Respondent averred that the Bank Guarantee in question has already been invoked hence the prayer for stay on invocation of the same has become infructuous. c. Respondent avers that the present application is not maintainable as the respondent acted in accordance with the provisions of the code and has duly verified the claim of the applicant based on the information available. d. It is averred that CIRP is a time bound process and the proceedings do not envisage a process by which the RP is required to communicate the reason for rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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