TMI Blog2021 (4) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... voked in the second impugned demand notice dated 19th June, 2020 - Further, the impugned Demand Notices were not issued to the Petitioner. The tax dues were stated to be recoverable from the corporate debtor in respect of whom an order of liquidation had been passed by the NCLT on 19th November, 2018. There are no substance in the submission of the learned AGP for Respondent Nos. 1 to 3 that the statutory dues of Respondent Nos. 2 and 3, which are in respect of the subject vehicles would follow the subject vehicles and the Respondent Nos. 2 and 3 can claim their statutory dues from the purchaser of the subject vehicles - the dues relatable to the subject vehicles belonging to the corporate debtor can only be recovered under the provisions of IBC viz. waterfall mechanism under Section 53 of the IBC and not from the Petitioner as purchaser. There are no substance in the preliminary issue raised by the learned AGP for the State as to the maintainability of this Petition. Section 14 of the MV Act, 1958 provides any person who is aggrieved by any order of the Tax Authority, may file an Appeal before such person or authority, in such manner within such time and on payment of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x demand notices dated 16th June 2020 and 19th June 2020 issued by Respondent No. 3. 3. The Petitioner further seeks direction against Respondents to allow the Petitioner to approach the local RTO within whose jurisdiction the vehicles are at a standstill for physical verification, fitment of trolley wherever necessary and issuance of renewal of fitness certificate under Rule 62(2) of Central Motor Vehicles Rule and submit form No. 38(A) in the office of Respondent No. 3. 4. The Petitioner is a private limited company incorporated under the Companies Act, 1956 and carrying out transportation business. Respondent No. 1 is the State of Maharashtra through its Transport Secretary having control over Respondent Nos. 2 and 3; Respondent No. 2 is the Transport Commissioner defined under Rule 2(1) of Maharashtra Motor Vehicles Rules 1989; Respondent No. 3 is the Regional Transport Officer defined under Rule 2(f) of the Maharashtra Motor Vehicles Rules 1989; Respondent No. 4 is the Resolution Professional appointed by the National Company Law Tribunal, Ahmedabad Bench. 5. A brief background of facts is necessary. 6. The National Company Law Tribunal ( NCLT ), Ahmedabad Bench pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated letter to the Respondent No. 3 seeking transfer of ownership of the 153 subject vehicles in the name of the Petitioner under Section 50 of the Motor Vehicles Act, 1988 ( M.V. Act ). Necessary Sale Certificate as well as RTO forms signed by the Respondent No. 4 were forwarded to Respondent No. 3 for transfer of the vehicles in the name of the Petitioner. 10. On 18th June 2019, the Directorate of Enforcement issued a provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 ( PML Act ) in relation to all movable properties i.e. 6170 vehicles of the Corporate Debtor. On 3rd December 2019 the Adjudicating Authority under the PML Act modified the provisional attachment by excluding 4826 vehicles which had been taken over by Respondent No. 4 under the provisions of IBC out of which 2336 vehicles had already been sold and amount of sale had been deposited in PNB. 11. Respondent No. 4 addressed a letter dated 26th December 2019 to the Respondent No. 3 seeking removal from the blacklist of about 2929 vehicles registered with its office. Reference was made to the order of the Adjudicating Authority under PMC Act permitting transfer of 4826 vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 153 subject vehicles purchased by the Petitioner. 15. The Petitioner addressed a Representation on 16th October 2020 to the Respondent No. 3 seeking transfer of the subject vehicles after referring to the facts leading to the purchase of the subject vehicles by the Petitioner under the IBC. It was mentioned in the Representation that the subject vehicles were not in use. Thereafter, on 4th November 2020, Respondent No. 1 issued a notification exempting payment of road tax under MMVT Act for a period on and from 1st April 2020 until 30th September 2020 i.e. during the pandemic. 16. Being aggrieved by the action of Respondent Nos. 1 to 3 of not transferring ownership of the subject vehicles purchased by the Petitioner in the auction by Respondent No. 4 and the issuance of the tax demand notices dated 16th June 2020 and 19th June 2020 ( the impugned demand notice ), the Petitioner has filed the present Petition. 17. Mr. Khandeparkar learned Counsel appearing for the Petitioner has submitted that the Respondent Nos. 2 and 3 had issued the impugned demand notices dated 16th June, 2020 and 19th June, 2020 in the name of Respondent No. 4 in relation to payment of tax in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the corporate debtor shall have to be realized under the waterfall mechanism together with all creditors and in this regard the expression used in Section 53 to the effect that the 'distribution of proceeds from the sale of the liquidation assets' is relevant. In the present case, the subject vehicles which had been taken custody of by the Respondent No. 4 as liquidator in accordance with Section 35 of IBC, had been sold in auction as per Regulation 33 read with schedule 1 of liquidation regulations. The dues in respect of the subject vehicles which are statutory dues could only paid or settled in accordance with Section 53(e) (i) of IBC. It is to be noted that the only exception to the waterfall mechanism was in the case of secured creditor. However, in the present case the secured creditor had already relinquished their security interest under Section 52 of the IBC qua assets of the corporate debtor. In any case Respondent Nos. 2 and 3 are not secured creditors qua the subject vehicles. 19. Learned Counsel for the Petitioner has further relied upon Section 238 of the IBC to contend that the IBC has a overriding effect over any other law in time being in force which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that unlike a vessel in admiralty jurisdiction, the subject vehicle which is a truck is not a juristic entity and hence it cannot be contended that the Respondent Nos. 2 and 3 are entitled to follow the subject vehicle or truck. There is no provision which creates a charge or lean on the subject vehicle as regards the amount claimed. The medium for recovery of any amount due from the corporate debtor in liquidation, is not in terms of Section 8 and/or 12 of the MMVT Act, but under the liquidation regulations and IBC. 22. Learned Counsel for the Petitioner has further submitted that under Section 50 of the MV Act, 1988, an application is to be made for transfer of ownership by the transferor which in the present case is Respondent No. 4(Liquidator). No part of Section 50 provides for payment of outstanding tax as a condition precedent to transfer of vehicle. He has thus submitted that the attempt on the part of Respondent Nos. 2 and 3 to read Section 8 of the MMVT Act into Section 50 of the MV Act is not only misconceived but also contrary to plain language thereof. 23. Learned Counsel for the Petitioner has submitted that the Petitioner has filed an application under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that that Any person who is aggrieved by any order of the Tax Authority, may file an Appeal before such person or authority, in such manner within such time and on payment of such fees as may be prescribed . It is further submitted that the Petitioner has already applied under Section 3(3) of the MV Act for invoking non-user clause and the Application of the Petitioner is pending. He has accordingly submitted that the Petitioner should exhaust that remedy before applying herein and hence in view of these preliminary objections, this Petition is not maintainable. 26. Learned AGP has further submitted that it is a cardinal principle of the MV Act, that tax goes along with vehicle which means that at the time of purchase of the vehicles and application for registration, the previous tax has to be cleared by the purchaser. Hence, the purchaser will have to pay the entire tax of the vehicle at the time of registration of the vehicle. He has submitted that the total tax due in respect of the subject vehicles is ₹ 5,36,56,918/- from the year 2013-14 to 2020-21. He has submitted that the Petitioner would have to clear the tax at the time of applying for transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble property belonging to himself. He has submitted that it is clear from the decision of the Supreme Court that where the Petitioner participated in auction proceedings as in the present case conducted by Respondent No. 4 under the IBC and where Respondent No. 4 admittedly issued the auction notice with a specific condition of sale of the subject vehicles on 'as it where it basis', it was for the Petitioner to verify the encumbrance and then to participate in the auction proceedings. 29. Learned AGP for the State has relied upon decision of the Supreme Court in the case of Telangana State Southern Power Distribution Company Ltd. Vs. Srigdhaa Beverages (2020) 6 SCC 404. It has been held that as an auction purchaser, where the bidding is on 'as is where is whatever there is and without recourse basis' the purchaser would have to inspect the premises and make enquiries about the dues in all respects. He has submitted that in this decision, the Supreme Court has observed that the purchaser would necessarily be put to notice on the dues of the various accounts including the electricity dues. 30. Learned AGP for the State has also placed reliance upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the subject vehicles. He has submitted that in view of Section 8 of the MMVT Act, the tax is connected with the subject vehicles and cannot be treated at par with any other liability such as Sales Tax, VAT and Income Tax Act for that purpose which is being referred to as crown debt. He has submitted that merely because the subject vehicles have been published for auction under IBC, that would not override the provisions of Section 8 of the MMVT Act. He has relied upon Section 139 of the MMC Act, 1949 which provides that the actual occupier of the immovable property/premises is bound to pay the property taxes and the definition of the occupier can be seen under Section 2(44) of the said Act. This would include the new purchaser to whom the property is transferred under registered instrument of sale deed who would have to clear the unpaid tax on the said property if not paid by the previous owner. He has submitted that similar provision is there under Section 8 of the MMVT Act. It would thus be for the Petitioner as purchaser to pay the tax in respect of the subject vehicles as the tax on the subject vehicles goes with the subject Vehicles under Section 8 of the MMVT Act. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner and infact the impugned demand notices were addressed to the Respondent No. 4, (Liquidator). In any event he has submitted that the Respondent No. 3 lacks inherent jurisdiction to issue the demand notices against the company which is in liquidation. He has submitted that the claims made in the impugned demand notices would necessarily have to be lodged with the liquidator as the corporate debtor against whom such claims are made is in liquidation. However, the Respondent Nos. 2 and 3 would only be entitled for payment as per the waterfall mechanism under Section 53 of the IBC. He has further submitted that the impugned demand notices are issued in violation of the principles of natural justice and without hearing the Petitioner. He has submitted that the overriding effect as provided under Section 238 read with Section 53 of IBC will prevail over a demand under Section 8 of MMVT Act, 1958. He has submitted that the Petitioner would have no objection, if there is a direction for transfer of ownership of vehicles without quashing any claim of road tax with liberty being granted to Respondent Nos. 2 and 3 to lodge a claim of the said amounts with the liquidator under IBC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor in respect of whom an order of liquidation had been passed by the NCLT on 19th November, 2018. The Respondent No. 4 had been appointed as liquidator under Section 34(1) of the IBC. Thus it is clear that the provisions of the IBC were to apply. 39. It would be necessary to refer to the relevant provisions of the IBC. These are as under:- 5 (21) Operational debt means a claim in respect of the provisions of goods or services including employment or 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 35. Power and duties of liquidator (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:- (a) to verify claims of all the creditors; (b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor; (c) to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report; (d) to take such measures to protect and preserve the assets and properties of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to report the progress of the liquidation process in a manner as may be specified by the Board; and (o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under section 53: Section 38: Consolidation of claims. 38. (1) The liquidator shall receive or collect the claims of creditors within a period of thirty days from the date of the commencement of the liquidation process. (2) A financial creditor may submit a claim to the liquidator by providing a record of such claim with an information utility: Provided that where the information relating to the claim is not recorded in the information utility, the financial creditor may submit the claim in the same manner as provided for the submission of claims for the operational creditor under sub-section (3). (3) An operational creditor may submit a claim to the liquidator in such form and in such manner and along with such supporting documents required to prove the claim as may be specified by the Board. (4) A creditor who is partly a financial creditor and partly an operational creditor shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a secured creditor for any amount unpaid following the enforcement of security interest; (f) any remaining debts and dues; (g) preference shareholders, if any, and (h) equity shareholders or partners, as the case may be. (2) Any contractual arrangements between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction. Explanation.-For the purpose of this section- (i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and (ii) the term workmen's dues shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013). Section 238: Provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and from a corporate debt by liquidation and such corporate insolvency resolution process is to be completed in a time bound manner. Therefore, the entire corporate insolvency resolution process as such cannot be equated with winding up proceedings . Therefore, considering Section 338 of the IBC, which is a subsequent Act to the Tea Act, 1933, shall be applicable and the provisions of the IBC shall have an overriding effect over the Tea Act, 1933. Any other view would frustrate the object and purpose of the IBC. If the submission on behalf of the appellant that before initiation of proceedings under Section 9 of the IBC, the consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is to be obtained, in that case, the main object and purpose of the IBC, namely, to complete the corporate insolvency resolution process in a time bound manner, shall be frustrated. The sum and substance of the above discussion would be that the provisions of the IBC would have an overriding effect over the Tea Act, 1933 and that no prior consent of the Central Government before initiation of the proceedings under Section 7 or Section 9 of the IBC would be required and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96. The Supreme Court has accordingly held that where a Petition is admitted under Section 7 of the IBC recording satisfaction with regard to the default and the debt being due from the Corporate Debtor, then the application under Section 8 of the Arbitration and Conciliation Act, 1996 is not maintainable. The provisions of IBC has thus been held to have overriding effect over the provisions of the Arbitration and Conciliation Act, 1996. 42. Another decision of the Supreme Court relied upon by the Petitioner is Al Champdany Industries Ltd. (Supra) concerns the erstwhile regime of the Companies Act, 1956 and in context of claim of municipal taxes made against the Company in Liquidation. In paragraphs 14 and 16, the Supreme Court held thus:- 14. If the property tax was merely a statutory dues without creating any encumbrance on the property which had cast a duty upon all the auction-purchasers to make an investigation, it would mean that they must try to find out all the liabilities of the company in liquidation in their entirety 16. The Companies Act or any other law does not impose any additional obligation upon the purchaser to make an enquiry with regard to the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the Resolution Professional, would stand extinguished. 46. The claims raised in the impugned Demand Notices would necessarily have to be lodged before the Respondent No. 4 as liquidator and can only be then decided by the liquidator and where claims are not lodged, they appear to stand extinguished. Considering that in the present case, the CIRP proceedings in liquidation have not been completed, it would be open for the Respondent Nos. 2 and 3 to even at this stage lodge their claims before the Respondent No. 4 as Liquidator and their claims can only be satisfied under waterfall mechanism for payment as provided for in Section 53 of the IBC. 47. We find no substance in the submission of the learned AGP for Respondent Nos. 1 to 3 that the statutory dues of Respondent Nos. 2 and 3, which are in respect of the subject vehicles would follow the subject vehicles and the Respondent Nos. 2 and 3 can claim their statutory dues from the purchaser of the subject vehicles. The medium for recovery of the amounts due from the corporate debtor in liquidation considering that these are statutory dues in respect of the subject vehicles which were sold by the Resolution Professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is where is whatever there is and without recourse basis there can be no doubt that the liability to pay the electricity dues exits on the purchaser. The facts of this case is entirely different from the present case and thus would not be applicable to the statutory dues of the Respondent Nos. 2 and 3 which are clearly recoverable from the corporate debtor in liquidation under the provisions of the IBC. The decision of the Supreme Court in Municipal Corporation of Delhi (Supra) relied upon by the learned AGP would also not applicable in the present case. This was not case of a sale by the corporate debtor in liquidation conducted by the Resolution Professional and where the statutory dues are recoverable from the corporate debtor in liquidation under the IBC but was a case of transfer of immovable property, where the liability to pay unpaid property tax prior to transfer would be attracted and the transferee is bound to pay the tax after transfer as per the provisions of the Delhi Municipal Corporation Act. It was further held in the said decision that the said tax constitutes the first charge upon the land and buildings and that while the liability to pay tax lies upon the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the submission of the learned AGP that since the Petitioner had applied under Section 3(3) of the MMVT Act, for invoking non-user clause and such application is pending, it would be necessary for the Petitioner to finish that remedy before moving this Petition. In fact, learned Counsel for the Petitioner has submitted that the Petitioner had no objection if there is a direction for transfer of ownership of the subject vehicles without quashing any claim of road tax. 52. We further find no substance in the submissions of learned AGP that the subject vehicles cannot be transferred under Section 50 of the MMVT Act, 1988 till the statutory dues in respect of the subject vehicles are discharged. The recovery under Section 8 of the MMVT Act and registration and transfer under Section 50 of the MMVT Act are two separate an independent functions and as such they cannot be interlinked. In the present case it is clear from the facts on record as well as the provisions of the IBC that it would be necessary for Respondent Nos. 2 and 3 to lodge their claims before the Respondent No. 4 as liquidator of the corporate debtor. We find no impediment in transferring ownership of the subject ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to the outcome of the Application under Section 3(3) of the MMVT Act. In so far as the issue as to whether the impugned demand notices claiming statutory dues against the Corporate Debtor in liquidation in respect of the subject vehicles prior to their date of their purchase can at all be claimed against the Petitioner as purchaser of the subject vehicles under the provisions of the MMVT Act, we hold that it cannot be claimed against the Petitioner. The impugned demand notices which seek payment of the tax dues under the MMVT Act would also require to be quashed and set aside. Hence the following order:- a) Rule is made absolute in terms of prayer clauses (a) and (b), which read thus:- (a) That by Writ of Mandamus and or by appropriate Writ, Direction and Order of similar nature, Your Lordships be pleased to direct the Respondents to transfer the ownership of the 153 vehicles (List annexed at Exhibit H ) in favour or in name of Petitioner and further pleased to quash and set aside the impugned tax demand notices dated 16th June, 2020 19th June, 2020 issued by the Respondent No. 3. (b) That by Writ of Mandamus and or by appropriate Writ, Direction and Order of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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