TMI Blog2022 (9) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... plan was pending before the Adjudicating Authority and the Adjudicating Authority vide the impugned order disposed of the said I.A. and against the same an appeal is also pending before this Tribunal, in which the matter was heard and Reserved for Orders - this Tribunal finds that the Claim of the Respondent is belated and cannot be considered and the finding of the Adjudicating Authority in directing the Appellant / RP to place the Claim of the Respondent in Form-C before CoC per se illegal and unsustainable. Accordingly, the point is answered against the Respondent. Whether the Resolution Professional has power to admit the Claims suo-motu? - HELD THAT:- The I B Code, 2016, prescribes the duties to be performed by the Interim Resolution Professional and Resolution Professional as per Section 18 and Section 25 of the Code. The IBBI CIRP Regulations prescribed the procedure to be adopted followed. As per Chapter IV Regulation 7 the claims by Operational Creditor to be submitted with proof to the IRP in Form-B and as per Regulation 8 of the Regulations the Financial Creditors shall submit the Claims to the IRP in Form-C. After receipt of claims, the IRP shall verify the Clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the websites of the Corporate Debtor and also on IBBI s website. While so, the promoters of the Corporate Debtor approached the Hon ble Supreme Court in Associate Holding Private Limited Vs. Union of India filed WP (C) No. 1391 of 2018 (tagged along with Dharini Sugars and Chemicals Ltd. Vs. Union of India). The Hon ble Supreme Court passed a status quo order in the said writ petition on 30.11.2018. 4. It is submitted that as per Form-A the claims were to be submitted on or before 10.12.2018 and the Appellant received the claims, verified, collated and admitted as described in para 7.5 of Appeal paper book. The Hon ble Supreme Court pronounced the judgment and the judgment did not have a bearing on the present proceedings. Since the status quo order stood vacated, the CoC in its meeting held on 12.04.2019 agreed that the CIRP could now continue. In view of status quo order, the CIRP could not be completed and Appellant filed an I.A. before the Adjudicating Authority seeking exclusion of 154 days from the CIRP which was allowed and excluded the period. 5. It was found that the Corporate Debtor had availed the special incentives and concessions scheme issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant was directed to file an application before the Adjudicating Authority for its approval. 8. It is submitted that at the belated stage the Assistant Commissioner of Commercial Taxes, Bangalore filed I.A. No. 134 of 2020 on 05.03.2020 seeking setting aside the Appellants order rejecting the claim of the commercial taxes of Rs. 54,46,13,819/-. While matter stood thus, the Respondent filed W.P. No. 14815 of 2020 before the Hon ble High Court of Karnataka seeking to declare that the constitution of CoC and all the proceedings in the CIRP are null and void and quash all further proceedings with respect to METLs resolution plan and sought a direction to the Appellant to reconstitute CoC by including the Respondent etc. The said claim was solely based on an industrial concession given to industries in State of Karnataka and as such there was no disbursement of amounts at all. The Respondent has not filed any Form-C . Hon ble High Court initially granted stay of pending proceedings before the Adjudicating Authority . The Hon ble High Court on 04.03.2021 directed the Respondent to file an application before the Adjudicating Authority with respect to its claim within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be faced with undecided claims after the resolution plan submitted by that applicant is approved by the CoC . 12. In view of the reasons as stated above the Learned Senior Counsel prayed this Bench to allow the Appeal and set aside the impugned order passed in I.A. No. 85 of 2021 in C.P. No. 51 of 2018. Respondent s Submissions: 13. The Respondent filed its reply vide diary No. 819 and stated that the Adjudicating Authority determined two issues in the above I.A. viz. (a) whether the claim of this Respondent should have been considered by the Resolution Professional based on the books of accounts of the Corporate Debtor (b) whether the basis of the claim of this Respondent amounts to a financial debt. 14. The Respondent extended the loan facility to the Corporate Debtor and the Corporate Debtor had provided bank guarantee to the extent of Rs.20,80,44,296/- to this Respondent. Under the loan agreement, the Corporate Debtor was obligated to renew bank guarantees. Since the Corporate Debtor failed to renew the bank guarantee and this Respondent wrote a series of letters dated 22.05.2020, 28.05.2020, 04.07.2020, 04.09.2020 requesting to renew b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka, Department of Industries and Commerce as a Financial Creditor in Form-C shall be put up by the RP to the CoC for its consideration/acceptance, in the light of our findings and decision in the forgoing paragraphs. Reconstitution of the CoC will also be considered by the RP . 20. From the aforesaid directions, it is clear that the Adjudicating Authority declared as under; (a) Respondent i.e. State of Karnataka Department of Industries and Commerce as a Financial Creditor , (b) The claim of the Respondent herein shall be put up by the RP to the CoC for its consideration/acceptance. 21. The basis arriving such finding by the Adjudicating Authority on the following facts. 22. The Corporate Debtor approached the Respondent (being the Department of Industries of Commerce which acts as a catalyst for the overall development of the industrial sector in the State of Karnataka) to avail sanction of loan under the special incentives and concessions scheme on 28.12.2021. The project of the Corporate Debtor to establish a wood base industry for manufacture of particle boards etc. with an investment of Rs.495.29 crores. The Respondent approved and reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent to move before the NCLT for its claim. Accordingly, the I.A. No.85 of 2021 came to be filed before the Adjudicating Authority seeking reliefs as prayed therein. 26. The Adjudicating Authority while deciding the aforesaid I.A. No.85 of 2021 framed issues whether the Respondent claim would amount to a financial debt and whether such claim can be considered even if not submitted within the period stipulated under Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons), Regulations 2016. 27. In regard to the aforesaid issues the Adjudicating Authority para 9 and para 12(8) of the impugned order (at page no. 80 84 of appeal paper book) held as under: 9. Hence, we are of the view that the Respondent s argument that no actual money was disbursed for the time value of money and that there was no financial debt has to be rejected and the said transaction has to be considered as Financial Debt under Section 5(8) of the Code. 12(8) Hence, since the time lines referred to in Regn. 12(2) are held to be directory in nature the claim made by the financial creditor even after the last date ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arting from the eleventh year, not acceding 50% of the investment made by the unit. 2. 95% of the CST generated by inter-state sales of the end products to be reimbursed in the initial 5 years. 3. Exemption from payment of electricity duty in the initial 5 years from the date of commencement of commercial production on the power supply received from ESCOMs or power utilized from captive generation. 4. Eligible gross VAT should be worked out based on the following principles. i. For sales made by the industrial unit meant for final consumers within the state, the Gross VAT on this transaction will be the Eligible Gross VAT. ii. For sales made by the industrial unit to other declares within the state who in turn make inter-state sales, stock transfer or export sales, the buying dealer(s) will be eligible to claim ITC equivalent to Gross VAT on this turnover. The Gross VAT on this turnover will not be eligible for the loan incentive. iii. Any sales or purchase between the company and its ancillary units or downstream units will be eligible for the VAT loan in the hands of one entity only. The same transaction will not be considered for the VAT Loan twice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial Debt would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. 32. In view of the Judgment of the Hon ble Supreme Court (supra) even if the money borrowed does not carry any interest and include Interest Free Loan advanced to finance the business operations of a corporate body, would amount to financial debt within the meaning of Section 5(8) of the Code. Therefore, the stand of the Appellant that there is no interest component for the claim made by the Respondent is negatived. 33. From the above Government Order , it is seen that there is no time value of money involved in such an arrangement. The Hon ble Supreme Court in Phoenix ARC Pvt. Ltd. Vs. Spade Financial Services Limited Ors. reported in (2021) SCC Online SC 51 para 50 held as under: The IRP in his letter dated 25.05.202018 has noted that as per the ledger provided by Spade, no interest was claimed on the alleged debt and no adjustment was made regarding the payment of Principal or interest by the Corporate Debtor to Spade. It has been submitted in the written submissions filed on behalf of Spade and AAA that the auditors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peration 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 . 30. 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 . 37. Further, the Hon ble High Court of Madras in Ruchi Soya Industries Ltd. Vs. Union of India Anr. in W.P. No. 31090 of 2015 dated 26.04.2021 held that the customs duty is Operational Debt at paragraph 80 as under: 80. The petitioner shall therefore file an appropriate application before the National Company Law Board and get the issue clarified from the National Company Law Board that the indeed crown debts like the differential customs duty payable to the respondent under the subject bill of entry which is the subject matter of the present writ petition were treated as operational debt before it by the corporate applicant . 38. Point No. 2..... 39. It is an admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publication of Form-A. CIRP is a time bound process and if the Adjudicating Authority sets the clock back, it would certainly go against main objective of the Code. 40. Further, this Tribunal in the matter of Deputy Commissioner of GST Central Excise Vs. Mr. Vijay Kumar V. Iyer in Company Appeal (AT) (Ins) No. 604 of 2021 para 10 12 held as under: 10. We have gone through the Appeals and although it is stated that collectively Hundred Crores are involved with regard to both the Appeals, the fact remains that till the Resolution Professional was approved no claim was submitted by the Appellants in both these Appeals. The Impugned Order shows that these were proceedings arising out of Company Petitions of 2018 and thus the excuse of Covid-19 which attracted Lockdown in March, 2020 is not appealing. 12. Keeping in view above observations of Hon ble Supreme Court of India, we do not find any reason to entertain these Appeals. Even if the Resolution Plan has been challenged in other Appeals by other entities succeeds, fact would still remain that the claims of the Appellants were never filed during CIRPs and thus there was no question of considering the same in the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otu? 45. The I B Code, 2016, prescribes the duties to be performed by the Interim Resolution Professional and Resolution Professional as per Section 18 and Section 25 of the Code. The IBBI CIRP Regulations prescribed the procedure to be adopted followed. As per Chapter IV Regulation 7 the claims by Operational Creditor to be submitted with proof to the IRP in Form-B and as per Regulation 8 of the Regulations the Financial Creditors shall submit the Claims to the IRP in Form-C . After receipt of claims, the IRP shall verify the Claims in accordance with Regulation 13 and the IRP maintained list of creditors containing Names of Creditors along with the amount claimed by them, the amount of their Claims admitted and the Security Interest, if any, in respect of such claims. There is no such provision that the IRP shall admit the Claim without filing a Claim either in Form-B or in Form-C . Therefore, this Tribunal , is of the view that the IRP suo-motu cannot admit the Claims without their being a Claim by the `Claimants viz. `Operational Creditors , `Financial Creditors and the Claims by other Creditors . Every Claim shall be submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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