Gandhamardhan Sponge Industries Pvt. Ltd. vs Income Tax Department and Anr.

Per: D. Arvind, Member (Technical):

The Court congregated through hybrid mode.

Heard Ld. Counsels for the parties.

This application has been preferred by Gandhamardhan Sponge Industries Pvt. Ltd. (hereinafter referred as “Applicant/Corporate Debtor”) against the Deputy Commissioner of Income Tax Circle One, Cuttack (hereinafter referred as “Respondent/IT Department”). The present application has been instituted by the Successful Resolution Applicant (SRA) of Gandhamardhan Sponge Industries Pvt. Ltd. seeking:

The present application has been preferred by the applicant seeking directions/reliefs mentioned above alleging the sanction of resolution plan by the respondent. This Adjudicating Authority approved the resolution plan of the corporate debtor, Gandhamardhan Sponge Industries Pvt. Ltd. vide its Order dated 25.03.2021.

The CIRP of the corporate debtor commenced on 04.10.2019, by virtue of an Order passed by this Adjudicating Authority and entered by way of approval of the resolution professional on 25.03.2021. List of dates and events has been captured in the form of a table as under:

Sl. Date Events No.

Pursuant to the publication in Form B inviting clients, the respondent No. 1 had submitted its claim for an amount of Rs. 55,46,41,862/-. As per the plan, an amount of Rs. 4,43,72,000/-must be paid and the same has been paid on 24.03.2022.

In accordance with resolution plan duly approved by an Order dated 25.03.2021, passed by this Tribunal, the entire claim of the respondent for the period up to the date of approval of the resolution plan of the corporate debtor stands extinguished. Therefore, this notice which pertains to Financial Year 2019-2020 is not maintainable as any demand that can arise stood extinguished, in view of our Order approving resolution plan on 25.03.2021, and hence this application.

Ld. Counsel for Applicant submits that a Successful Resolution Applicant takes over corporate debtor on a fresh led principal and assets any past dues or claims including respondent No. 1 herein stood extinguished and not proceedings can be initiated in respect of dues prior to the period of approval of the resolution plan. In this context, he relies on Ghanashyam Mishra & Sons Pvt. Ltd. V. Edelweiss Asset Reconstruction Company Ltd., reported in 2021 9 SCC 657 & Essar Steel Limited V. Satish Kumar Gupta reported in (2020) 8 SCC 531.

Ld. Counsel submits that the stand taken by the applicant is not acceptable and maintainable because the liability of the petitioner company for Assessment Year 2009-2010, 2010-2011, 2013-2014 and 2014-2015 was settled by this Adjudicating Authority vide its Order dated 25.03.1021. However, the current proceeding is in relation to Financial Year 2019-2020 (Assessment Year 2021). According to the Ld. Counsel this period is not covered by the Order which approved.

He relied on Hon’ble Supreme Court’s judgment rendered in State Tax Officer Vs. Rainbow Papers Limited [citation] to claim that resolution applicant’s approval is invalid for invoking the statutory dues of the tax authority. In view of above, he submits that the application is not maintainable and the same will have to be dismissed.

We find that the Corporate Insolvency Resolution Process of the corporate debtor commenced on 04.10.2019, pursuant to which public announcement in Form B was made by the resolution professional on 05.10.2019, inviting claims from financial and operational creditors.

The respondent herein had submitted its claim in the relevant form amounting to Rs. 55,46,41,862/- on 18.08.2020. The CoC in their commercial wisdom allocated Rs. 4,43,72,000/- against the claimed amount and the same was approved by this Adjudicating Authority vide its Order dated 25.03.2021. It is a well-established law that the corporate debtor was come out of insolvency resolution process by way of successful resolution of its insolvency cannot be settled with past dues as the successful resolution applicant takes over the corporate debtor on a fresh slate principal and assets as such, any dues claimed/unclaimed for the period up to the date of approval of the resolution plan stands extinguished as held by the Hon’ble Supreme Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. V. Edelweiss Asset Reconstruction Company Ltd., reported in 2021 9 SCC 657 and Essar Steel Limited V. Satish Kumar Gupta reported in (2020) 8 SCC 531.

We find that the notice and demand in question is for the Financial Year 2020, whereas the resolution plan was approved on 25.03.2021. Therefore, any dues up to that period stood extinguished consequent to the approval of the resolution plan.

In view of above, we find no merit in the argument made by the respondent and consequently, this I.A. No. 880/KB/2024 is allowed and disposed of by way of granting relief prayed for in this application.

Certified copy of this order, if applied for with the Registry be supplied to the parties in compliance with all requisite formalities.