Laser Solar LLP vs Kannan Tiruvengadam

ORDER

a. Direct that 25th June, 2022 i.e., the date of issue of the sale certificate by the Respondent Liquidator shall be deemed to be the date of acquisition ("Acquisition Date") of the said Company by the Applicant on a going concern basis;

b. Direct the Registrar of Companies, Ministry of Corporate Affairs and all other statutory bodies connected thereto and/or regulatory authorities regulating and overseeing the business of Corporate Debtor to ensure a seamless transition and/or transposition of the Applicant and its nominees as the shareholders, directors and/or key managerial persons of the said Corporate Debtor;

c. Declaration that no creditor of the said Corporate Debtor whether operational and/or financial, having any claim of any nature whatsoever in respect of a period prior to the Acquisition Date can raise such claim or demand payment in respect thereof from the Applicant;

d. Declaration that the Applicant is entitled to all licenses and approvals and is entitled to all contractual rights and benefits of the said Corporate Debtor and that such licenses and approvals and/or contractual rights and benefits would continue to vest in the said restructured and revived company and/or in the Applicant. of India;

e. Declaration that the Applicant and/or the revived and restructured Corporate Debtor is not liable in respect of any tax liability accruing before and/or prior to the Acquisition Date.

f. Declaration that the Applicant and/or the restructured and revived company have no liability for any past actions and/or omissions and/or for any noncompliance of the applicable laws by the erstwhile directors, shareholders and/or key managerial persons of the said Corporate Debtor;

g. Declaration that the Applicant and/or the said revived and restructured Corporate Debtor has no liability in respect of any litigation investigation enquiries and/or liabilities connected there with and/or arising there from in respect of any claim deed action or thing which has taken place prior to the Acquisition Date;

h. Declaration that the Applicant is entitled to the continuation of all rights, leases and/or other benefits attached to any land belonging to and/or held by the said Corporate Debtor;

i.

Declaration that the Applicant is entitled to all co-operation and support from Government Agencies, Statutory authorities and/or other entities discharging public duties and functions to carry out the objectives of the Code in restructuring and reviving the said Corporate Debtor as a 'going concern';

j. Direct that the utility providers for the essential services e.g. power Supply Company, water supply authority to restore uninterrupted supply of power and water with immediate effect;

k. Direct that no utility supplier, should withhold / delay supply of utility on the ground of non-payment of dues prior to the Acquisition Date.

l. Grant the reliefs and concessions as prayed for in Annexure A;

m. Ad-interim order in terms of the prayers made above;

n. Such further or other order or orders be passed and/or direction or directions be given as this Hon'ble Tribunal may deem fit and proper.

3. Submissions of the Applicant in I.A. no. 953/KB/2022:

c. No approval / consent shall be necessary for issuance of New Equity Shares in accordance with Section 42 and Section 62(1)(c) of the Companies Act, 2013 and other applicable law.

	On and from the Acquisition Date of the Corporate Debtor, the
status of the Corporate Debtor in the records of the Registrar
of Companies should be reflected as 'active' from the status of
'under liquidation' and necessary instructions in this regard are

issued to the Registrar of Companies;

e. a direction be issued for issue of equity shares amounting to Rs.1,00,00,000/- divided into 10,00,000 equity shares of Rs. 10 each, by the Corporate Debtor in the name of nominees of the Applicant;

f. From the Date of Acquisition, the Board of Directors of the said Company be reconstituted as per the Companies Act, 2013 by removing the erstwhile directors and appointing the directors nominated by the Applicant and the Registrar of Companies do all such acts, deeds and things that are necessary in that regard and to enable the said Company to file relevant returns required by law;

g. The Registrar of Companies to record satisfaction of all charges that have been created and remained unsatisfied prior to the Date of Acquisition and liquidator to submit necessary compliance including filing of prescribed returns in this regard with Registrar of Companies and making necessary entries thereof in the Statutory Records of said Company.

2.

No action by creditors

a. On and from the Acquisition Date, no Financial Creditors or Operational Creditors shall be entitled to take, initiate, institute or continue any suits, steps or proceedings against the said Company or its assets (whether by way of demand, legal proceedings, alternative determination process including arbitration or an expert determination process), the levying of distress, execution of judgment, decree or order, or otherwise) in any court of law, tribunal, arbitration panel or other authority in any jurisdiction whatsoever (including taking any action to foreclose, recover or enforce any security interest created by the said Company in respect of its property (including any action. under SARFAESI)) for the purpose of obtaining payment of any liability;

b. The creditors (secured or unsecured) of the said Company shall deemed to have issued no-objection on the Acquisition Date and the security created in favour of the secured creditors shall be released, extinguished and all the financing and security documents shall terminate without any further act of the said Company; It is further prayed that the secured creditors shall be directed to return all the title deeds and documents deposited with the respective secured creditors be returned to the said Company/Applicant on an immediate basis;

c. Any bond, surety, guarantee, power of attorney, undertaking issued by the Corporate Debtor to any person, either in India or outside India before the Acquisition Date shall stand cancelled and permanently revoked;

d. Direction be issued to the Liquidator to, immediately, (i) write back all the liabilities of the Corporate Debtor, including creditors, term loans, working capital loans, tax liabilities, other statutory liabilities, other payables etc. which are not payable and reflect the total liabilities at the amount of the consideration (as reduced by the amount of insolvency resolution process costs and the liquidation costs) determined in the auction; and (ii) the assets which are not recoverable (debtors, inventories and loans and advances, etc.) should be written down to their realizable value; in the financial statements (Profit and Loss Account and the Balance Sheet) of the Corporate Debtor as on 31 March 2022. The said financial statements should be prepared and filed by the Liquidator with the relevant regulators such as Registrar of Companies, Income Tax Authorities, etc.;

e. Direction be issued that all known or unknown, claimed or unclaimed, disclosed or undisclosed, crystallised, uncrystallised, contingent or assessed dues/liabilities/obligations/risks/penalties etc., of any nature whatsoever and may have a financial impact, as on the Acquisition Date and for the period prior to the Acquisition Date, including but not limited to, prior claims of all creditors (whether secured or unsecured), workers, employees, statutory authorities on account of Income Tax, Sales Tax, GST, Service Tax, DGFT, Excise, Customs etc. or shareholders, should be extinguished/ waived/infructuous, once the distribution of the Purchase Consideration is made by the Liquidator, as per the provisions of the Code and Regulations thereof and specifically as per section 53 of the Code, as full and final settlement of their dues.

3. Related to Licenses/ Approvals/Contractual Rights and Benefits

a. All subsisting consents, licenses, approvals, rights, entitlements, benefits and privileges whether under law, contract, lease or license, granted in favour of the said Company or to which the said Company is entitled to, including but not limited to slag procurement license, shall, notwithstanding any provision to the contrary in their terms and irrespective of the commencement of the insolvency/liquidation proceedings under the Code, in relation to the said Company be deemed to continue without disruption, for the benefit of the said Company; and

b. All subsisting consents, licenses, approvals in respect of the factory of the said Company, shall be renewed/ regularised, subject to all compliances in that regard by the by the said Company/applicant on and from the Acquisition Date;

c. All the existing contracts and arrangements with the Existing Promoters/ Directors of the said Company shall stand terminated on and from the Acquisition Date. Save and except the contracts and arrangements which shall be terminated by the said Company / Applicant, all other contracts and arrangements shall remain in existence on the same terms and conditions.

d. The Liquidator to complete all compliances for the period up to the Date of Acquisition including but not limited to filing of necessary documents and returns with the Registrar of Companies, Income Tax Authorities, GST Authorities, Provident Fund Authorities any other Government or Statutory or Regulatory Authorities should be completed and necessary entries in that regard be made in the statutory records of the said Company.

e. Delays in filing of the statutory records by the said Company prior to the Acquisition Date be condoned without any liability of whatsoever nature. Any filing done to regularize the records shall be deemed to have been filed in the normal course within the stipulated time;

f. The said Company / Applicant would be entitled to use any valid warranties or guarantees related to any plant and machineries or other assets purchased prior to the Acquisition Date.

4. Related to Taxes

a. Approved 'private bid' be considered as a 'resolution plan' approved by Hon'ble NCLT, under any law for the time being in force, in view of the spirit of IBC legislation;

b. The bid submitted by the Applicant should be considered as resolution plan under Section 79 of the Income tax Act, 1961 after providing an opportunity of being heard to the income tax authority;

c. The brought forward tax losses of the Corporate Debtor be permitted to be carried forward and set-off against the taxable income (notwithstanding anything to the contrary contained in section 79 of the Income tax Act, 1961) as change of shareholding of the Corporate Debtor is happening pursuant to the bid submitted by the Applicant under the E-Auction Process. For doing so, an opportunity of being heard may be provided to the income tax authority;

d. The requirement and applicability of certificate under section 281 of the Income-tax Act, 1961 and provisions of taking over its predecessor's tax liability under Section 56 and Section 170 of the Income Tax Act, 1961 shall be deemed to be complied with (consider 'waived) on the Acquisition Date;

e. Any write back / written down of liabilities should not be treated as taxable income subject to tax, as per the provisions of the Income tax Act, 1961 (including provisions of section 115 B), as the said waiver is on account of private bid approved by the Hon'ble NCLT. For doing so, an opportunity of being heard may be provided to the income tax authority;

f. The relevant tax authorities to allow setting off of summation of book losses and unabsorbed depreciation for the purpose of computing book profit under section 115 B of the Income tax Act, 1961. For doing so, an opportunity of being heard may be provided to the income tax authority;

g. The Applicant and / or its nominees will have a liberty to undertake the necessary measures towards revival of the Corporate Debtor / business of the Corporate Debtor, as may be necessary to maximize the value / utility of the Corporate Debtor or its businesses / assets, including but not limited to corporate restructuring by way of merger or demerger or amalgamation, consolidation of shares etc. in view of the spirit of insolvency legislation;

h. Direct that, any requirements to obtain waivers from any tax authorities including in terms of Section 115 B of the Income Tax Act, 1961 shall be deemed to have been granted on the Acquisition Date and the procedure stated under the aforesaid sections shall be deemed to be complied with on the Acquisition Date;

i.

Direct that the transactions contemplated for sale of the assets of the said Company under the e-auction notice shall not be considered as void under Section 81 of the Central Goods and Service Tax Act, 2017 and the concerned authority shall not impose any successor liability on the Applicant and the said Company in respect of such sale of the assets of the said Company;

j. All assessment/ re-assessment/ revision/ penalty/ appellate or other proceedings pending in the case of the said Company as on the Acquisition Date, relating to the period prior to that date, shall stand terminated and all consequential liabilities, if any, shall be waived and shall be considered to be not payable by the said Company;

k. All notices issued under the provisions of the respective Acts to initiate any proceedings viz. assessment/ re-assessment/ revision/ penalty/etc. against the said Company in relation to the period prior to the Acquisition Date shall be considered withdrawn and shall not be proceeded against; 1.

l. Any proceedings which were kept in abeyance in view of insolvency process or otherwise shall not be revived after the Acquisition Date;

m. No further demand for period prior to the Acquisition Date shall be raised by the respective Departments;

n. All tax litigations, prosecutions, tax legal proceedings, suits, demands, notices, show-cause notices, demand notices, actions, arbitration or administrative, judicial, quasi-judicial, regulatory, government or any enforcement agencies, pending or threatened against the said Company or whose outcome adversely effects the said Company arising prior to or after the Acquisition Date, shall be deemed to have been withdrawn or dismissed and will be deemed to have been barred with effect from the Acquisition Date;

o. Relevant authorities to provide unconditional exemption from stamp duty, registration fee and similar local taxes levied pursuant to the acquisition of the Corporate Debtor;

p. The Applicant or its nominees or the Corporate Debtor are allowed to file the return of income or revised return of income, as the case may be, if required to give the effect of Acquisition of the Corporate Debtor.

5. Related to liability for past actions or omissions or non- compliances under applicable laws

a. Direct that any non-compliance of provisions of any laws rules, regulations, directions, notifications, circulars, guidelines, policies, licenses, approvals, consents or permissions including any suspension, cancellation, revocation or termination, by the said Company and/or its Directors and/or Key Managerial Persons prior to the Date of Acquisition shall be deemed to be extinguished and/or regularised automatically, as the case may be, on the Acquisition Date, without imposition of any penalty or fine or interest or similar charge;

b. The relevant Governmental Authorities shall not initiate any proceeding in relation to any non-compliances with Applicable Law by the said Company during the period prior to the Acquisition Date. Neither shall the Applicant, nor the said Company, nor the directors, officers and employees thereof appointed on and from the Acquisition Date be liable for any violations, liabilities, penalties or fines with respect to or pursuant to the said Company not having in place requisite licenses and approvals required to undertake its business as per applicable law, or any non-compliances of applicable law by the said Company.

6. Litigations, liabilities, inquiries, investigations etc.

a. Direct that the all inquiries, investigations, assessments, notices, causes of action, suits, claims, disputes, litigations, arbitration, or other judicial, regulatory or administrative proceedings against, or in relation to, or in connection with the said Company or the affairs of the said Company (other than against the Erstwhile Promoters or former members of the management of the said Company), pending or threatened, present or future, in relation to any period prior to the Date of Acquisition or arising on account of the acquisition shall be deemed to be withdrawn or dismissed, without imposition of any penalty or fine or interest or similar charge.

7. Land and property related reliefs:

a. Each asset (including properties, whether freehold, leasehold or license basis) of the said Company shall be vested in the said Company free and clear of all encumbrances from the Acquisition Date;

b. Direction be issued that the Applicant or its nominees shall in no event be held responsible for any liabilities/ obligations/ risks of the Corporate Debtor, pertaining to the period prior to the Acquisition Date and the same should be dealt with as per the provisions of the Code;

c. Waiver of any property tax, lease rent shall be deemed to have been permanently extinguished with effect from the Acquisition Date;

d. All the assets including uninstalled assets, whether tangible or intangible, shall be free from any options, pledge, mortgage, lien, charge, security interest, adverse claim, pre-emptive right, attachment (whether any provisional or exceptional), restraint, covenants or conditions, claim, debenture, hypothecation, deposit by way of security, bill of sale, beneficial ownership (including usufruct and similar entitlements), public right, common right, way leave, any other interest held by a third party or such other encumbrance;

e. Further the Adjudicating Authority may be pleased to direct that the change in control of the said Company pursuant to sale and transfer of the said Corporate Debtor as going concern shall not constitute any transfer of such land under Applicable Laws or under any contract of lease, sub-lease, rent or license and accordingly no further act, deed or thing shall be necessary to be complied with by the said Corporate Debtor under the Applicable Laws and it shall be deemed that all such statutory compliances/ compliances have stood complied with on the Acquisition Date so that the said Company continues to enjoy continuous ownership use possession and occupation of the lands in question without any interruption or objections or obstructions in order to keep the said Company a going concern;

f. The Adjudicating Authority may be pleased to direct that the Corporate Debtor or the Applicant shall not be liable to pay any charges levied and/or to be levied under any contract of lease, sub-lease, rent or license pursuant to the change in control of the said Corporate Debtor because of the sale and transfer of the said Corporate Debtor as going concern.

8. Others

a. The said Company / Applicant shall be allowed to pursue and/or contest any claim made by the said Company, including but without limitation, claims from the insurance and subsidy.

b. The Applicant or its nominees be permitted to conduct the affairs of the Corporate Debtor, post the Acquisition Date in the manner as they may deem fit and consider appropriate;

c. The name of the Corporate Debtor shall be excluded / deleted from the credit information bureau, as a defaulter and for availing fresh loans from the banks and financial institutions, past track records of the Corporate Debtor including defaults made should not be taken into the account;

d. No adverse implications including but not limited to imposition of any fine, fee, interest, penalty, or similar nature, under any law or regulation or decree or notification or circular or agreement or contract etc, should be allowed pursuant to the change in shareholding and management of the Corporate Debtor;

e. Statutory Authorities shall release any deposits, incentives, benefits, subsidies etc, if any, due to the said Corporate Debtor expeditiously to ensure an early revival of the business of the said Corporate Debtor;

f. Corporate Debtor shall be allowed to participate in the auction/ sale/ tender/ offer/ proposal of all department/ authorities/ public sector undertakings for a period of 3 years from the Acquisition Date without having to submit the details of past revenue, past performance, profitability records, net worth or criteria of similar nature;

g. The Liquidator to cooperate with and provide all necessary support and assistance to the Applicant including handing over of all papers, documents, relevant letters/ notices, fixed asset register of the said Company, etc, for the period prior to the Acquisition Date.

4 Submissions of the Applicant in Supplementary Affidavit dated 03.05.2023:

5 Analysis and Findings:

“ 22. It is no longer Res Integra that while approving a 'Corporate Debtor' sale as a 'going concern' in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the 'Corporate Debtor' is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a 'going concern' and after payment of the sale proceeds distributed in accordance with Section 53 of the Code. The Impugned Order in I.A. 889 of 2020 is modified to the extent that the sale of the first Respondent as a 'going concern' is upheld and the direction sought for in prayer (c) & (e) in CA No. 1189 of 2019 seeking extinguishment of past/remaining unpaid outstanding liabilities including contingent liabilities, prior to the sale as

^“61. All these details are required to be contained in the information memorandum so that the resolution applicant is aware, as to what are the liabilities, that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the Corporate Debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stake-holders after it gets the seal of approval from the Adjudicating Authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is, that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is, that he should start with fresh slate on the basis of the resolution plan approved.

62.

This aspect has been aptly explained by this Court in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra).

“107.

For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count.” “

“Law is well-settled that with the finalization of insolvency resolution plan and the approval thereof by the NCLT, all dues of creditors, Corporate, Statutory and others stand extinguished and no demand can be raised for the period prior to the specified date.”