Mr. Sarvesh Kashyap vs T.S. Murali

[Per: Barun Mitra, Member (Technical)]

The present application is filed under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 by the Liquidator praying for directions to be issued to the Respondent to hand over the vacant possession of the immovable property bearing number G-158, Block-G, Sector-41, Noida (hereinafter referred to as the “subject property”) to the liquidator for willful disobedience of this Tribunals order dated 21.04.2023 and breach of undertaking dated 20.05.2023 given by the Respondent.

Coming to the factual narrative and the chronological sequence of events, it is pertinent to notice that this Tribunal vide its order dated 21.04.2023 had allowed the Respondent to submit a full and final settlement proposal of dues in respect of all statutory creditors. This Tribunal while giving a chance to the Respondent to submit a settlement proposal had also categorically stated that the same was to be completed within a limited and stringent time frame. With this in mind a timeframe of only two weeks was allowed for submission of the settlement proposal. The Respondent failed to submit the proposal within two weeks and filed I.A. 1937/2023 before this Tribunal praying for two weeks extended timeline. This Tribunal while allowing extended period of 10 days categorically stated in its order dated 11.05.2023 that no application for further extension would be entertained. The Respondent thereafter submitted a settlement proposal on 20.05.2023 which was transmitted to the statutory creditors of the Corporate Debtor by the Liquidator. The Respondent along with their settlement proposal had also given an undertaking that in case their settlement proposal of 20.05.2023 is not accepted by the statutory creditors, he would vacate and relinquish all rights, titles and enjoyments in the subject property. While three statutory creditors viz. the ESIC, EPFO and Income Tax Department had accepted the settlement proposal, the GST Department had communicated on 22.06.2023 that the settlement proposal did not provide for any payment plan and that the Respondent had preferred an appeal before the CESTAT for reducing their interest and penalty. Since the settlement proposal had not been accepted by GST, in terms of this Tribunal’s order dated 21.04.2023 and undertaking given by the Respondent on 20.05.2023, an email was sent by the Liquidator on 26.06.2023 to vacate the subject property. The Respondent instead of vacating the subject property, filed I.A. 2849/2023 before this Tribunal, inter-alia, praying for extension of timeline for a period of one month to comply to this Tribunal’s orders of 21.04.2023 and 11.05.2023. This Tribunal on 07.07.2023 allowed the Respondent extension of one months’ time till 07.08.2023 but left it open for the liquidator to proceed thereafter with liquidation in accordance with the earlier judgement. The Respondent again submitted a revised settlement proposal on 01.08.2023 to the Liquidator which in turn was forwarded to the GST Department for their concurrence. As the GST Department did not respond to the revised settlement proposal, the Liquidator requested the Respondent on 09.08.2023 to vacate the subject property as per their undertaking given earlier. The Respondent instead of vacating the property has requested the Liquidator to reject the claim of Rs.8,26,68,028/- of the GST Department in view of the fact that an appeal filed by them before the CESTAT had been admitted for adjudication.

It is the contention of the applicant/Liquidator that the only property left for realization is the subject property. Only four claims had been admitted of which the amount admitted for the GST Department is 96.22%. The GST Department which is the majority shareholder has not responded to the revised settlement proposal of the Respondent till date. In terms of the order of this Tribunal, the Respondent was therefore required to hand over the property to the liquidator which has not been done in spite of written undertaking having been given to that effect. It has been contended that the Respondent is a habitual offender and has been willfully disobeying and circumventing the orders of this Tribunal on some pretext or the other. There was a willful breach of undertaking given by the Respondent to vacate the subject property at a time when their settlement proposal to the GST Department had been a non-starter on grounds of having been non-responsive. Emphasizing that proceedings under IBC are strictly timebound including the process of liquidation it was contended that delay in the liquidation process is proving detrimental to the interests of both the Corporate Debtor under liquidation as well as the statutory creditors.

It is the counter claim of the Respondent that it had sent an email to the Liquidator to enquire about the exact claim of the GST Department. Since this query remained unanswered by the Liquidator and there was need to ascertain the true and correct position of the dues of the Corporate Debtor in relation to the GST Department, there was some small delay in submitting a draft settlement proposal. Hence, an IA had been filed requesting for an extension of timeline for submission of full and final proposal for which time had been granted by this Tribunal. It was also pointed out that the Respondent have been making genuine efforts to settle the claims of all the statutory creditors. The Respondent contended that it has successfully met the dues of three statutory creditors and hence should not be denied the opportunity to settle the dues of the fourth statutory creditor.

As regards the GST Department, it was stated that they had filed an appeal before the CESTAT with respect to the GST dues of the Corporate Debtor along with condonation of delay application. The CESTAT vide its order dated 17.07.2023 and 25.07.2023 had admitted the appeal for final adjudication. The CESTAT had allowed the delay condonation following which the Respondent had made a mandatory deposit of 7.5% of the principal amount which has led to a stay on the recovery of the claim amount. In support of their contention, attention was adverted to clause 4.2 of Circular No. 984/08/2014-CX issued by Ministry of Finance vide F. No.390/Budget/01/2012-JC dated 16.09.2014. It was pointed out that on the deposit of 7.5% of the principal amount, there is now a stay on the recovery mechanism of the GST Department and the claim cannot be admitted by the liquidator.

The Respondent submitted further that they had already sent an email on 01.08.2023 to the Liquidator apprising of this development and reiterating that GST dues are not recoverable till the final adjudication of the appeal. The claim of the GST Department has become invalid on the ground that the appeal is pending before the CESTAT and hence the claim filed by the GST Department has become infructuous. It has also been stated that the GST Department can no longer recover the claim amount under the IBC and its claim will stand extinguished. It was also asserted that no useful purpose would be served at this stage by pressing ahead with liquidation.

We have duly considered the arguments and submissions advanced by the Learned Counsel for the parties and perused the records carefully.

This Tribunal on 21.04.2023 in allowing the Respondent to settle the dues of the statutory creditors had done so by holding that the liquidator should assume a more positive approach and not shun the bonafide efforts made by the present Respondent to clear the debt of the Corporate Debtor. It had therefore decided to give an opportunity to the present Respondent to settle with the fourth statutory creditor rather than straight away allow auction of the subject property with the caveat that this settlement was to be completed within a limited and stringent timeframe. This was allowed so as to balance the interests of all stakeholders while being fully conscious of the objectives of timeliness in the completion of proceedings under IBC. For easy referencing, we have extracted below the operative portion of the orders of this Tribunal of 21.04.2023 as hereunder:

This Tribunal had shown special consideration in allowing the Respondent to arrive at a settlement. Those who seek equity must also do equity unto others. However, from the conduct of the Respondent, we are constrained to observe that it appears that he has been trying to take unfair advantage of the reprieve that was granted to him by this Tribunal to enter into a final settlement proposal with the GST Department. We notice that despite allowing two extensions of time to the Respondent, he failed to submit a responsive proposal and instead chose to file an appeal before the CESTAT. The object behind filing the appeal was to reach an end which was clearly different from the purpose for which time was allowed by this Tribunal towards full and final settlement. Instead of clearing the claims of the majority stakeholder, endeavours have only been made to dispute and stagger the claims by filing an appeal. Such conduct is indicative that the Respondent unscrupulously leveraged the earlier judgment of this Tribunal to file an appeal and by taking cover of this appeal to derail the liquidation process and avoid handing over of the subject property. Such a conduct is an anathema to the timely framework of liquidation proceedings under the IBC. In the process, the objectives of the IBC have been upset and defeated. Speed is the essence of IBC and the process of liquidation is time-bound to be completed within one year. Keeping in mind that the liquidation process in the instant case is already much delayed we do not find strong and cogent reasons to allow more time.

This brings us to the contention of the Respondent that the claims of the GST Department stand extinguished with the filing of the 7.5% pre-deposit amount. The Respondent has relied upon the judgement of the Hon’ble Supreme Court in Chandra Sekhar Jha v. UoI & Anr. 2022 SCC OnLine SC which held that the amount to be deposited to maintain an appeal under the Customs Act had been reduced from 100% to 7.5%. The above judgment does not have any bearing on the present matter since in that judgment the issue was whether any discretion was available to the appellate body to scale down the pre-deposit amount which is not the issue in the present case.

We find the contention of the Respondent to be mis-conceived that on making the pre-deposit, the claim of the GST Department stands extinguished as is evident from a reading of the relevant clause of the circular as reproduced below:

We are not inclined to waste time of this Tribunal any further in this case and in terms of Para 33(iv) and (vi) of the orders of 21.04.2023(supra), reiterate that the liquidator may proceed with the liquidation proceedings as GST Department has not yielded to the settlement proposal of the Respondent. The Respondent is accordingly also directed to vacate the subject property forthwith not later than seven days from the date of uploading of this order. As regards the appeal filed by the Respondent before the CESTAT, it shall be open to the Liquidator to decide on the future course of action. The Liquidator shall claim his fees and expenses and make provision for adjustment of the pre-deposit amount in respect of CESTAT appeal in terms of IBBI (Liquidation Process) Regulations, 2016. The I.A. is disposed of with the above observations. No costs.