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Judgment
Per: Charanjeet Singh Gulati, Member (Technical)
The present IA is filed by Municipal Corporation of Greater Mumbai (MCGM/Applicant) seeking the following reliefs:
a. To pass necessary orders directing the Resolution Professional of the Corporate Debtor i.e. the Respondent herein to consider and accept the claim submitted by the Applicant in respect of the outstanding dues payable by the Corporate Debtor in the capacity of the Corporate Guarantor in the event of default committed by the Financial Creditor towards payment of the said dues to the Applicant herein;
b. To condone the delay if any occurred in filing the claim by the Financial Creditor i.e. the Applicant with the Respondent as laid down under Regulation 12 of the CIRP Regulation;
c. To condone the delay if any in filing the instant Application before this Tribunal.
Facts and Submissions made by the Applicant in brief:
The Corporate Insolvency Resolution Process (CIRP) was initiated against Housing Development and Infrastructure Limited (Corporate Debtor) vide this Tribunal’s order dated 20.08.2019 in CP/27/2019 and Mr. Abhay Narayan Manudhane (Respondent) was appointed as the Interim Resolution Professional (IRP) and was subsequently confirmed as the Resolution Professional (RP).
The RP invited claims from the creditors on 29.08.2019 and the Applicant/MCGM filed its claim in prescribed Form B on 07.09.2019. The total outstanding claim of MCGM is Rs. 895,03,29,656/- (Rupees Eight Hundred and Ninety-Five Crore Three Lakh Twenty-Nine Thousand Six Hundred and Fifty-Six Only) which includes the outstanding amounts of property taxes of three projects viz. Vertical I-Majestic Towers, Vertical II- Whispering Towers and Vertical III-Premier Exotica in respect of which Resolution Plans has been approved by the Committee of Creditors (CoC). However, in the published list of the Admitted Claims, the RP has not included the claims of MCGM.
Three Interlocutory Applications bearing Nos. 3624/2022, 3626/2022 and 3627/2022 before this Tribunal seeking the approval of the Resolution Plans of the said 3 Projects/Verticals are pending to which MCGM has filed a reply opposing the Applications contending that the Resolution Professional has not admitted statutory claims.
It is submitted that the Corporate Debtor is liable to pay statutory due, property taxes to Applicant (MCGM) since 31 March 2020 in respect of various properties that are Owned/Developed or Under Development by the Corporate Debtor, which they have failed to do despite MCGM providing them with multiple opportunities for the same. The Corporate Debtor has defaulted in making payment towards property taxes which are Developed/Under Development/Owned by it.
The total claim is the first charge under Section 212 of the Mumbai Municipal Corporation (MMC) Act, 1888 which MCGM being a Statutory Body/Operational Creditor is entitled to receive as their dues from the Corporate Debtor. The amount payable to Applicant includes the Notice of the Demand fees and penalty amount levied by Applicant (MCGM) for every year in a respective year wise format as per the provisions of the MMC Act, 1888. The submission of MCGM herein is that the amount mentioned hereinabove is Statutory property tax due and payable to Applicant (MCGM) by the Corporate Debtor will change till the realization of the actual payment.
The Resolution Professional is duty bound by law to follow the process as mandated by IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, however, the Resolution Professional has failed to verify the liabilities of the Corporate Debtor through the Books of Accounts of the Corporate Debtor under Regulation 4 thereof.
It is submitted that the Resolution Professional does not have the Authority to reject claims of Statutory creditors. It is the settled position of law that if the submitted Resolution Plan ignores the statutory demands payable to any State or Central Government, the Adjudicating Authority is bound to reject such resolution plan and such statutory dues are liable to be paid to the Authority.
The Applicant (MCGM) being a State body, falls under the category of a Statutory Creditor and a Secured Creditor. Under I&B Code, the definition of the Secured Creditor does not exclude any Government Authority, therefore, the Applicant humbly submits that the claim of the Applicant (MCGM) must be included before the Resolution plan is passed.
The Applicant states that the Respondent vide letter dated 07.09.2019 addressed to the Applicant informed that claim filed by the Applicant cannot be accepted since the claim submitted by the Applicant is filed beyond the period of 90 days of the CIRP commencement date and further it was also asserted by the Respondent that the claim filed by the Applicant was subject to legal opinion as the Applicant was not the direct lender of the Corporate Debtor.
It is submitted that the Applicant has submitted its claim within time, but the RP has failed and neglected to accept the same. The Applicant states and submits that the CIRP Regulations, 2016 vide regulation 12(2) has provided that a Creditor can submit the proof of claim even after the stipulated date mentioned in the public announcement. According to the provisions of regulation 12(2) such claim can be filed till the approval of a resolution plan by the Committee. In the present case, the resolution plan of the Corporate Debtor has not been approved by the COC and therefore, the Respondent ought to have accepted the claim of the Applicant in terms of the regulation stated hereinabove and probably on consideration that every claimant may not notice the public announcement or fail to submit claim by the last date.
Submissions of the Respondent/RP:
The RP does not deny the fact that MCGM had filed its claim on 07.09.2019 but contends that MCGM had submitted its claim in Form B for only an amount of Rs. 372,87,91,307/- and not for Rs. 895,03,29,565/-. After verifying the claim, the RP admitted an amount of Rs. 289,29,21,982/- and MCGM was included in the list of Operational Creditors. The balance amount was not admitted by the RP as it pertained to dues owed to the Applicant by entities other than the Corporate Debtor. The list was uploaded on the website of the Corporate Debtor on 07.01.2020. Further, this was intimated to the Applicant by the RP vide its Letter dated 16.02.2023 but the App1icant did not challenge the non-admission of the balance claim anytime thereafter, except filing of the fresh claims through instant IA.
The Applicant has not submitted any document or record for claim of Rs. 895 Crores towards property tax. It is submitted that the enhanced claim of Rs. 895,03,29,656/- is not only unsupported and unsubstantiated, but the same is being wrongfully sought at a belated stage, that too when resolution plans are nearing approval by this Tribunal.
The claim of the Applicant to be provided distribution as a secured creditor is equally misconceived. Section 5(21) of the I&B Code makes it clear that the dues towards any Central Government, State Government and Local Authority constitute as an "operational debt". It is precisely due to this reason that the Applicant filed its claim in Form B i.e. Proof of Claim by Operational Creditors (Except Workmen and Employees). Further, the reliance of the Applicant on Section 212 of the MMC Act is equally misconceived since such provisions would not have any overriding effect on the provisions of the Code. Even otherwise, Section 212 of the MMC would not give any preference to the Applicant over other secured creditors of the Corporate Debtor.
Analysis and Findings
We have heard the Ld. Counsel for the Applicant and the Respondent/RP and perused the record.
As a matter of fact, the Corporate Insolvency Resolution Process (CIRP) of Housing Development and Infrastructure Limited (HDIL/ Corporate Debtor) was initiated by this Tribunal vide order dated 20.08.2019 and Mr. Abhay Narayan Manudhane (Respondent) was appointed as the Interim Resolution Professional (IRP) and was subsequently confirmed as the Resolution Professional (RP) of the Corporate Debtor. The Resolution Professional, in accordance with the applicable Regulations and law, had invited claims from creditors.
It is an admitted fact that MCGM (the Applicant herein) submitted its claim on 07.09.2019. However, the Applicant submits that the RP has not admitted its claim, therefore, the Applicant was constraint to move the present application seeking direction from this Tribunal to direct the RP to admit its claim of Rs. 895,03,29,565/-. Being property taxes to be paid by the Corporate Debtor.
In this regard, the RP submits that the claim filed by the Applicant on 07.09.2019 is only for an amount of Rs. 372,87,91,307/- out of which Rs. 289,29,21,982/- has been admitted by the RP. The list of claims admitted by the RP is annexed to the Reply filed by RP.
We note that MCGM has annexed to the present application, a series of documents containing statements of outstanding amount of property taxes payable by the Corporate Debtor with respect to its properties. We further note that the said outstanding dues of property taxes is with respect to the various properties of the Corporate Debtor and does not pertain only to the three Verticals, namely, Majestic Towers, Whispering Tower and Premier Exotica in respect of which Resolution Plans have been approved by the CoC and are pending approval of this Tribunal.
A letter dated 21.03.2023 issued by Brihanmumbai Municipal Corporation (BMC) has been annexed to the application which is reproduced below:
“With refer to above the report of this office of HDIL properties in liquidation with N.C.L.T. regarding outstanding of property taxes situated in MCGM jurisdiction given by ward is as under.
Total Billing Amount- Rs. 591,23,67,713/-
Total Penalty Amount- Rs. 303,79,61,943/-
Total Outstanding Amount- Rs. 895,03,29,656/-
Out of the above total outstanding of property taxes with penalty, the detail outstanding of specific properties as asked by legal deptt. are as follows:
| Sr. No. | Property Name | Ward & Total SAC No | Billing Amt. | Penalty Amt. | Total Outstanding |
| 1 | Whispering Tower at Mulund | T 13 | 632009866 | 399115657 | 1031125523 |
| 2 | The Exotica at Kurla | L 02 | 367153792 | 154056097 | 521209889 |
| 3 | The Majestic at Nahur | S 07 | 502702883 | 256021914 | 758724797 |
| Total | 1501866541 | 809193668 | 2311060209 |
Further, Statement issued by BMC showing the outstanding dues of property taxes with respect to the properties of the Corporate Debtor clearly sets out the fact that the amount of Rs. 895 crores claimed by MCGM is in respect of various properties of the Corporate Debtor besides the three verticals in question. The said statement is reproduced below:
| Amount Involved | Total Amt. | ||||
|---|---|---|---|---|---|
| Billing Amt. | Penalty Amt. | ||||
| 1 | H/E | 14 | 515969652 | 275745870 | 791715522 |
| 2 | H/W | 39 | 424672925 | 376457353 | 801130278 |
| 3 | K/E | 27 | 425191008 | 179842727 | 605033735 |
| 4 | P/N | 17 | 62102785 | 12310993 | 74413778 |
| 5 | P/S | 42 | 1309792309 | 634389625 | 1944181934 |
| 6 | R/C | 1 | 24241390 | 9238174 | 33479564 |
| 7 | L | 73 | 2015684895 | 894839630 | 2910524525 |
| 8 | S | 7 | 502702883 | 256021914 | 758724797 |
| 9 | T | 13 | 632009866 | 399115657 | 1031125523 |
| Grand Total | 233 | 5912367713 | 3037961943 | 8950329656 | |
The RP argued that MCGM has already filed its claim on 07.09.2019 for Rs. 372,87,91,307/- out of which Rs. 289,29,21,982/- has been admitted by the RP. It is the contention of the RP that claim of Rs. 895,03,29,6565/- was never made before the RP. In this regard, it is submitted by the MCGM that the initial claim of Rs. 372,87,91,307/-was made on 07.09.2019 for property taxes due upto 31.03.2020 whereas the present claim of Rs. 895,03,29,6565/- is the outstanding dues of property taxes post 31.03.2020 i.e. during the CIRP Period.
The RP argued that since the resolution plans of the three verticals, namely, Whispering Tower, Majestic Towers and Premier Exotica, have been approved by CoC on 04.11.2022 and is pending before this Tribunal for approval, thus, the claim of MCGM at such a belated stage should not be entertained.
However, we are of considered opinion that the CIRP of the Corporate Debtor is still in process considering the fact that out of the ten verticals of the Corporate Debtor, Resolution Plans of only six verticals have been approved by the CoC and is pending before this Tribunal. Thus, it cannot be construed that the CIRP of the Corporate Debtor has come to an end when the voting of resolution plans of the remaining verticals is still in process. Moreover, even if the CoC approves the resolution plans in respect of all the verticals of the Corporate Debtor, the same shall be binding on all the stakeholders including the government authorities only on approval of such resolution plans by the Adjudicating Authority as contemplated under section 31 of the I&B Code, 2016. Notably, none of the resolution plans of the Corporate Debtor has been yet approved by this Tribunal.
The Applicant/MCGM is a statutory authority and the dues pertain to property taxes even incurred during the CIRP period. Further, MCGM has also prayed through this application to condone the delay in filing the claim before the RP. Considering the same, we are of the view that since the CIRP of the Corporate Debtor is not been closed yet, the MCGM has the right to file the updated claim of Rs. 895,03,29,6565/-keeping in view the fact that the said dues have also arisen during the CIRP Period and the same needs due consideration by the RP.
The Applicant has specifically pleaded it to be a ‘financial creditor’ and a ‘secured creditor’ under the Code, thus, we would also like to touch upon the same.
Ordinarily, any statutory/government dues including taxes are considered as ‘operational debt’ under the I&B Code and the concerned authorities are treated as ‘operational creditors’.
However, as regards the contention of MCGM that it is a ‘secured creditor’, it is imperative to look at section 212 of the Mumbai Municipal Corporation Act, 1888:
“212. Property taxes to be a first charge on premises on which they are assessed.
Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the State Government thereupon be a first charge in the case of any building or land held immediately from the Government upon the interest in such building or land of the person liable for such taxes and upon the goods and chattels, if any, found within or upon such building or land and belonging to such person; and, in the case of any other building or land, upon the said building or land and upon the goods and chattels, if any, found within or upon such building or land and belonging to the person liable for such taxes.”
The Hon’ble Supreme Court in State Tax Officer (1) v Rainbow Papers Ltd. [2022 SCC Online SC 1162] had considered section 48 of the Gujarat Value Added Tax (GVAT) Act to hold that State is a ‘secured creditor’ under I&B Code. Section 48 of GVAT Act states that tax payable to the Government under the GVAT Act shall be a first charge on the property. We are conscious of a subsequent judgment passed by Hon’ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. & Ors (2023 INSC 625).
This Tribunal had made a detailed analysis as regards the conflict and applicability of Rainbow papers (supra) and Paschimanchal (supra) in the case of Assistant Commissioner of State Taxes & Excise Circle-2 vs. CA Amit Gupta, Liquidator of Provogue (India) Limited [IA/2734/2022 in CP(IB)/1667(MB)/2018]. The relevant paragraphs of the said order are extracted below:
“30.We see that the controversy in the present case is whether the Applicant is a secured creditor under the CST Act or not. Once a creditor is classified as a “secured creditor” or “unsecured creditor”, such classification shall remain irrespective of whether the Corporate Debtor is in the Resolution Plan process or Liquidation process. Even in Paschimanchal (supra) judgment, it is held that “Gujarat Value Added Tax Act, 2003 no doubt creates a charge in respect of amounts due and payable or arrears. It would be possible to hold [in the absence of a specific enumeration of government dues as in the present case, in Section 53(1)(e)] that the State is to be treated as a ‘secured creditor’”.
34.… In Paschimanchal (supra), the Hon’ble Supreme Court has made general observations that all government dues shall fall under section 53(e)(ii) of the I&B Code, 2016 whereas in Rainbow Papers (supra), the Hon’ble Supreme Court has clearly laid down that in view of the language in section 48 of the GVAT Act, State is a ‘secured creditor’, even after considering the waterfall mechanism in section 53 of I&B Code. Further, the Hon’ble Supreme Court, in the Review Petition (supra), has noted the observations of the Hon’ble Co-ordinate Bench in Paschimanchal (supra). Even after referring to the same, the Hon’ble Supreme Court has rejected the Review Petition thereby upholding the judgment of Rainbow Papers (supra) that State is a ‘secured creditor’. Thus, for all the reasons discussed above, we reject the submission of the Liquidator that Rainbow Papers (supra) will not apply in the facts of the present case. 35. In view of the authoritative judgment by the Hon’ble Supreme Court in the Review Petition which is binding on all the courts by virtue of Article 141 of the Indian Constitution, we are bound by the ratio in State Tax Officer (1) v Rainbow Papers Ltd. [2022 SCC Online SC 1162] read with Sanjay Kumar Agarwal vs. State Tax Officer (1) & Anr [Review Petition (Civil) N. 1620/2023 in Civil Appeal No. 1661/2020].”
We observe that by virtue of section 212 of MMC Act, the property tax constitutes a first charge on the premises on which it is assessed. This is similar to section 48 of the GVAT Act on account of which the State was treated as a ‘secured creditor’.
Moreover, the method of recovery is specified in sections 203 and 209 of MMC Act which are reproduced below:
“203. Distress and attachment.
(1)If the person liable for the payment of the tax for which a bill is served upon him and does not pay the tax together with penalty or interest or both as required under the provisions of this Act to pay the same, and if no appeal is preferred against the said tax, as hereinafter provided, such sum, with all costs of the recovery, may be levied under a warrant in the form of Schedule 3, or to the like effect, to be issued by the Commissioner by distress and sale of the goods and chattels of the defaulter or the attachment and sale of the immovable property of the defaulter, or, if the defaulter be the occupier of any premises in respect of which a property tax is due, by distress and sale of any goods and chattels found on the said premises.
(2)Where the person liable to pay the tax according to the bill served upon him pays the tax as required under the provisions of this Act but does not pay the amount of penalty or interest or both either in whole or in part as may be due on the unpaid amount of tax, for such amount which has remained unpaid, a warrant in the form of Schedule J, mutatis mutandis, may be issued by the Commissioner in the same manner as if such sums were due on account of the tax.
(3)When a warrant is issued for the attachment and sale of immovable property, the attachment shall be made by an order prohibiting the defaulter from transferring or charging the property in any way, and all persons from taking any benefit from such transfer or charge, and declaring that such property will be sold unless the amount of tax due penalty or interest or both, if any, due and payable together with all costs of recovery is paid into the municipal office within twenty-one days.
(4)Such order shall be proclaimed by fixing at some conspicuous part of the property and upon a conspicuous part of the municipal office and also, when the property is land, paying revenue to the State Government, in the office of the Collector.
(5)Any transfer of or charge on the property attached or any interest therein made without the written permission of the Commissioner shall be void as against all claims of the Corporation enforceable under the attachment.
209. When occupiers may be held liable for payment of property taxes.
(1)If the sum due on account of any property tax remains unpaid after a bill for the same has been duly served on the person primarily liable for the payment thereof and the said person be riot the occupier for the time being of the premises in respect of which the tax is due, the Commissioner may serve a bill for the amount on the occupier of the said premises, or, if there are two or more occupiers thereof, may serve a bill on each of them for such portion of the sum due as bears to the whole amount due the same ratio which the rent paid occupier bears to the aggregate amount of rent paid by them both or all in respect of the said premises.
(1A) Notwithstanding anything contained in sub-section (1), on and from the date of adoption of capital value as the base for levy of property taxes under section 140A, but subject to the other provisions of this Act, the Commissioner may, serve a bill for the amount of property tax on such occupier of the said premises, or, if there are two or more such occupiers thereof, may serve a bill on each of them for such portion of the sum due as bears to the whole amount of tax based on the capital value, due in the same ratio which the capital value, of such portion of the premises of the occupier or occupiers bears to the aggregate amount of the tax based on the capital value, in respect of the said premises.
(2)If the occupier or any of the occupiers fails within thirty days from the service of any such bill to pay the amount therein claimed, the said amount may be recovered from him in accordance with the foregoing provisions.
(3)No arrear of a property tax shall be recovered from any occupier under this section, which is due on account of any period for which the occupier was not in occupation of the premises on which the tax is assessed.
(4)If any sum is paid by, or recovered from an occupier under this section, he shall be entitled to credit therefore in account with the person primarily liable for the payment of the same.
As can be seen from the above, the MCGM has the authority under section 203 read with section 209 to recover the unpaid property taxes from attachment and sale of the immoveable properties of the defaulter. Thus, from a conjoint reading of Sections 203, 209 and 212 of the MMC Act along with the support derived from our observations in Provogue (India) Ltd (supra), we have no hesitation in holding that the first charge created under section 212 of MMC Act on the properties of the Corporate Debtor constitutes a security interest and in view thereof, the Applicant/MCGM is a ‘secured creditor’.
We further note that the already admitted claim of Rs. 289,29,21,982/- of MCGM being property taxes for the period till 31.03.2020 has been admitted by the RP in the nature of unsecured operational debt. However, considering our discussions made above, we direct the RP to consider the said admitted claim as a ‘secured debt’.
As regards the updated claim of Rs. 895 crores, on perusing the statements annexed to the application, we note that the said claim also includes outstanding property taxes for period prior to the initiation of CIRP process. Since the same is claimed while the CIRP is in process, reference is made to the observations of Hon’ble Supreme Court in the case of RPS Infrastructure Limited vs. Mukul Kumar and Anr. [(2023) 10 SCC 718]:
“19.The second question is whether the delay in the filing of the claim by the appellant ought to have been condoned by the Respondent No. 1. The IBC is time bound process. There are, of course, certain circumstances in which the time can be increased. The question is whether the present case would fall within those parameters. The delay on the part of the appellant is of 287 days. The appellant is a commercial entity. That they were litigating against the corporate debtor is an undoubted fact. We believe that the appellant ought to have been vigilant enough in the aforesaid circumstances to find out whether the corporate debtor was undergoing CIRP. The appellant has been deficient on this aspect. The result, of course, is that the appellant to an extent has been left high and dry. 21. The mere fact that the adjudicating authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon. As described above, in Essar Steel, the Court cautioned against allowing claims after the resolution plan has been accepted by the CoC. 22.We have thus come to the conclusion that the NCLAT’s impugned judgment cannot be faulted to reopen the chapter at the behest of the appellant. We find it difficult to unleash the hydra-headed monster of undecided claims on the resolution applicant.”
It can be seen from the above judgment that it is only when a resolution plan of the Corporate Debtor is approved by the CoC that new claims cannot be submitted to the RP. However, in the present case, the resolution plans of all the verticals of the Corporate Debtor are not yet approved by the CoC or by the Adjudicating Authority and therefore, the CIRP process of the Corporate Debtor have not yet ended. Also, as can be seen from a bare reading of Section 203 read with 209 of the MMC Act, reproduced in Para 21 above, the MCGM has the authority to attach any property of the defaulter and not just the property on which the tax is assessed. Thus, MCGM having its claims with respect to various properties of MCGM is well within its rights to file the updated claim before the RP, which also includes its claim for the period post commencement of CIRP of the Corporate Debtor.
As already noted above, the said claim of Rs. 895 crores includes both pre-CIRP and post CIRP property tax dues. As regards the claims pertaining to pre-CIRP period, since the RP had already admitted Rs. 289,29,21,982/- for period upto 31.03.2020, we direct the RP to verify and admit the present updated claim of dues pertaining to pre-CIRP period without prejudice to the already admitted claim of Rs. 289,29,21,982/-. With respect to the property taxes incurred during the CIRP period, we are of considered opinion that such dues are part of CIRP costs and therefore, the question of belated filing of claim does not arise. Therefore, the RP is directed to verify the claim with respect to property tax incurred during CIRP period and admit the same in the nature of CIRP costs as per law.
Accordingly, we direct the Applicant/MCGM to file its claim before the RP and the RP shall verify and admit the claims as per law and in accordance with the observations made hereinabove.
In the result, the present application is allowed and disposed of.