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Judgment
This writ petition has been filed challenging Ext.P5 notice dated 11.01.2024 issued by the first respondent to the petitioner. Ext.P5 is an assessment notice under the Building and other Construction Workers’ Welfare Cess Act, 1996 (hereinafter referred to as ‘the 1996 Act’) proposing to levy and collect from the petitioner an amount of Rs.1,35,81,737/- (cess + service charge) in terms of the provisions of the 1996 Act.
The petitioner (the Sacred Heart Province) is a congregation of the Carmelites of Mary Immaculate, a section of the Catholic religious denomination. The petitioner contends that it had entered into Ext.P2 agreement with the 2nd respondent (a Company which had subsequently been ordered to be liquidated) for the sale of property belonging to it. It is the case of the petitioner that Ext.P2 agreement contemplates that the 2nd respondent would construct a residential apartment complex on the land and that 80% of the consideration for the land was to be paid in cash and 20% of the consideration was to be paid by allotting 27 apartments having a total built-up area of 46,016 square feet to the petitioner. It is the case of the petitioner that going by the provisions contained in the 1996 Act read with the provisions of the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act, 1996 (hereinafter referred to as the 'Regulation of Employment Act'), the petitioner cannot, under any circumstances, be liable for the payment of cess under the 1996 Act. It is submitted that after proceedings were initiated against the 2nd respondent under the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the IBC’), the project in question was taken over by the additional 4th respondent under a Project Specific Resolution Plan approved by the National Company Law Tribunal, Kochi Bench (hereinafter referred to as 'the Tribunal'), vide Ext. P9 order. It is submitted that during the course of the insolvency proceedings against the 2nd respondent, the Resolution Professional appointed by the Tribunal issued a notice (Ext. P6) to the 1st respondent calling upon the 1st respondent to raise its claim (if any), and yet the 1st respondent failed to raise any claim for the payment of cess before the Resolution Professional. It is stated that the petitioner had also informed the 1st respondent through Ext.P7 that the 2nd respondent company was subject to proceedings under the IBC and that claims, if any, should be raised before the Resolution Professional. It is stated that the failure of the 1st respondent to raise its claims before the Resolution Professional does not mean that such claims can be raised on the petitioner.
Sri. A.V. Thomas, the learned Senior Counsel appearing for the petitioner on the instructions of Adv. Kevin Thomas, has taken me through the provisions of the 1996 Act, the relevant provisions of the Regulation of Employment Act, the terms of Ext.P2 agreement (specifically clauses 1, 7, 10, 11, 12, 13, 31, and 40), and through the provisions of Ext.P3 Sale Deed. He submits that by no stretch of imagination could it be held that the petitioner was liable for the payment of cess under the 1996 Act in respect of the project in question. In support of his contentions, he has also relied upon the decisions of this Court in Pooja Constructions v. Secretary, Kerala Uranma Devaswom Board, 2024 KHC Online 812, Viswanathan M. V. v. Kerala Water Authority, 2026 (2) KHC 322, and Rajan Kudumbathil v. State of Kerala and Others (judgment dated 23-10-2019 in W.P(C)No.22621 of 2019). The learned Senior Counsel has also referred to the relevant provisions of the IBC to contend that the 1st respondent, having failed to raise a claim on the 2nd respondent before the Resolution Professional, cannot now claim any amount from the petitioner or the additional 4th respondent (the successful Resolution Applicant). He further pointed out that even though this Court, through an interim order dated 04.04.2024 in the writ petition, permitted the 1st respondent to proceed against the 2nd respondent, no claim has been raised by the 1st respondent before the Resolution Professional. It is submitted that on account of the provisions contained in Clause (40) of Ext.P2 agreement, the petitioner can, at best, be made liable only to pay the cess under the 1996 Act for the apartments allotted to it, and not for any other area. It is further submitted that the petitioner is willing to remit the cess amount corresponding to the built-up area allotted to the petitioner in terms of Ext.P2 agreement and Ext.P11 allotment agreement. Lastly, it is submitted that Ext.P5 notice is one issued on a printed form and in violation of the principles of natural justice.
Smt. Chitra P. George, the learned Government Pleader appearing for the 1st respondent, submits with reference to the counter affidavit filed in this writ petition that Exts.R1(a), R1(b), and R1(c) documents establish beyond doubt that the petitioner is the owner of the property and is therefore liable to pay cess under the 1996 Act. The learned Government Pleader has referred to the definition of 'employer' under Section 2(1)(i) of the 1996 Act, as well as the definition of 'establishment' under Section 2(1)(j) of the Regulation of Employment Act, which is made applicable to the provisions of the 1996 Act. The learned Government Pleader further referred to Sections 4 and 5 of the 1996 Act and Rule 3 of the (hereinafter referred to as the '1998 Rules') and the judgment of a Division Bench of this Court in District Labour Officer and the Assessment Officer, Alappuzha v. K.K. Raji, 2016 (4) KHC 345, to contend that even a subsequent owner is liable for the payment of cess under the 1996 Act. The learned Government Pleader also submits that Ext.P5 was only an assessment notice, and it is not an assessment itself. Finally, it is submitted (without prejudice to the aforesaid contentions) that since the process of liquidation of the 2nd respondent has not been completed, the 1st respondent may still be able to raise his claims before the competent authority and as and when claims are invited.
The learned Standing Counsel appearing for the 3rd respondent Board relied on the judgments of the Hon'ble Supreme Court in M/s. Dewan Chand Builders & Contractors v. Union of India, 2012 (1) SCC 101, and Lanco Anpara Power Ltd. v. State of Uttar Pradesh and others, (2016) 10 SCC 329, and he submits that it is clear from the decision in M/s. Dewan Chand Builders (supra) that the owner is, at any rate, liable for cess and the provision for collection of the cess from the contractor is only to ensure that, if for any reason, the cess cannot be collected from the owner, it can be collected from the contractor.
Sri. Sankar P. Panicker, the learned counsel appearing for the additional 4th respondent, submits that the additional 4th respondent was the successful Resolution Applicant for the project in question. It is submitted that the resolution plan submitted by the additional 4th respondent was accepted and approved by the Tribunal. It is submitted with reference to the provisions of Section 31 of the IBC that, upon approval of the resolution plan, any claim by any authority (including the Government) that has not been raised will stand extinguished. It is submitted that the law is settled by the judgments of the Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., (2021) 9 SCC 657, as well as JSW Steel Ltd. v. Pratishtha Thakur Haritwal, 2025 SCC OnLine SC 672. It is submitted that the decisions of the Supreme Court referred to above establish beyond doubt that when the 1st respondent fails to raise a claim before the Resolution Professional at the relevant time despite being put on notice, he cannot, at any later point of time and after the approval of the resolution plan by the Adjudicating Authority, be allowed to raise any claim for the payment of cess on the additional 4th respondent or its members.
Sri. P.V Vinod, the learned counsel appearing for the Resolution Professional appointed by the Tribunal supports the submissions of the learned counsel appearing for the additional 4th respondent. It is reiterated that the 1st respondent, despite being informed, failed to raise any claim for cess in respect of the project in question at the relevant time, and therefore, the 1st respondent cannot be permitted to raise any claim now, as it stands extinguished by virtue of Section 31 of the IBC.
The learned Senior Counsel appearing for the petitioner submits, in reply, that after the issuance of Ext.P5, the 1st respondent issued an identical notice dated 02.02.2024 (Ext.P10 filed along with reply affidavit) to the 2nd respondent. It is submitted that this indicates that the 1st respondent was well aware that the liability to pay the cess was that of the 2nd respondent, and not on the petitioner. It is also pointed out that, going by the averments in the counter affidavit filed by the 1st respondent, a pre-assessment notice was also issued to the 2nd respondent, and no such pre-assessment notice was issued to the petitioner.
Having considered the submissions made across the bar and on an appreciation of the relevant statutory provisions, I am of the view that the petitioner is entitled to succeed.
Section 3 of the 1996 Act, to the extent it is relevant, reads thus:
“3.Levy and collection of cess.—(1) There shall be levied and collected a cess for the purposes of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding two per cent, but not less than one per cent. of the cost of construction incurred by an employer, as the Central Government may, by notification in the Official Gazette, from time to time specify.
(2)The cess levied under sub-section (1) shall be collected from every employer in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority is required, as may be prescribed.
(3)The proceeds of the cess collected under sub-section (2) shall be paid by the local authority or the State Government collecting the cess to the Board after deducting the cost of collection of such cess not exceeding one per cent. of the amount collected.
(4)Notwithstanding anything contained in sub-section (1) or sub-section (2), the cess leviable under this Act including payment of such cess in advance may, subject to final assessment to be made, be collected at a uniform rate or rates as may be prescribed on the basis of the quantum of the building or other construction work involved.”
Under Section 2(d) of the 1996 Act, words and expressions used but not defined therein, but which are defined in the Regulation of Employment Act, shall have the meanings respectively assigned to them in that Act. Section 2(1)(i) of the Regulation of Employment Act defines the 'employer' in the following manner:
"'employer', in relation to an establishment, means the owner thereof, and includes -
(i)in relation to a building or other construction work carried on by or under the authority of any department of the Government, directly without any contractor, the authority specified in this behalf, or where no authority is specified, the head of the department;
(ii)in relation to a building or other construction work carried on by or on behalf of a local authority or other establishment, directly without any contractor, the chief executive officer of that authority or establishment;
(iii)in relation to a building or other construction work carried on by or through a contractor, or by the employment of building workers supplied by a contractor, the contractor;”
The word 'establishment' in Section 2(1)(i) of the Regulation of Employment Act is defined in Section 2(1)(j) of the said Act in the following manner:-
““establishment" means any establishment belonging to, or under the control of, Government, any body corporate or firm, an individual or association or other body of individuals whch or who employs building workers in any building or other construction work; and includes an establishment belonging to a contractor, but does not include an individual who employs such workers in any building or construction work in relation to his own residence the total cost of such construction not being more than rupees ten lakhs”
Section 4 of the 1996 Act imposes the liability to furnish returns on the employer. Section 5 of the 1996 Act deals with the assessment of cess and specifically provides that the cess shall be assessed based on the returns submitted under Section 4 of the 1996 Act or based on an inquiry to be conducted. An analysis of the provisions of sub-sections (1) and (2) of Section 5 of the 1996 Act indicates that the cess assessed in the manner prescribed by Section 5 of the 1996 Act is to be paid by the employer. This is also the position under sub-section (2) of Section 3 of the 1996 Act, which indicates that the cess is to be collected from the employer.
Therefore, the crucial question to be determined in this case is as to whether the petitioner is the 'employer' for levy of cess under the provisions of the 1996 Act. Analysis of the provisions contained in Ext.P2 indicates beyond doubt that the petitioner was the owner of the land, on which the 2nd respondent was to construct certain residential apartments. The petitioner was to receive consideration for the land by way of cash (80%) and by way of allotment of apartments for the balance 20%. It is also clear from Ext.P2 agreement that the responsibility of the petitioner was only to convey undivided interest in the land to the third parties to whom the 2nd respondent may allot other apartments (other than those allotted to the petitioner) based on instructions to be given by the 2nd respondent. A perusal of the definitions contained in the 1996 Act and the Regulation of Employment Act referred to above indicates to me that the liability to pay cess is on the person who engages building workers in any building or other construction work, i.e. on the person who pays the wages of building workers in the construction of any building. While in normal circumstances, the owner of the land may also be responsible for payment of cess under the 1996 Act (because he would also be responsible for ultimately paying wages to the building workers engaged for the purposes of constructing a building on such land), in the facts and circumstances of this case, it is clear that the entire responsibility to pay any amount towards the construction was on the 2nd respondent and not on the petitioner. Thus, it can be safely concluded that in the facts of this case, the petitioner cannot be called upon to pay cess under the 1996 Act. In view of my finding that the petitioner is not liable to pay cess under the 1996 Act as it was not responsible for the payment of wages to the building workers, it is not necessary to refer to or analyse the decisions cited by the learned Counsel for the additional 3rd respondent.
The next question to be considered is whether the fact that building permits and plans were secured in the name of the petitioner and the fact that the occupancy certificate was also issued in the name of the petitioner will make the petitioner liable for the cess under the 1996 Act. The judgment of this Court in Pooja Constructions (supra) appears to be a complete answer to the above question. Paragraph 16 of the judgment in Pooja Constructions (supra) reads thus:-
“16.On analysing the facts available in the case on hand, I am of the view that the respondents have no role in the process of development of the project. On going through Ext.B9, it is seen that there is no provision indicating any kind of role for the landowners in the matter of construction and development. The landowners do not share any profit or loss out of the Project. The Project is fully under the control of the appellant. The landowners do not have any say in the development and construction of the project. The landowners have no obligation to the allottees of the apartments, apart from obtaining the required Permits and Plans and executing the required Sale Deeds. Ext.B9 Agreement entered into between the appellant and the respondent is not a joint venture agreement.”
Therefore, nothing turns on the fact that the building permits and plans were secured in the name of the petitioner. The fact that the occupancy certificate was also issued in the name of the petitioner does not make the petitioner an 'employer' liable for payment of cess under the provisions of the 1996 Act.
Since I have proceeded to decide the question of liability of the petitioner on merits, it is not necessary to consider the contention that the issuance of a notice in printed form vitiates the proceedings.
This judgment would be incomplete without considering the question as to whether the additional 4th respondent or its members would be liable for cess, especially in the light of the fact that the petitioner has conceded before this Court that it is willing to bear the cess for the 27 apartments allotted to him in terms of Ext.P11 allotment agreement.
Section 31 of the IBC after its amendment w.e.f 06.04.2026 reads thus:
“31. Approval of resolution plan.—
(1)If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.
Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.
Provided further that the Adjudicating Authority may, on an application made by the resolution professional, with the approval of the committee of creditors, by a vote of not less than sixty-six per cent. of the voting share, in such form and manner, and subject to such conditions as may be specified, first approve the implementation of the resolution plan and thereafter approve the manner of distribution provided therein within a period of thirty days from the date of approval of implementation of such resolution plan
(2)Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. Provided that the Adjudicating Authority may, before rejecting the resolution plan, give notice to the committee of creditors to rectify any defects in the resolution plan.
(2A) The Adjudicating Authority shall pass an order under sub-section (1) or (2), within a period of thirty days from the date of receipt of the resolution plan:
(3)After the order of approval under sub-section (1),—
(a)the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and
(b)the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.
(4)The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act before the resolution plan is submitted to the Adjudicating Authority under sub-section (6) of section 30.
(5)Notwithstanding anything contained in any other law for the time being in force and subject to sub-section (6), where a resolution plan has been approved under sub-section (1), a licence, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, associated with such resolution plan, shall not be suspended or terminated during the subsistence of the remaining period of such grants or rights, if the corporate debtor or, if applicable, the person whose resolution plan is approved under sub-section (1), complies with the obligations in respect of the remaining period of such grants or rights.
(6)Where the Adjudicating Authority approves the resolution plan under sub-section (1),-
(a)unless otherwise provided in the resolution plan, any claim, against the corporate debtor and its assets under any other law for the time being in force, prior to the date of approval, shall be extinguished; and
(b)no proceedings shall be continued or instituted against the corporate debtor or its assets on the basis of such claims, including proceedings for assessment of the claims.
Explanation I.––For the purposes of this section, it is hereby clarified that nothing in this section shall affect a claim or any proceeding in respect of a person who was a promoter or in the management or control of the corporate debtor, a guarantor of the corporate debtor or any person having a joint liability or a joint and several liability with the corporate debtor, as the case may be.
Explanation II.––For the purposes of this section, it is hereby clarified that if a person has a joint liability or a joint and several liability with the corporate debtor for payment of debt owed to a creditor before the approval of resolution plan, and such person makes a payment for such debt after the approval of the resolution plan, then any right of such person to be indemnified by the corporate debtor shall be extinguished.
Explanation III.—For the removal of doubts, it is hereby clarified that the provisions of sub-sections (5) and (6) shall be deemed to apply to the resolution plan that is approved under sub-section (1), on and from the date of commencement of this Code, except for matters that have attained finality under this Code."
In Ghanshyam Mishra and Sons (supra), the Supreme Court has made it clear that the claims as provided in the resolution plan will stand frozen and will be binding on the corporate debtor, its employees, members, creditors including the Central Government, any State Government or any local authority, guarantors, and other stakeholders. (See paragraphs 58 to 62, 86, & 94 of the SCC report). The conclusions of the Court read thus:
“In the result, we answer the questions framed by us as under:
(i)That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;
(ii)2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;
(iii)Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued."
The Supreme Court reiterated the legal position in JSW Steel Ltd. (supra).
In view of the categorical declaration of law by the Hon'ble Supreme Court in the decisions referred to above, I am of the opinion that the failure of the 1st respondent to raise a claim before the resolution professional, at the relevant time, is fatal and any claim for payment of cess under the 1996 Act stands extinguished. However, taking into account the submissions of the learned Government Pleader that even if the claim for cess cannot be made against the additional 4th respondent, it may still be open to the 1st respondent to raise such claim as the liquidation proceedings of the 2nd respondent have not been concluded, I make it clear that this judgment will not prevent the 1st respondent from raising any such claim in the liquidation proceedings, if such claim is maintainable, in accordance with the law.
Further, in the light of the submission of the petitioner that the petitioner will pay the cess for the area comprised in 27 apartments allotted to him, I direct the 1st respondent to make a separate assessment of the amount of cess to be paid on the area comprised in 27 apartments allotted to the petitioner. On such assessment being completed with notice to the petitioner, the petitioner shall pay the amounts assessed.
The writ petition is ordered accordingly.
APPENDIX OF WP(C) NO. 13295 OF 2024
PETITIONER’S EXHIBITS
Exhibit P1 TRUE COPY OF THE CERTIFICATE ISSUED BY THE KERALA REAL ESTATE REGULATORY AUTHORITY DATED 10/12/2020
Exhibit P2 TRUE COPY OF THE AGREEMENT FOR SALE DATED 28/11/2011 EXECUTED BETWEEN THE PETITIONER AND THE 2ND RESPONDENT
Exhibit P3 TRUE COPY OF THE SALE DEED NO.1255/2021 OF THRIKKAKARA SRO DATED 27/03/2021 EXECUTED BY THE PETITIONER IN FAVOUR OF THE 2ND RESPONDENT
Exhibit P4 TRUE COPY OF THE ORDER DATED 25/01/2023 IN CP(IBC)/54/ KOB/2022 OF THE NATIONAL COMPANY LAW TRIBUNAL, KOCHI
Exhibit P5 TRUE COPY OF THE ASSESSMENT NOTICE DATED 11/01/2024 SENT BY THE 1ST RESPONDENT
Exhibit P6 TRUE COPY OF THE LETTER DATED 06/03/2023 SUBMITTED TO THE 1ST RESPONDENT BY ASTEN REALTORS PVT LTD
Exhibit P7 TRUE COPY OF THE LETTER DATED 27/01/2024 SENT BY THE PETITIONER TO THE 1ST RESPONDENT
Exhibit P8 TRUE COPY OF THE ACKNOWLEDGMENT DATED 31/01/2024 BY THE 1ST RESPONDENT
Exhibit P9 TRUE COPY OF THE ORDER DATED 14/08/2024 IN IA (IBC)/ 493/ KOB/2023 IN CP (IBC)/54/KOB/2022 OF THE NATIONAL COMPANY LAW TRIBUNAL, KOCHI
Exhibit P10 A TRUE COPY OF THE ASSESSMENT NOTICE DATED 02/02/2024 SENT BY THE 1ST RESPONDENT DEPUTY LABOUR OFFICER TO 2ND RESPONDENT ASTEN REALTORS PVT LTD, ALONG WITH TYPED COPY
Exhibit P11 A TRUE COPY OF THE ALLOTMENT AGREEMENT DATED 02/11/2015 EXECUTED BETWEEN THE 2ND RESPONDENT AND PETITIONER.
RESPONDENT’S EXHIBITS
Exhibit R1(a) TRUE COPY OF THE BUILDING PERMIT ISSUED BY THE THRIKKAKARA MUNICIPALITY DATED 25.10.2011
Exhibit R1(b) TRUE COPY OF THE EXTENSION ORDER DATED 18.03.2020
Exhibit R1(c) TRUE COPY OF THE PARTIAL OCCUPANCY CERTIFICATE DATED 22.09.2017.
RESPONDENT’S EXHIBITS
Exhibit R4 (a) TRUE COPY OF THE REGISTRATION CERTIFICATE 01-01-2020 BEARING NO. EKM/TC/15/2020 ISSUED BY THE REGISTRAR, OFFICE OF THE DISTRICT REGISTRAR (GENERAL)
Exhibit R4 (b) TRUE COPY OF THE ORDER DT.25-01-2023 IN CP(IB)54/KOB/2022 ON THE FILE OF THE HON’BLE NATIONAL COMPANY LAW TRIBUNAL, KOCHI BENCH
Exhibit R4 (c) TRUE COPY OF THE ORDER DT. 14.08.2024 IN IA(IBC)/493/KOB/2023 IN CP(IBC)/54/KOB/2022 ON THE FILE OF THE HON’BLE NATIONAL COMPANY LAW TRIBUNAL, KOCHI BENCH.
RESPONDENT’S EXHIBITS
Exhibit R2/1 THE COPY OF THE ORDER OF HON’BLE NCLT DATED 14.08.2024 IN IA(IBC)/493/KOB/2023 IN CP(IBC)/54/KOB/2022
Exhibit R2/2 A COPY OF THE PUBLIC ANNOUNCEMENT INVITING CLAIM
Exhibit R2/3 A COPY OF THE ORDER OF LIQUIDATION DATED 19.11.2024 PASSED BY THE HON’BLE NCLT