State Tax Officer vs Mr. Abhishek Nagori – Liquidator for Asian Natural Resources (India) Ltd. & Anr.

Relief Clause:

A. "Hon'ble NCLT may set aside the order of Respondent No. 1 dated 26.11.2018, as the impugned order is bad in law and requires to be set aside. B. Hon'ble National Company Law Tribunal may consider the unpaid dues of the Appellant as secured dues towards Government outstanding and the Appellant as "secured creditor". C. Hon'ble Tribunal may be pleased to grant such other and further reliefs which may be deemed just, fit and proper in the interest of justice."

(a). Abhishek Nagori. Insolvency Professional Liquidator for Asian Natural Resources (India) Limited F.C.A, A.C.S., D.I.S.A, I.P Regn. No. IBBI/IPA/001/IP-P00020/2016-17/10044 330/348. Third Floor, Tower-A. Atlantis K-10, Opp. Vadodara Central, Sarabhai Main Road, Vadodara-390023, Gujarat-India E-mail: [email protected];[email protected]

Speed Post

August 16,2018

To,

Shri C A Pateol

State Tax Officer(1),

Assistant Commissioner of State Tax,

Bachat Bhavan, Relief Road,

Ahmedabad-380001

E-mail ID: ac0020-ctgujarat.gov.in

Subject: Regarding claim submitted and accepted- (liquidation proceedings of ANRIL) – The State Tax Officer (1), Unit 20- (Ahmedabad)

Reference: Letter NO. Sr/S.T.O. (1)/Unit-20/Recovery/B.No. 1507 dated 06-08-2018 and E-mail dated 06.08.2018.

Respected Sir,

We have been appointed as liquidator of M/s Asian Natural Resources India Limited (Corporate Debtor) by honorable NCLT-Ahmedabad Bench vide order dated 09.02.2018. We received your claim and subsequent information as sought and the same was analysed and verified.

The details of claim accepted in your case are:

Name of Creditor

Date of Receipt of claim in

Amount claimed : Rs. 15,15,78,102/-(revised)

Amount accepted: Rs. 15,15,78,102/-

Type of creditor Remarks, if any: Statutory Creditor

You are also informed that the list of stakeholders has already been submitted with the honourable NCLT and adding new claim will require the approval of the Honorable NCLT Ahmedabad. We will file application for the same.

Please let us know if you have any objection or query.

Regards.

Your sincerely,

Abhishek Nagori | Insolvency Professional

Liquidator for Asian Natural Resources (India) Limited

Regn. No. IBBI/IPA-001/IP-P00020/2016-17/10044.

Speed Post November 26, 2018

To,

Ms. A. M. Chavda

State Tax Officer (1),

Office of Assistant Commissioner state tax,

Unit 20, 5th floor, Bachat Bhavan,

Relief road, Ahmedabad-380001

E-mail: [email protected]

Reference: letter no. O.W.D. No. STO-1/UNIT-20/RECOVERY/B.No. 2741 dated 06-11-2018

Subject: Regarding your objection for the type of creditor in case of M/s Asian Natural Resources India Limited (formerly known as M/s Bhatia International Ltd.)

Respected madam,

We have been appointed as liquidator of M/s Asian Natural Resources India Limited (Corporate Debtor) by the honourable NCLT-Ahmedabad Bench vide order dated 09.02.2018. We received your letter no. O.W.D No-STO-1/UNIT-20/RECOVERY/B.NO. 2741 dated 06.11.2018 regarding objection for the type of creditor in case of M/s Asian Natural Resources India Limited (Formerly known as M/s Bhatia International Ltd.).

Regarding captioned matter you are informed that as per Section 53 of the Insolvency and Bankruptcy Code, 2016 states that:

"(1)

Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, Namely:-

(a)

The insolvency resolution process costs and the liquidation costs paid in full; secured creditor in liquidation proceedings. Distribution of assets. SEC 2] THE GAZETTE OF INDIA EXTRAORDINARY 31S

(b)

The following debts which shall rank equally between and among the following:-

(i)

Workmen's dues for the period of twenty-four months preceding the liquidation commencement; and

(ii)

Debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;

(c)

Wages and any unpaid dues owed to employee other tyhan workmen for the period of twelve months preceding the liquidation commencement date;

(d)

Financial debts owed to unsecured creditors;

(e)

The following dues shall rank equally between and among the following:-

(i)

any amount due to the Central Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

(ii)

Debts owed to a secured creditor for any amount unpaid following the enforcement security interest;

(f)

Any remaining debts and dues;

(g)

Preference shareholders, if any, and

(h)

Equity shareholders or partners, as the case may be.

(2)

Any contractual agreement between recipients under sub-section (1) with equal ranking, if distributing the order of priority under that sub-section shall be disregarded by the liquidator.

(3)

The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipients shall be distributed after such deduction.

Explanation. - for the purpose of this section-

(i)

It is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rand equally, each of the debts will either be paid in full or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and.

(iii)

The terms "workmen's dues" shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013."

We as a liquidator are bound by The Insolvency and Bankruptcy Code 2016. The Insolvency and Bankruptcy code 2016 overrides the other laws enacted in the parliament as mentioned above and prevails all over other laws. Hence we cannot consider your claim under the category of secured creditor.

Regards

Your sincerely,

Regards.

Your sincerely,

Abnhishek Nagori | Insolvency Professional

Liquidator for Asian Natural Resources (India) Limited

Regn. No. IBBI/IPA-001/IP-P00020/2016-17/10044.

Enclosed:

(i)

Letter No. O.W.D No-STO-1/UNIT-20/RECOVERY/B.NO.2741 dated 06-11-2018

"Appeal against the decision of liquidator:- A creditor may appeal to the Adjudicating Authority against the decision of the liquidator [accepting or] rejecting the claims within fourteen days of the receipt of such decision".

Section 3

(30)

"Secured creditor" means a creditor in favour of whom security interest is created.

(31)

"security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person:

Provided that security interest shall not include a performance guarantee.

(1)

Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely :-

(a)

the insolvency resolution process costs and the liquidation costs paid in full;

(b)

the following debts which shall rank equally between and among the following :-

(j)

workmen's dues for the period of twenty-four months preceding the liquidation commencement date; and

(ii)

debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;

(c)

wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date;

(d)

financial debts owed to unsecured creditors;

(e)

the following dues shall rank equally between and among the following:-

(i)

any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

(ii)

debts owed to a secured creditor for any amount unpaid following the enforcement of security interest;

(f)

any remaining debts and dues;

(g)

preference shareholders, if any; and

(h)

equity shareholders or partners, as the case may be.

(2)

Any contractual arrangements between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator.

(3)

The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction.

Explanation_ For the purpose of this section—

(i)

it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and

(iii)

the term "workmen's dues" shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013.

(e)

the following dues shall rank equally between and among the following:-

(i)

any amount due to the Central Government and the State Government including the amount to be received on account of the consolidated fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

1)

We heard the counsel for both the parties at length and also perused the material available on record and judicial precedents, i.e., both the Acts, Insolvency and Bankruptcy Code, 2016 as well as Central Excise Act, on the subject, as both the statutes are having status of special law and contains non obstante clause under Section 142A of the Customs Act, 1962, as well as Section 11E of the Central Excise Act, 1994, and, thus, having priority for distribution of proceeds including the liquidation of assets.

2)

Notwithstanding the above, the I & B Code, 2016, is also a special law and make provision for non obstante clause under Section 238 of the Code, which is having overriding effect over other prevailing law and statue, time being in force. Section 238 of the Code speaks as under;

"238. Provisions of this Code to override other laws

The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law".

3)

Further Section 53 of the Code provides a Waterfall Mechanism, as under

Section 53: Distribution of Assets

(1)

Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely :—

(a)

the insolvency resolution process costs and the liquidation costs paid in full;

(b)

the following debts which shall rank equally between and among the following :— workmen's dues for the period of twenty-four months preceding the liquidation commencement date; and debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;

(c)

wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date;

(d)

financial debts owed to unsecured creditors;

(e)

the following dues shall rank equally between and among the following:— any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

debts owed to a secured creditor for any amount unpaid following the enforcement of security interest;

(f)

any remaining debts and dues;

(g)

preference shareholders, if any; and

(h)

equity shareholders or partners, as the case may be.

(2)

Any contractual arrangements between recipients under sub- section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator.

(3)

The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be distributed after such deduction.

Explanation: For the purpose of this section—

(i)

it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if the proceeds are insufficient to meet the debts in full; and

(ii)

the term "workmen's dues" shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013.

4)

In addition to the above, Hon'ble Supreme Court came to an occasion to examine similar legal position in its landmark decision in Solidaire India Pvt. Ltd. v. Fairgrowth Financial Services Ltd. & Ors. [(2001) 3 SCC 71] and Maruti Udyog Ltd. v. Ram Lal & Ors. [(2005) 2 SCC 638], wherein Their Lordships have pleased to observe and rule that if there are there are two special statues, which contain non obstante provisions, the later statute must prevail. Therefore, by virtue of Section 238 of the Code being the later statute, the Applicant submits that Section 238 of the Insolvency and Bankruptcy Code, 2016, being a subsequent law, the proceedings contained therein shall have overriding effect on the other proceedings of Custom Act and Central Excise Act. Therefore, by following the above stated ruling, in our humble view, the provisions of Section 53 described about the Insolvency and Bankruptcy Code, which provides manner for priority to be given for making distribution of proceedings from sale of liquidation assets shall prevail over the provisions of Section 11(e) of the Central Excise Act and other provisions of Customs Act. Hence, the Respondents' Department cannot legally withhold the releasing of the material/goods, which the property of the Corporate Debtor company (in liquidation) as pre-requisite condition for making the Customs duty by the Liquidator of Corporate Debtor company (in liquidation), because the claims of the respondents' departments have to be treated as Government dues and needs to be dealt with under the Waterfall Mechanism of Section 53 of Insolvency and Bankruptcy Code. Further, the adequate interest of the respondents/Central Excise Department to be taken care of by the Liquidator while disposing of the assets and it will get proportionate amount as per its admissibility and preference. Therefore, the respondents' department are legally expected to release the goods/material without further delay, which are lying in Customs Bonded Warehouses (Exhibit-A) unconditionally. Otherwise, it may tantamount to the violation of Section 238A read with Section 53 of the Insolvency and Bankruptcy Code, 2016. Moreover, such position has further been settled by the Hon'ble National Company Law Appellate Tribunal in the matter of Pr. Director General of Income Tax v. M/s. Synergies Dooray Automobiles Ltd. & Ors. [Company Appeal (AT) (Insolvency) No.205 of 2017], whereby Their Lordship have held as such:

"the Income Tax Department, Sales Tax Department and other legal authorities having a statutory claims come with the meaning of the term 'Operational Creditor' thereby clarifying that the statutory authorities are not to get priority in payments as compared to the workmen and employees or the secured financial creditors of a corporate debtor. However, since the present case is that of liquidation, section 53 of the Code provides for the mechanism and the order of priority for distribution of proceeds from the sale of assets of the corporate debtor. Dues payable to the Central or State Governments, as the case may be, are included under section 53(e) (i) of the Code".

5)

By this decision, the Hon'ble National Company Law Appellate Tribunal has pleased to direct to the Income Tax Department to lift its attachment order so as to facilitate the Corporate Insolvency Resolution Process (CIRP) proceedings being conducted under the Insolvency and Bankruptcy Code, 2016.