State Trading Corporation Of India Limited vs M/s Spacevision Impex Private Limited

,

Dr. Deepti Mukesh, J",

The Present Application is filed under section 9 of Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC, 2016’) read with Rule 6 of the",

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity ‘the Rules’) by the State Trading Corporation of",

India Limited (for brevity ‘Applicant’) with a prayer to initiate the Corporate Insolvency process against M/s Spacevision Impex Private Limited,

(for brevity ‘Corporate Debtor’).,

The Applicant, State Trading Corporation of India Limited is a Government of India Enterprise, having its registered office at 3rd Floor, Trade",

World, C Wing, Kamala Mill, Senapati Bapat Marg, Lower Parel (West), Mumbai-400013 and having CIN U74899DL1956GOI002674.",

The Corporate Debtor is a limited company incorporated under the provisions of the Companies Act, 1956 on 20.04.2004 having CIN",

U74999DL2007PTC161986 as per Master Data and having registered office at D-14, Kailash Colony, New Delhi-110048. The Authorised Share",

Capital of the Corporate Debtor is Rs. 8,00,00,000/- and Paid Up Share Capital is Rs. 7,66,20,000/- as per Master Data of the company.",

The Applicant has stated that during the year 2004-2005, M/s Spacevision Impex Private Limited, the Corporate Debtor had approached the",

Applicant for domestic/foreign procurement of benzene, fuel oil, LDO, orthoxylene, steel scrap and other raw materials from various domestic parties",

on its behalf and in pursuant to that the applicant agreed to procure the said goods as per the terms and conditions which were particularly mentioned,

in the Memorandum of Understanding dated 19th January, 2005.",

It is submitted that as per the terms and conditions of the MoU agreement dated 19th January, 2005 it was agreed between the parties that the",

applicant would procure the said goods upon the request of the corporate debtor and would sell to the corporate debtor and the terms of undertaking,

with respect to tax liabilities were recorded in various clauses including indemnifying clauses specially as per Clauses 15, 16 and 21 of the",

Memorandum of Understanding which are reproduced below:,

“Clause 15.0 Taxes/ Levies/ Cess and Duties,

15.1 SIPL shall keep STC indemnified against such payment/liabilities if claimed by any authority/ ies even at a later date against the sale made under,

this MoU.,

15.2 Any statutory charges and applicable duties/ levies/ taxes at any point of time for transactions under this MOU shall be to the account of SIPL.,

Clause 16.0 Sales Tax,

16.1 In case of domestic procurement STC shall sell the cargo on transit to SIPL. This being a sale in transit to SIPL, the SIPL shall take full",

responsibility of any sales tax liability under the sales tax rules of state and central government including turnover tax and other liability of similar,

nature.,

Clause 21.0 Indemnification,

21.1 SIPL will indemnify STC for any loss, damage or cost which STC may be required to pay or suffer with regard to the import under this",

agreement. No claim shall be passed on STC either by seller or SIPL.,

21.2 All shortage losses in the tanks will to the account of SIPL,

21.3 STC shall not be responsible for any repercussion on this agreement on account of any change in Govt. rules and regulations, or for any failure on",

the part of the supplier.,

21.4 SIPL shall always abide by the state and central government rules and regulations including sales tax provisions.,

21.5 In case after the LC is established, there is any modification of the policy of the Govt. of India whereby the purchase/import of benzene, fuel oil,",

LDO, ortho-Xylene and other raw materials is removed from the OGL list or any other restrictions are placed, SIPL will be fully responsible for",

payment of all costs and expenses to STC on its first demand and shall also indemnify STC against any claims raised by either the seller or any other,

agency connected with the implementation of this contract.,

21.6 SIPL shall fulfill all conditions relevant to trading and/or storage and/or manufacturing of any petroleum product as per petroleum act 1934 and,

petroleum rules, 2002. SIPL shall keep STC fully indemnifies against any adverse repercussions caused by SIPL vis-a-vis these rules and act in",

course of execution of this agreement.â€​,

It is submitted that the Applicant had supplied various commodities during 2004-2005 and raised various invoices against the corporate debtor for,

the assessment year 2004-2005. It is submitted that under section 8(1) of the Central Sales Tax Act 1956, the “C†Forms are to be submitted by",

the registered users in order to get rebate of 2 % Sales Tax on the commodities as described above if the goods are sold out of state. It is stated that it,

is the obligation of the corporate debtor to submit Forms C to the applicant but despite repeated reminders and requests by the applicant, there was",

deliberate failure and neglect in submission of the “Câ€​ Forms by the corporate debtor to the applicant.,

It is submitted that for the assessment year 2004-2005 with respect to the sales tax by the assessment authority an ex-parte order was passed in,

2009 raising huge demand, tax and penalty under both Bombay Sales Tax Act and Central Sales Tax Act against the applicant. The applicant filed an",

application for cancellation of the order which was considered by the assessing authority and cancellation order was passed on 08.06.2010. On fresh,

assessment being done by the authority final assessment orders were passed on 30.07.2010 wherein under Central Sales Tax Act the demand of Rs.,

388,53,25,846/- was raised. Aggrieved by the said order, applicant filed an appeal being appeal no. 328 of 2010-2011 and the appellate authority",

granted ad-interim stay on 09.03.2011 extended up to 10.08.2011. Thereafter, the appellate authority issued notice of hearing of said appeal to the",

applicant, which was duly received and the reminder was also received by the applicant.",

It is further submitted that the applicant had shifted its address twice during that period, ultimately on 15.04.2015 the applicant received letter from",

joint commissioner office, with respect to the appeal being listed on 15.05.2015. Again, thereafter on 29.07.2015 the applicant was called for hearing",

for the stay application. After hearing the order, the stay application was passed filed under Central Sales Tax Act and the applicant was directed to",

make part payment as condition precedent on or before 20.08.2015 and stay was made absolute. Accordingly, the applicant had made part payment of",

The following amounts recoverable from the associate

on account of non-furnishing of Form C, as per the

assessment order",

Particular,Amount (Rs)

Prorate tax on value of Rs. 5, 03,13,938.67@ 15.8%

(as per the order)","79,49,602.31

Interest prorate till the date of order (31.07.2010),"63,59,681.847

Total as per order,"1,43,09,284.16

Further interest @15% p.a. (01.08.2010 to

31.12.2017)","88,47,907.37

Penalty may be levied,"79,49,602.31

Total,"3,11,06,793.84

The issue whether statutory liability is within the purview of ‘operational debt’ or not is settled by Hon’ble NCLAT in the matter,

“Pr. Director General of Income Tax (Admn. & TPS) Vs. M/S Synergies Dooray Automotive Limited & Orsâ€, which is reproduced as",

under:,

“Legal issues:,

The question arises for consideration in these appeal are:,

i. Whether the ‘Income Tax’, ‘Value Added Tax’ or other statutory dues, such as municipal tax, excise duty, etc. come within the",

meaning of operational debt or not ? and;,

ii. Whether the Central Government, the State Government or the legal authority having statutory claim, come within the meaning of ‘Operational",

Creditor’?,

--------------------------------,

--------------------------------,

Operational Debt in normal course means a debt arising during the operation of the company (‘Corporate Debtor’). The goods and services,

including employment are required to keep the company (‘Corporate Debtor’) operational as a going concern. If the company (‘Corporate,

Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax",

etc., will arise. As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the",

company is operational, we hold such statutory dues has direct nexus with operations of the company. For the said reason also, we hold that all",

statutory dues including ‘Income Tax’, ‘Value Added Tax’ etc. come within the meaning of ‘Operational Debt’.â€​",

The claim of the applicant in present application is covered by the above judgement as the said tax or statutory liability of the supply made as per the,

agreement were covered and entrusted as payable by the corporate debtor. Claim remains uncontroverted by the corporate debtor which amounts to,

admission of debt and default.,

The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application.,

The default occurred on non-submission of C Forms and still continuing. Hence the debt is not time barred and the application is filed within the,

period of limitation.,

The Applicant further states that in spite of several opportunities given none appeared on behalf of the corporate debtor nor any reply is filed and,

the matter was listed to be heard on 06.05.2019.,

The present application is complete after hearing learned counsel for applicant and perusing the documents on records, an further the claim being",

uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt, present application is admitted.",

Since the Applicant has not named the Insolvency Resolution Professional, this Tribunal appoints Mr. Devinder Arora, with registration number",

IBBI/IPA-002/IP-N00200/2017-18/10586 (email â€" [email protected], Mobile No. 8826268770) as the Interim Resolution Professional subject",

to the condition that no disciplinary proceedings are pending against such an IRP named who may act as an IRP in relation to the CIRP of the,

Respondent and specific consent is filed in Form 2 of Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rule, 2016 in",

relation to specifically the corporate debtor and the applicant herein and make disclosures as required under IBBI (insolvency Resolution Process for,

Corporate Persons) Regulations, 2016 within a period of one week from the date of this order.",

As a consequence of the application being admitted in terms of Section 9(5) of IBC, 2016 moratorium as envisaged under the provisions of Section",

14(1) shall follow in relation to the Corporate debtor prohibiting proviso (a) to (d) of the Code. However, during the pendency of the moratorium",

period, terms of Section 14(2) to 14(4) of the Code shall come in vogue.",

In terms of above order, the Application stands admitted in terms of Section 9(5) of IBC, 2016. A copy of the order shall be communicated to the",

Applicant as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its",

records. Further the IRP above named be also furnished with copy of this order forthwith by the Registry.,