The Commissioner Central Goods & Service Tax, Kutch Gandhidham, Gujarat vs East India Transport Agency & Anr.

[Per: Barun Mitra, Member (Technical)]

The present appeal, filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’ in short) by the Appellant arise out of order dated 09.05.2022 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad, Division Bench, Court-1) in I.A. No. 415(AHM)2022 arising out of CP(IB) No. 55 of 2020. By the impugned order, the Adjudicating Authority on an application filed by Interim Resolution Professional of Corporate Debtor under Section 60(5) read with Section 19 of the Insolvency and Bankruptcy Code directed the present Appellant to take part in the Corporate Insolvency Resolution Process (‘CIRP’ in short) and pay CIRP costs as per voting share. Aggrieved by this, the present appeal has been preferred.

The brief facts of the case which are necessary to note for deciding this appeal are as follows: -

 A Section 9 petition under IBC filed by East India Transport Agency against SRK Multimodal Solution Pvt. Ltd., the Corporate Debtor was admitted on 23.11.2021 by the Adjudicating Authority and an Interim Resolution Professional (‘IRP’ in short) was appointed.

 The IRP started the process of collating claims and thereafter proceeded to hold Committee of Creditors (“CoC” in short) meetings. The present Appellant submitted a claim of Rs. 23,88,77,845/- being pending tax dues. Since there were no Financial Creditors, the CoC was constituted on 16/12/2021 of all claimants who had claimed as Operational Creditors in accordance with Regulation 16 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 (‘CIRP Regulations’ in short).

 The CoC comprised of following three members with voting share as assigned against their names, namely, East India Transport Agency (2%); the Asst. Commissioner, CGST, Gandhidham (88%) (the present Appellant) and Asst. Commissioner of Income Tax, Gandhidham (10%).

 The 1st and 2nd CoC meetings were held on 23-24 December 2021 and 29-30 December 2021 respectively. The 2nd CoC meeting was held to confirm appointment of IRP as Resolution Professional; to ratify and approve remuneration of IRP; expenses incurred by the IRP etc. The present Appellant, however, did not cast his vote during the second CoC meeting and stated during the said meeting that CBIC Master Circular No. 1081/02/2022-CX dated 19.01.2022 on Recovery and Write-off of Arrears of Revenue do not provide for payment of fees and CIRP costs.

 Since two of the Operational Creditors of the CoC including the present Appellant did not cast their vote in the 2nd CoC meeting, the Resolution Professional approached the Adjudicating Authority for directions. The Adjudicating Authority on 16.03.2022 in IA/65(AHM) 2022 in CP(IB) 55 of 2020 held that CoC cannot deny to act under law and directed the CoC members to cast their vote in CoC meetings in respect of resolutions placed before it.

 In the 3rd CoC meeting held on 11.04.2022, the Appellant again did not vote while the other two members of the CoC voted in favour of resolution confirming appointment of IRP as Resolution Professional as well as payment of IRP fees and CIRP cost. Since the Appellant with 88% vote-share had not cast his vote, the Resolution Professional again moved the Adjudicating Authority for directions to the present Appellant to cast its vote in CoC meetings and contribute to CIRP costs.

 In the 4th CoC meeting, the Appellant ratified the CIRP costs except that of IRP fees and sought a decision of the CoC in the next meeting for withdrawal of CIRP process. Accordingly, this matter was taken up in the 5th CoC meeting held on 17.05.2022. Since the other two members of CoC with 12% share voted against the withdrawal resolution, hence, the Section 12 A withdrawal application falling short of 90% vote share could not get passed. The Appellant during the 5th CoC meeting stated that they were not interested to run the CIRP process and preferred to go for liquidation. This was also agreed by Asst. Commissioner of Income Tax, Gandhidham and hence with 98% voting share, the CoC members decided to go for liquidation.

 In IA/415 (AHM) 2022 in CP(IB) 55 of 2020 filed by the Resolution Professional, the Adjudicating Authority on 09.05.2022 ordered the Resolution Professional to proceed with CIRP; directed the Appellant to take part in CIRP and directed CoC to pay CIRP costs as per voting share.

 The Appellant, aggrieved with the above orders of the Adjudicating Authority dated 09.05.2022 has come up in appeal seeking exemption/exclusion from bearing the expenses and fee of Resolution Professional and CIRP costs.

The Learned Counsel for the Appellant submitted that Rule 112 of NCLT Rules, 2016 has restricted collection of any kind of fees payable from the Central Government at the time of filing any application and hence CIRP costs cannot be collected from them. It is further submitted that it is not justified on the part of the Adjudicating Authority to compel the Appellants to pay CIRP costs when they voted against this resolution in the CoC meeting. It was further added that the aforementioned CBIC Master Circular of 19.01.2022 also do not provide scope for payment of IRP fees and CIRP costs.

Contesting the above submissions, the Learned Counsel for the Respondent stated that the decision of the Adjudicating Authority directing the CoC to pay the CIRP cost in proportion to their voting share was in order as it was in consonance with the provisions of IBC.

We have heard the submissions of the Learned Counsel for both the parties and perused the material on record carefully.

The issues which have come before our consideration are two-fold, firstly, whether the Appellant by virtue of CBIC Master Circular and NCLT Rules is dispensed from payment of IRP fees and CIRP expenses and whether this Tribunal can allow relief to the Appellant by exempting them from bearing the expenses of CIRP cost and fees of RP; and, secondly, whether the AA had erred in directing the Resolution Professional to proceed with CIRP and also recover CIRP costs.

We may therefore first dwell upon the tenability of the contention of the Appellants that as Rule 112 of the NCLT Rules, 2016 restricts collection of fees payable at the time of application filed by an officer on behalf of Central Government, therefore, CIRP costs also cannot be collected from Government department.

At this stage it is relevant to extract Rule 112 of NCLT Rules, 2016 which deals with “Fees”:

The definitions clause of NCLT Rules, 2016 at Rule 2 (12), states that unless the context otherwise requires, “fee” is the amount payable in pursuance of the provisions of the Act and these rules for any petition or application or interlocutory application or a document or for certified copy of document or order of the Tribunal or such other paper as may be specified in Schedule of Fees to these rules and includes any modifications as may be made thereto or any fee as prescribed for filing of documents to the Tribunal by these rules.

From a bare reading of the above NCLT Rules, it is quite clear that fees mentioned in Rule 112 read with the definition clause 2(12) does not mention either CIRP costs or the fees to be paid to the IRP or RP. The aforesaid NCLT Rules are confined to fees payable on account of petition or appeal or application filed or references made for documents/orders before the NCLT. This is clearly distinguishable from the expenses which constitute insolvency resolution process costs; costs of the IRP or the Resolution Professional cost which are defined in Section 5(13) read with CIRP Regulation 31, 33 and 34 respectively. Hence we find that the argument advanced by the Learned Counsel for the Appellant that CIRP cost and IRP fees is not recoverable from government departments to be misconceived and untenable as we find no such express provision either in the IBC or the NCLT Rules.

This brings us to the applicability of CBIC Master Circular No. 1081/02/2022-CX dated 19.01.2022 on Recovery and Write-off of Arrears of Revenue in IBC matters in the context of payment of CIRP costs and IRP fees. From a cursory glance at the aforementioned circular as at pages 117-133 of the Appeal Paper Book, contents of the Master Circular do not appear to refer to how CIRP costs and IRP fess are to be handled. Be that as it may, we cannot lose sight of the well settled legal proposition that IBC is a complete code in itself and the Hon’ble Supreme Court has taken a clear view in “Innoventive Industries Ltd. Vs ICICI Bank Ltd. & Anr (Civil Appeal Nos. 8337-8338 of 2017) and Principal Commissioner of Income Tax Vs Monnet Ispat & Energy Ltd.(2018) SCC Online SC 3465 that the provisions of IBC will prevail over other laws in view of the non-obstante clause contained in Section 238 of IBC. It is beyond any pale of doubt that IBC is a complete code in itself and that being the case, in the present matter, in respect of payment of fees of Resolution Professional and CIRP cost, the norms as laid down in the IBC and relevant CIRP Regulations will prevail over the Master Circular and will be squarely applicable on the Appellant. Therefore, we hold that the Appellants cannot find any succour in the Master Circular issued by CBIC in support of their contention.

The Learned Counsel for the Appellant has prayed before this Tribunal for grant of exemption from bearing the expenses and fees of Resolution Professional and CIRP cost. For the reasons stated above, it clearly is beyond the remit of this Tribunal to allow any exemption or waiver from the payment of fees of Resolution Professional and CIRP costs. We are therefore of the considered view that the Adjudicating Authority had committed no error in directing CoC to pay CIRP costs as per voting share.

This brings us to the question as to whether the Adjudicating Authority had erred in directing the Resolution Professional to proceed with the CIRP and further directing the Appellant having 88% voting share to take active part in CIRP. From the material on record, it is borne out that the Adjudicating Authority having admitted the CIRP proceedings on 23.11.2021 and appointed the IRP, the latter had started discharging his duties and responsibilities diligently in terms of IBC Code and Rules/ Regulations framed thereunder.

The IRP started collating claims in a timely manner and the Appellant also submitted his claim. Thus the Appellant was very much an integral part of the CIRP process from its inception. As there were no Financial Creditors of the Corporate Debtor and the IRP was obligated to scrupulously follow the procedures prescribed in the IBC Code and the Rules/Regulations framed thereunder, he had no choice but to set up the CoC with only operational creditors under CIRP Regulation 16 and hence cannot be put to fault for this. We also note that Appellant had taken a consistent stand that it did not want to participate in the CoC/CIRP process and at one stage expressed a desire to withdraw. However, the desired resolution for seeking withdrawal from CIRP process was duly considered by CoC but could not pass muster as it fell short of the prescribed 90% vote share. It is also noted that the Resolution Professional had approached the Adjudicating Authority not once but twice for directions so that the CIRP could proceed smoothly and the Adjudicating Authority was well within his jurisdiction to have directed the CIRP to proceed and direct the CoC to pay CIRP costs. On this aspect too, we are of the considered view that the decision of the Adjudicating Authority also does not suffer from any infirmity and we therefore concur in it.

In view of the above discussions, facts and circumstances, we are of the considered opinion that there are no convincing reasons to interfere with the Impugned Order. In the result, the appeal having no merit is dismissed. No costs.