Citation: IA/887/2022 & IA/1606/2022
CORAM: Hon’ble Member (Judicial): Justice P.N. Deshmukh (Retd.)
Hon’ble Member (Technical): Mr. Shyam Babu Gautam
An Applications was filed under section 60(5) of Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules, 2016.
In deciding a petition filed in Subodh Kumar Agrawal v. TagudaPte. Limited, the National Company Law Tribunal, Mumbai Bench, comprises up of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), noted that all past liabilities arising out of any levies or tax dues to any government authorities, etc., pertaining to pre-Corporate Insolvency Process period which accrued during the CIRP period and are not part of the Resolution Plan, shall stand extinguished and As a result, the Bench waived the Corporate Debtor's incurred income tax and GST liabilities that had occurred after the start of CIRP.
Ushdev International Limited, Corporate Debtor was assigned to the process for resolving corporate insolvency ("CIRP"). The Resolution Professional named, Mr. Subodh Kumar Agrawal. Taggeda Pte Limited, Resolution Applicant submitted a plan for resolving the corporate debt, and the same was approved by Committee of Creditors. Before the adjudicating authority, the resolution professional further applied for approval of the aforementioned resolution plan.
When approving the Resolution Plan, the Adjudicating Authority instructed that all past liabilities resulting from levies, taxes, or other obligations to government authorities that were not covered by the Resolution Plan and related to the pre-CIRP period would be cancelled as of the date of approval aforesaid Resolution Plan. Furthermore, the relevant Authorities must approve any waiver that is requested in the Resolution Plan. As a result, even though the Resolution Plan had been fully authorised by the CoC, the aforementioned ruling essentially did not permit the precise waivers requested in it.
As a result, the Applicant made a request to the Adjudicating Authority to modify the order from March 2, 2022, except for waivers requested under the Resolution Plan. The waivers included liabilities incurred during the CIRP period, liabilities that would arise upon the adoption of the Resolution Plan, and liabilities that would develop up until the closing date (as outlined in the Resolution Plan). Additionally, the resolution applicant requested a remission of the corporate debtor's accrued income tax and Goods and Services Tax (GST) liability as of the CIRP start date.
Judgement: The Bench held that all prior debts related to taxes owed, levies, and other obligations to government agencies that are not covered by the Resolution Plan and apply to the CIRP period shall be discharged as of the date the Resolution Plan was approved. It was noted that the authorities must submit their claim to the Resolution Professional prior to the CoC's acceptance of the Resolution Plan. Liabilities cannot be placed on the Resolution Applicant after the Resolution Plan has been approved. The Bench consequently excused the unpaid income tax and GST. Additionally, the Bench noted that the income tax liability on notional income, arising from the implementation of the Resolution Plan as a result of writing back the unpaid dues to the creditors. The Bench also noted that the income tax obligation on notional revenue that would have resulted from the Resolution Plan's adoption due to the writing down of creditors' unpaid debts in the Corporate Debtor's books would also be waived. As a result, these liabilities were also discharged.