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2023 Supreme(Del) 2861
IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Tara Vitasta Ganju, JJ.
Sree Metaliks Limited – Appellant
Versus
Additional Director General & Ors. – Respondents
W.P.(C) No.3119 of 2021 & CM APPL. 9461 of 2021
Decided On : 16-02-2023
Mr Ramji Srinivasan, Senior Advocate with Mr Vikash Kumar Jha, Mr Ritu Anand Vishwakarma and Ms Varalika Dev, Advocates, for the Petitioner.
Mr Ajit Sharma, Senior St. Counsel with Mr A. Renganath, Advocate for R-1 to 3.
Mr Asheesh Jain, CGSC with Mr Keshav Mann & Mr Gaurav Kumar, Advocates for R-4 to 7.
The Resolution Plan approved under the Code binds all stakeholders and extinguishes claims not part of the plan.
Headnote:
show-cause notice - sustainability of the show-cause notice - Insolvency and Bankruptcy Code, 2016 - Section 31, Section 53 - The impugned show-cause notice was quashed as it sought to exercise futility given the law laid down by the Supreme Court in Ghanashyam Mishra. The clean slate principle cannot be set at naught by entertaining claims that concern the period obtaining before the approval of the Resolution Plan.
Fact of the Case:
The petitioner, Sree Metaliks Limited, sought to quash the show-cause notice issued by the Directorate of Revenue Intelligence (DRI) concerning the sustainability of the notice dated 18.07.2019. The petitioner argued that the notice was issued after the Resolution Plan framed under the Insolvency and Bankruptcy Code, 2016 (Code) received the imprimatur of the National Company Law Appellate Tribunal (NCLAT). The petitioner contended that the Resolution Plan takes into account statutory liabilities, including excise duty, and once approved, it is binding on all stakeholders, extinguishing claims not part of the plan. The respondents argued that the Court did not have jurisdiction and that the liability of the assessee under the Customs Act, 1962 was a first charge on its property.
Finding of the Court:
The impugned show-cause notice was quashed as it sought to exercise futility given the law laid down by the Supreme Court in Ghanashyam Mishra. The clean slate principle cannot be set at naught by entertaining claims that concern the period obtaining before the approval of the Resolution Plan.
Issues: The sustainability of the show-cause notice in light of the Resolution Plan approved under the Code, the jurisdiction of the Court, and the liability of the assessee under the Customs Act, 1962.
Ratio Decidendi: The Resolution Plan approved under the Code binds all stakeholders and extinguishes claims not part of the plan. The liability of the assessee under the Customs Act, 1962 is a first charge on its property, but the impugned show-cause notice sought to exercise futility given the law laid down by the Supreme Court in Ghanashyam Mishra.
Final Decision: The impugned show-cause notice was quashed.
JUDGMENT
[Physical Court hearing/Hybrid hearing (as per request)]
TABLE OF CONTENTS
Preface:
Background:
Submissions advanced on behalf of the petitioner:
Submissions advanced on behalf of the respondents:
Reasons and Analysis:
Conclusion:
Preface:
1. The short issue which arises for consideration in the writ petition concerns the sustainability of the show-cause notice [in short "impugned show-cause notice"] dated 18.07.2019, issued by respondent no.2 i.e., Additional Director General (ADG), Directorate of Revenue Intelligence (DRI), Zonal Unit, Hyderabad.
1.1. Before we proceed further, we may indicate, that unless the context requires otherwise, hereafter, the respondents will be collectively referred to as the "DRI/DGFT".
Background:
2. The petitioner i.e., Sree Metaliks Limited ["SML"] asserts, that the impugned show-cause notice is liable to be quashed and/or set aside, for the reason, that it has been issued after the Resolution Plan framed under the aegis of the National Company Law Tribunal, Kolkata Bench [in short "NCLT"] on 07.11.2017, received the imprimatur of the National Company Law Appellate Tribunal [in short "NCLAT"].
3. In support of this plea, SML adverts to two significant documents.
3.1. Firstly, the Public Announcement made by one Mr Vinod Kumar Kothari i.e., the Interim Resolution Professional (IRP) on 01.02.2017, calling upon all creditors of SML to submit proof of their claims on or before 13.02.2017 in such Forms as prescribed under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ["2016 Regulations"] with him i.e., the IRP.
3.2. Secondly, the e-mail dated 17.05.2017 addressed by the Resolution Professional (RP) i.e., one Mr Kuldeeep Verma to Senior Intelligence Officer, Directorate of Revenue Intelligence, Bhubaneshwar Regional Unit/respondent no.3. Via this e-mail, the RP informed respondent no.3, that Corporate Insolvency Resolution Process (CIRP) had been initiated qua SML, pursuant to an order dated 30.01.2017 passed by the NCLT.
4. The aforementioned communication i.e., the e-mail dated 17.05.2017 also adverted to the following aspects:
(i) First, the power of the Board of Directors under Section 17 of the Insolvency and Bankruptcy Code, 2016 [in short "Code"] stood suspended and vested with the RP.
(ii) Second, the provisions of Section 14 of the Code had kicked in.
(iii) Third, the factum of issuance of summons under section 108 of the Customs Act, 1962 [in short "1962 Act"] and its service on SML had been brought to the notice of the RP, and since the moratorium had kicked in, further proceedings against SML ought to be kept in abeyance.
(iv) Fourth,respondent no.3 should provide details concerning SML till 30.01.2017, and for the period ensuing thereafter up until the date of the communication i.e., 17.05.2017.
5. Concededly, the respondents did not lodge their claims with the RP.
6. We may indicate here, that the DRI's stand is, that prior to the amendment brought about in Regulation 12 of the 2016 Regulations, it was only required to file "proof of claim".
6.1. Admittedly, proof of claim was not filed.
6.2. The stand taken vis-a-vis non-filing of proof of claim is, that SML had acknowledged the debt due, and accordingly sought an extension of time to fulfilits export obligations.
7. Therefore, the short issue, as indicated at the very outset, which requires examination is: which of the opposing points of view should be sustained, given the facts arising in the matter and the current state of the law.
8. Before proceeding further, it may be necessary to broadly etch out the background in which the instant writ action has been filed.
9. The petitioner, at the relevant point in time when it was in the business of manufacturing SpongeIron, MS Billets, TMT and Pellets had imported certain capital goods, albeit at a concessional rate of customs duty, under the Export Promotion Capital Goods Scheme ["EPCG scheme"].
9.1. The EPCG sche
