The IBC's moratorium provisions shield and protect the corporate debtor from pecuniary attacks, and the authorities cannot enforce recovery or levy interest on tax due during the moratorium.

JUDGMENT :

The petitioner, Deputy Commissioner (Works Contract), has approached this Court under Article 227 of the Constitution of India impugning the Order dated 26.10.2022 passed by the National Company Law Tribunal, Kochi Bench, under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 (for short, ‘IBC’).

2. The 2nd respondent Company is under liquidation. The 2nd respondent, M/s Albanna Engineering (India) Private Limited, a Corporate Debtor, was admitted into Corporate Insolvency Resolution Process (CIRP) on 25.10.2019. M/s Sanghvi Movers Ltd filed IBA No.38/2019 under Section 9 of the IBC against the 2nd respondent. The CIRP effected public commencement on 03.11.2019. The CIRP order was passed against the Corporate Debtor, and the moratorium was declared as provided under Section 14 of the IBC. The moratorium declared against the Corporate Debtor existed till 02.12.2021, the day on which the liquidation order was passed in I.A. No.147/KOB/2021.

2.1 On verification of the assessment records of the 2nd respondent Company pertaining to the period 2015-16 certain irregularities were noticed. Hence, notice under Section 25(1) of the KVAT Act was issued to the 2nd respondent. The assessment for the year 2015-16 was completed vide Order dated 25.02.2021, and the total liability of KVAT was determined to be Rs.11,76,35,628.70, which would include interest of Rs.4,31,82,699.14. The Department had claimed Rs.11,76,35,626.70 in Form-C dated 04.01.2022 before the resolution professional appointed by the Company Law Board for M/s Albanna Engineering (India) Private Limited.

2.2 Against the petitioner’s Form-C application, the 2nd respondent had filed an application before the National Company Law Tribunal, Kochi Bench, under Section 33(5) of the IBC seeking permission to prefer an appeal against the order of assessment dated 25.02.2021 passed by the petitioner. Though the application was only for seeking permission to file an appeal against the assessment order dated 25.02.2021, the National Company Law Tribunal had passed the impugned order stating that the Assessment Order was passed in violation of the prohibition provided under Section 14(1)(a) of IBC. Therefore, the Assessment Order was declared void ab initio. The National Company Law Tribunal dismissed the application of the 2nd respondent and directed the 2nd respondent to consider the claim submitted by the KVAT Works Contract Authorities independently, ignoring the assessment order dated 25.02.2021.

3. The question which falls for consideration in this writ petition before this Court is whether the NCLT is empowered to declare the assessment order as void ab initio under Section 33(5) of IBC?

4. Section 14 of IBC provides that when the insolvency process commences, the NCLT is mandated to declare a moratorium on the initiation of any coercive legal action against the Corporate Debtor. Section 14 of the IBC on reproduction reads as under:

“14. Moratorium.-

(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the adjudicating authority shall by order declare moratorium for prohibiting all of the following, namely-

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Explanation.-For the purposes of this sub-section, it i