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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P. SAM KOSHY, N. TUKARAMJI, JJ.
Sujana Universal Industries Limited - Petitioner
Versus
The Union of India, Represented by its Secretary & Ors. - Respondents
Writ Petition No. 24895 of 2023
Decided On : 11-03-2024
Writ of Mandamus - Income Tax - Income Tax Act, 1961, Section 148A - Summary of the acts and sections referenced and discussed by the court: The court discussed the consequences of the order of the National Company Law Tribunal (NCLT) in a proceeding under the Insolvency and Bankruptcy Code, 2016, and referred to various provisions of the IBC, including Section 31, and its binding effect on stakeholders. The court also highlighted the overriding effect of the IBC on any inconsistency with other laws, as well as the extinguishment of claims not part of the approved resolution plan, as established by judicial pronouncements.
Fact of the Case:
The petitioner sought a Writ of Mandamus to set aside an order passed by respondent No.2 under Section 148A of the Income Tax Act, 1961 for the assessment year 2019-2020. The petitioner contended that the authorities could not issue further notices once the resolution plan was approved by the NCLT, extinguishing earlier liabilities.
Finding of the Court:
The court set aside the impugned order for the assessment year 2019-2020, citing the binding effect of the resolution plan approved by the NCLT and the extinguishment of claims not part of the approved plan.
Issues: The main issue was whether the authorities could issue further notices in respect of liabilities extinguished by the approved resolution plan.
Ratio Decidendi: The court relied on the provisions of the Insolvency and Bankruptcy Code, 2016, particularly Section 31, and judicial pronouncements to establish the binding effect of the resolution plan on stakeholders and the extinguishment of claims not part of the approved plan.
Final Decision: The court allowed the writ petition and set aside the impugned order for the assessment year 2019-2020.
ORDER :
P. Sam Koshy, J.
The present writ petition has been filed seeking for issuance of a Writ of Mandamus for setting aside the impugned order dated 10.04.2023 (Annexure P1) passed by respondent No.2 under clause(d) of Section 148A of the Income Tax Act, 1961 (for short, ‘the Act’) for the assessment year 2019-2020.
2. Heard Mr. M.Naga Deepak, learned counsel for the petitioner and Mr. Vijhay K.Punna, learned Senior Standing Counsel for Income Tax appearing for respondents.
3. The brief facts relevant for adjudication of the present writ petition are that the petitioner establishment namely M/s.Sujana Universal Industries Limited filed a company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal, Hyderabad Bench, Hyderabad (briefly referred to hereinafter as ‘NCLT’) which was registered as C.P. (IB) No.186/9/HDB/2019. The said company petition stood admitted and proceedings for Corporate Insolvency Resolution Process (CIRP) was initiated. One Mr. Nethi Mallikarjuna Setty was appointed as the Resolution Professional to oversee the Corporate Insolvency Resolution Process. In the process, a Committee of Creditors (CoC) was constituted to inter alia evaluate the resolution plans received in respect of the Corporate Insolvency Resolution Process of the petitioner and public announcements were made and Expression of Interest (EoI) from entities interested in submitting resolution plans were invited.
4. M/s.Triterras Holdings Pte. Limited and M/s.Invent Assets Securitization and Reconstruction Pvt. Ltd. was the successful bidder and their resolution plan was accepted and approved by the Committee of Creditors vide order dated 24.12.2020 in I.A.No.868 of 2020 in C.P. (IB) No.186/9/HDB/2019. By virtue of the resolution plan approved by the NCLT, M/s.Triterras Holdings Pte. Limited and M/s.Invent Assets Securitization and Reconstruction Pvt. Ltd. took over the management and control of the affairs of the petitioner establishment and stepped into the shoes of the petitioner in the course of taking over the management.
5. According to the learned counsel for the petitioner, once when the resolution plan stood approved by the NCLT and the successful resolution applicant i.e. M/s.Triterras Holdings Pte. Limited and M/s.Invent Assets Securitization and Reconstruction Pvt. Ltd. having taken over the management including its management and control, the authorities concerned could not have issued any further notices in respect of any further liability which till then was not claimed or raised. M/s.Triterras Holdings Pte. Limited and M/s.Invent Assets Securitization and Reconstruction Pvt. Ltd. the successful resolution applicant had taken over the petitioner establishment on a clean slate basis. All earlier liabilities other than those which are reflected in the resolution plan stands extinguished.
6. In terms of the resolution plan so far as the liabilities of the corporate debtor i.e. the petitioner is concerned, it was in the plan itself envisaged as under :
(ix) That, pursuant to Section 32A of the IBC, all existing legal proceedings including those under the PMLA Act, 2002 initiated in relation to the Company shall stand extinguished from and on the NCLT Approval Date. Further, the approval of this Plan shall protect the assets of the Corporate Debtor from any future liability on account of past actions of the erstwhile promoters of the Corporate
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities, ensuring a fresh start for the corporate debtor.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities.
Once a resolution plan is approved under the IBC, the claims provided in the plan are binding and any claims not included in the plan are extinguished.
The approved Resolution Plan under the Insolvency and Bankruptcy Code binds all creditors, extinguishing claims not included, ensuring no surprise liabilities arise post-approval.
Approved resolution plans under the Insolvency and Bankruptcy Code extinguish all pre-CIRP claims not included, including statutory dues from tax authorities.
Approved resolution plans under the Insolvency Code extinguish claims not included, barring enforcement actions for pre-existing statutory dues.
Tax liabilities arising during corporate insolvency resolution cannot be extinguished by a resolution plan unless explicitly provided, as affirmed by recent Supreme Court rulings.
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