Back
2025 Supreme(Online)(NCLT) 328
NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Sanjay Puri, JJ
Sri Ramesh Kanuparthi – Appellant
Versus
Assistant Commissioner of Commercial Taxes – Respondent
IA(I.B.C) - 2388/2024
For the Petitioner:Sarvani Desiraju
For the Respondent:Sandeep Huilgol
Tax demands against a Joint Venture during Corporate Insolvency Resolution Process are unenforceable as they impact the assets of the Corporate Debtor, violating IBC moratorium provisions.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 14 - Central Goods and Services Tax Act, 2017 - Section 79(1)(c) - Tax demand against Joint Venture (JV) during Corporate Insolvency Resolution Process (CIRP) - The tax demand raised against the JV for the financial year 2018-19 is unenforceable during the CIRP as it impacts the assets of the Corporate Debtor (CD) protected under the IBC moratorium provisions. The JV, being an unincorporated entity, does not have a distinct legal personality separate from the CD, which assumes full responsibility for liabilities. (Paras 38, 52, 54)
(B) Jurisdiction - The Tribunal lacks jurisdiction to entertain applications concerning the JV as it is not a Corporate Debtor under the IBC. The provisions of IBC take precedence over contractual agreements. (Paras 19, 36)
Facts of the case:
The Corporate Debtor was admitted to CIRP on 15.11.2022. The JV, formed under a Joint Venture Agreement, was responsible for executing a project but is not a separate legal entity. The tax demand of ₹15,15,72,134/- was issued against the JV, leading to recovery proceedings.
Findings of Court:
The tax demand against the JV is unenforceable during the CIRP, and the Recovery Notice is suspended.
Issues: Whether the income of the JV constitutes the income of the CD and whether the tax demand can be enforced during the CIRP.
Ratio Decidendi: The court held that the JV does not have a separate legal identity from the CD, and tax liabilities incurred before CIRP are operational debts protected under the IBC moratorium.
Result: Applications disposed of with directions to suspend the tax demand.
ORDER
1. Both I.A. No. 2295 of 2024 & I.A No. 2388 of 2024 are filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) by the Applicant/RP. These have been taken up together for decision as they are interlinked and connected.
2. The RP of M/s. Gayatri Projects Limited (Corporate Debtor/CD) filed the I.A. No. 2295 of 2024, seeking the following reliefs:
(i) To declare the Order dated 10.04.2024 and the consequent recovery proceedings under section 79(1)(c) of the CGST Act, 2017 issued to the Manager, State Bank of India, Belgaum vide Form GST DRC- 13 dated 13.07.2024 by Respondent No. 1 as illegal as the same are in violation of the provisions of IBC and therefore set them aside; and,
(ii) To set aside the Order dated 15.10.2024 issued by Respondent No. 2 rejecting the appeal preferred by the Corporate Debtor through its JV by insisting on the pre-deposit as inconsistent with the provisions of IBC and allow for the Corporate Debtor to contest the impugned order dated 10.04.2024 passed by Respondent No. 1.
3. The I.A. No. 2388 of 2024 is also filed by the Resolution Professional with the following prayers:
(i) To suspend the operation of Letter dated 13.07.2024 (Recovery Notice vide Form GST DRC-13) to the Manager, State Bank of India, Siddeshwara Road, Athani Branch, issued by Respondent No. 1.
(ii) To grant an order of injunction against the Respondents not to take any further coercive steps till the disposal of the Interlocutory Application, I.A (IBC) No. 2295 of 2024, which is pending before this Hon’ble Tribunal.
4. The Corporate Debtor was admitted to the Corporate Insolvency Resolution Process (“CIRP”) pursuant to an order dated 15.11.2022, and the RP was appointed on the same date. Since the admission of the CD into the CIRP, the management and administration of the CD have been overseen by the RP.
Application:
5. The CD, along with RNS Infrastructure Limited (“RNS”) and Sadguru Infratech Private Limited (“SIPL”), entered into a Joint Venture Agreement dated 29.11.2016, under the name of Gayatri RNS SIPL JV (“JV”). The JV was an unincorporated entity and did not have a distinct legal personality. Pursuant to the agreement, share of work was allocated as follows:
• CD: 70%
• RNS: 25%
• SIPL: 05%
The CD was designated as the lead partner. Additionally, the members of the JV agreed to joint and several liabilities.
6. The Karnataka Neeravari Nigam Ltd. issued a tender on 18.10.2016 for the execution of a project involving survey, investigation, design, supply, installation, testing, and commissioning of a lift irrigation system, along with the construction of a Canal Distribution System.
7. The JV emerged as the successful bidder and consequently entered into an agreement with Karnataka Neeravari Nigam Ltd. for the execution of the project. A work order dated 06.03.2017 (Pg No 19 of the Application) was issued to the JV. On the same date, the members executed a Co-operation Agreement (Pg Nos. 23 to 31 of the application) delineating their respective roles and responsibilities.
8. On 06.03.2017, the members of JV executed a Co-operation Agreement (Pg Nos. 23 to 31 of the Application) delineating their respective roles and responsibilities. The CD also assumed accountability for all obligations, including regulatory compliances, tax payment & filing, levies, charges, maintenance of book of accounts and records, etc. Consequently, the CD assumed complete liability of JV.
9. It is averred that there has been an express modification to the JV entered on 29.11.2016, by which RNS and SIPL were released from any joint and several liabilities, making the CD solely responsible for all legal and financial obligations.
10. The JV being an unincorporated association of persons, is not a body corporate as defined under the Companies Act 2013 or a "person" under Section 3(23) of the IBC. Except for taxation purposes under Section 2(31) of the Income Tax Act, 1961, an unincorporated Association of Persons is not deemed a separate legal
