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2025 Supreme(Online)(NCLT) 327
NATIONAL COMPANY LAW TRIBUNAL
Shri Rajeev Bhardwaj, Shri Sanjay Puri, JJ
Sri Ramesh Kanuparthi – Appellant
Versus
Assistant Commissioner of Commercial Taxes Karnataka – Respondent
IA(I.B.C) - 2295/2024
For the Petitioner:Sarvani Desiraju
For the Respondent:Sandeep Huilgol
Tax liabilities incurred before CIRP are operational debts and cannot be enforced against the Corporate Debtor's assets, as the moratorium under IBC protects the Corporate Debtor from recovery actions.
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 during Corporate Insolvency Resolution Process (CIRP) - Tax liabilities incurred before CIRP are operational debts and cannot be enforced against Corporate Debtor's assets - Moratorium under IBC protects Corporate Debtor from recovery actions. (Paras 39, 52, 54)
(B) Joint Venture - Nature and legal status - An unincorporated Joint Venture does not possess a distinct legal personality and its income is not separate from the Corporate Debtor's income for the purposes of IBC. (Paras 10, 44)
(C) Jurisdiction - The Tribunal lacks jurisdiction to entertain matters unrelated to insolvency, including tax assessments against a Joint Venture distinct from the Corporate Debtor. (Paras 19, 36)
Facts of the case:
The Corporate Debtor was admitted to CIRP and sought to challenge tax demands issued against a Joint Venture it was part of, arguing that the demands violated IBC provisions.
Findings of Court:
The tax demand against the Joint Venture for the financial year 2018-19 is unenforceable during the CIRP as it would impact the Corporate Debtor's assets.
Issues: Whether the tax demand against the Joint Venture can be enforced during the CIRP and the legal status of the Joint Venture in relation to the Corporate Debtor.
Ratio Decidendi: The court held that tax liabilities incurred before CIRP are operational debts and cannot be enforced against the Corporate Debtor's assets, reaffirming the protective nature of the moratorium under Section 14 of the IBC.
Result: Applications disposed of with directions to suspend the tax demand enforcement.
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 lega
