The State Tax Department holds a first charge as a secured creditor under tax laws, prioritized in the distribution of assets under insolvency proceedings.

ORDER

[Per: Bench]

1. IA/522(AHM)2021 is an application filed by the Applicant–Resolution Professional (“RP”) on 29.07.2021 under Sections 25 (a), 32A, 60(5) and 238 of the Insolvency and Bankruptcy Code, 2016 (“IBC, 2016” with the following prayers:-

a) Your Lordship may be pleased to allow the present application;

b) Your Lordship may be pleased to direct Respondent for removing encumbrances/charges from the factory land, as specified in para 8 above, of the corporate debtor in terms of Section 32A of the Code;

c) Your Lordship may be pleased to hold that the claim of respondent shall be paid in accordance with Section 53 of the Code;

d) Your Lordship may be pleased to grant any other relief or reliefs as may be deemed fit in the interest of justice;

2. It is stated that CP(IB) 72 of 2018 was filed under Section 9 of the IBC, 2016 which came to be ordered on 10.11.2020. Pursuant to the invitation of claim, the Gujarat State Tax Department submitted a claim for a sum of Rs.38,58,19,833/- under Form-B which was accepted for a sum of Rs.3,37,65,975/-. Thereafter, the RP found while going through the land revenue records of the factory premises that a burden note/encumbrance has been entered by the Respondent herein upon the factory land being survey no. 388, 405 of Village - Mahiyal, Taluka - Talod. The encumbrance was for a sum of Rs.47,52,564/- for the year 2014-15 including interest a sum of Rs.2,31,84,958/- for the year 2017-18 and sum of Rs.1,05,81,017/- for the year 2018-19.

3. Thereafter, the RP sent an email on 27.04.2021 to the Respondent requesting the Respondent to remove the encumbrance since the claim filed was accepted by the RP.

4. As the Respondent has not removed the encumbrance another email was sent on 03.07.2021, however, the encumbrance continued.

5. The same was discussed in the 4th Committee of Creditors (“CoC”) meeting held on 28.04.2021.

6. It is the contention of the RP that because of the said encumbrance, he was unable to perform duties under the Code and that Sections 32A to Section 238 of the Code stand violated.

7. During the Corporate Insolvency Resolution Process (“CIRP”), the RP invited Resolution Plans for the Corporate Debtor. One M/s. Naresh Tradelink Private Limited gave a plan which was approved by the CoC pursuant to which this Tribunal vide order dated 29.06.2022 approved the Resolution Plan submitted by the said M/s. Naresh Tradelink Private Limited for the reasons stated in the said order. The following payments were envisaged in the Resolution Plan:-

8. IA/522(AHM)2021 was not disposed off at the time of approval of the Resolution Plan and was heard from time to time. The order dated 13.12.2022 records as under:-

“Ld. Counsel appearing for the State Tax Department submitted that in view of the Hon’ble Supreme Court’s judgment in State Tax Officer vs Rainbow Paper Ltd. in Civil Appeal No. 1661/2020 they have written a letter to the RP to treat the State Tax Officer Department as a Secured Creditor. Ld. Counsel for the RP submitted that he will take a call on this and he has kept that amount separately. We recorded this fact. Since the Ld. Counsel for the RP seeks some time, the matter stands adjourned.”.

9. Reply was filed by the State Tax Officer under Inward Diary No. D2719 dated 31.12.2021. Under para 4 of the reply, it is stated that the encumbrances/charge over the factory land belonging to the Corporate Debtor for survey no. 388 and 405 situated at Village: Mahiyal, Taluka: Talod, District: Sabarkantha was created vide entry no. 4538 and 4638 respectively for the recovery of outstanding tax dues and these mutation entries and tax amount due are way prior to the initiation of the proceedings under the I&B Code.

10. Further, under para 7 of th