Back
2025 Supreme(Online)(NCLT) 1791
NATIONAL COMPANY LAW TRIBUNAL
Shri. Rajeev Bhardwaj, J, Shri. Sanjay Puri, T
Sri Ramesh Kanuparthi – Appellant
Versus
Assistant Commissioner of Commercial Taxes Karnataka – Respondent
I.A (IBC) No. 2295 of 2024 | C.P (IB) No.308/7/HDB/2022 | I.A (IBC) No. 2388 of 2024
For the Applicant: Mrs. Sarvani Desiraju
For the Respondents: Mr. Sandeep Huilgol, Mr. Sandeepani Neglur
The court ruled that tax liabilities under the IBC cannot be enforced against the Corporate Debtor during the moratorium, as it significantly impacts its assets and operations.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5) - Application filed to challenge tax recovery proceedings against the Corporate Debtor JV - Challenges to recovery notice during CIRP processes addressed - The court determines what impacts operational debt under the IBC and clarifies the JC’s authority in assessing tax demands against the Corporate Debtor when undergoing Corporate Insolvency Resolution Process (CIRP). (Paras 1, 5, 38, 54)
(B) The Corporate Debtor is liable for legal compliance and obligations of the JV - The unincorporated JV does not constitute a separate legal entity for IBC purposes, making its liabilities subject to the CD’s moratorium protections. (Paras 9, 10, 49, 52)
Facts of the case:
The application contested the legality of tax recovery demands against the Corporate Debtor by asserting that the Joint Venture (JV) in which it partakes does not share a legal status that subjects it to tax liabilities independent of the Corporate Debtor. (Paras 2, 6)
Findings of Court:
Tax demands raised pre-CIRP are unenforceable against the Corporate Debtor's assets, violating IBC moratorium provisions. (Paras 52, 54)
Issues: Whether the income from the JV during the Corporate Debtor's CIRP phase constitutes operational debt under the IBC and whether the Recovery Notice can be enforced. (Paras 38, 54)
Ratio Decidendi: The court discerns that while tax authorities may assess liabilities, their recovery actions must comply with CIRP constraints; any demand taxing JV income concurrently infringes upon the protections afforded to the Corporate Debtor by the IBC. (Paras 39, 44)
Result: I.As disposed of, the tax demand is unenforceable due to the moratorium in place.
| Table of Content |
|---|
| 1. joint applications filed regarding tax recovery under ibc. (Para 1 , 2) |
| 2. authority of tribunal to suspend recovery actions during cirp. (Para 3 , 4) |
| 3. moratorium effects on tax recovery assessments. (Para 10 , 38 , 39) |
| 4. legal classification and treatment of joint ventures under ibc. (Para 44 , 50) |
| 5. final ruling on tax demands against assets of the corporate debtor. (Para 54) |
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 liab
