Income Tax claims do not qualify as secured debts in insolvency; adherence to statutory priority is crucial.

ORDER

(Heard through Hybrid)

This application has been filed by the Canara bank of India under Section 60 (5) of Insolvency and Bankruptcy Code 2016 r/w Rule 11 of NCLT Rules 2016 by Canara Bank against Mr. B. Ramana Kumar (herein after referred to as Liquidator/ 1st Respondent and Income Tax Department (herein after referred to as 2nd Respondent) in seeking following reliefs:

(a) To Pass an order directing the 2nd Respondent to return the sum of Rs.1,12,58,549/- (Rupees One Crore Twelve Lakhs Fifty Eight Thousand Five Hundred and Forty Nine only) paid by the 1 Respondent on 21.07.2023 into the Liquidation Estate of the Corporate Debtor.

(b) To pass an order directing the 1st respondent liquidator to thereafter re- distribute the proceeds strictly in accordance with Section 53 of the code and IBBI (Liquidation Process) Regulation 2016 and thus render justice.

1. SUBMISSIONS OF THE APPLICANT:

(i) The applicant submits that the corporate debtor is a private limited company incorporate on 05.02.2008 and engaged in the business of manufacturing, assembling and marketing of electrical control panels, DG sets, Electrical cables, meters for HT and LT and other allied products.

(ii) It is submitted that applicant on 06.03.2016 has sanctioned various credit facilities to the corporate debtor and the corporate debtor has secured such credit facilities and subsequently, the corporate debtor has defaulted in repaying the principle and interest amounts and hence the account of the corporate debtor has become Non- Performing Asset on 09.04.2015.

(iii) It is submitted that the applicant has issued a demand notice on 25.06.2015 and the applicant has taken a symbolic possession over the assets of the corporate debtor on 10.09.2015. In furtherance to which the applicant has filed an OA No.575/2015 before DRT-II, Chennai for the recovery of Rs.19,98,96,132.58/- and the same was allowed by DRT II on 25.01.2019.

(iv) The applicant submits that Income tax department has attached a mortgaged property of the corporate debtor on 08.12.2017 for non- payment of tax dues for the assessment year 2009-2010 and 2013-2014, and further the applicant submits that the applicant has no knowledge of the above mortgage.

(v) The applicant submits that the Krishna Energy Private Limited (herein after referred as Corporate Debtor) was admitted into Corporate Insolvency Resolution Process (herein after referred to CIRP) by this Tribunal vide order dated 22.11.2019 and subsequently, the liquidation process was commenced against the corporate debtor by this Tribunal vide order dated 06.01.2022 in IA/880(CHE)/2021 and Mr. B. Ramana Kumar was appointed as the liquidator of the corporate debtor.

(vi) It is submitted that on 05.02.2022, the proof of claim for an amount of Rs.54,62,68.669.14/- was submitted by the applicant before the liquidator and further the applicant submitted that it would relinquish its security interest and stand along with other stakeholders.

(vii) The applicant submits that the Liquidator has filed the list of stakeholder on 22.03.2022 and it includes three financial creditors namely, the Applicant Bank, Mr A N Suresh and Neena Suresh and the detailed extract of the list of the stakeholders are as follows:

(viii)The applicant submits that Income Tax department/ 2nd Respondent has not filed a claim before the liquidator within the time period provided under Insolvency and Bankruptcy Code, 2016 .

(ix) The applicant submits that , Stakeholders Consultation meeting was held on 11.04.2022 in which the liquidator has referred to the judgement of state tax ofÏcer vs. Rainbow papers Ltd 2022 (13)SCR 808 and stated that claims of the government department would be pari passu to that of the secured creditors as per section 53 of IBC,2016 and Income tax department was added as a part of the Stakeholders consultation committee (herein after referred as SCC).

(x) The appli