The Delhi Bench of National Company Law Appellate Tribunal (NCLAT) has upheld the Resolution Plan and held that the GST/IDT Department’s statutory dues do not have preferential treatment over secured creditors under the IBC framework.
The bench of Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) has relied on the decision of Supreme Court in the case of State Tax Officer vs. Rainbow Papers Limited as well as Sanjay Kumar Agarwal vs. State Tax Officer by which it was held that the department ought to have been treated as secured operational creditor and ought to have been given the same treatment as was given to other secured creditors.
The Department appealed against the National Company Law Tribunal (NCLT) Ahmedabad’s approval of the Resolution Plan for Cengres Tiles Ltd.. The Assessee was the Resolution Professional (RP) responsible for administering the insolvency process.
The Department’s admitted claim of Rs. 11,76,90,942 was reduced to Rs. 1,00,000/- under the approved Resolution Plan.
The Department contended that this treatment was contrary to law as they should have been recognized as secured creditors under Section 30(2) of the Insolvency and Bankruptcy Code, 2016 (IBC).
The issue raised was whether the Department’s claim be treated as a secured operational debt under the IBC, thereby entitling them to higher priority in payment?
The tribunal dismissed the Department’s appeal.
The NCLAT upheld the NCLT’s order, noting that the statutory dues are treated as operational debts under the IBC waterfall mechanism. The claim was correctly valued under Section 30(2) and Section 53(1).
Case Details
Case Title: Assistant Commissioner CGST vs Pradeep Kabra Resolution Professional of Cengres Tiles Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 844 of 2024
Date: 23/01/2025
Counsel For Appellant: Anushree Narain
Counsel For Respondent: Ravi Raghunath
