STATE TAX OFFICER (1) versus RAINBOW PAPERS LIMITED

Citation: [2022] 13 S.C.R. 808 · Decided: 06-09-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 13 S.C.R.
STATE TAX OFFICER (1)
v.
RAINBOW PAPERS LIMITED
(Civil Appeal No. 1661 of 2020)
SEPTEMBER 06, 2022
[INDIRA BANERJEE AND A.S. BOPANNA, JJ.]
Insolvency and Bankruptcy Code, 2016: ss. 9, 15, 30, 31&53
– Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 – rr. 4, 4A, 6 to
14 – Gujarat Value Added Tax, 2003 – s. 48 – s. 53 of the IBC, if
overrides s. 48 of GVAT – Certain amount due from the respondent
to the Sales Tax authorities towards CST and VAT – Recovery
proceedings initiated and respondent’s property attached – Petition
u/s. 9 for initiation of CIRP and Resolution professional-RP was
appointed – Appellant then filed claim before the RP that certain
amount was due under the GVAT Act and RP informed the appellant
that its entire claim had been waived off – Challenge to, by the
appellant –NCLT rejected the application as not maintainable and
holding that the Government cannot claim first charge over the
property of the Corporate Debtor, as s. 48 which provides for first
charge on the property of a dealer in respect of any amount payable
by the dealer on account of tax, interest, penalty etc. under the said
Act, cannot prevail over s. 53 of the IBC – NCLAT dismissed the
appeal as also held that the claim of the State is belated – On appeal,
held: NCLAT erred in holding that s. 53 of the IBC overrides s. 48
of GVAT – s48 of the GVAT Act is not contrary to or inconsistent
with Section 53 or any other provisions of the IBC – Under Section
53(1)(b)(ii), the debts owed to a secured creditor, which would include
the State under the GVAT Act, are to rank equally with other specified
debts including debts on account of workman’s dues for a period
of 24 months preceding the liquidation commencement date – State
is a secured creditor under the GVAT Act – s. 3(30) of the IBC defines
secured creditor to mean a creditor in favour of whom security
interest is credited – Such security interest could be created by
operation of law - Definition of secured creditor in the IBC does
not exclude any Government or Governmental Authority –
   [2022] 13 S.C.R. 808
808
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Furthermore, delay in filing a claim cannot be the sole ground for
rejecting the claim–Impugned orders set aside.
Allowing the appeal, the Court
HELD 1.1 The Regulations have to be read as a whole and
not in a truncated manner and interpreted in the light of the
statutory provisions of the IBC. The time lines stipulated in the
IBC even for completion of proceedings are directory and not
mandatory. [Para 23][831-C-D]
1.2 The claims were invited well before the 5th October,
2017 which was the last date for submission of claims. Under the
unamended provisions of Regulation 12(1), the appellant was not
required to file any claim. Read with Regulation 10, the appellant
would only be required to substantiate the claim by production of
such materials as might be called for. The time stipulations are
not mandatory as is obvious from Sub-Regulation (2) of Regulation
14 which enables the Interim Resolution Professional or the
Resolution Professional, as the case may be, to revise the
amounts of claims admitted, including the estimates of claims
made under Sub-Regulation (1) of the said Regulation as soon as
might be practicable, when he came across additional information
warranting such revision. [Para 24][831-D-F]
1.3 There was no obligation on the part of the State to lodge
a claim in respect of dues which are statutory dues for which
recovery proceedings have also been initiated. The appellants
were never called upon to produce materials in connection with
the claim raised by the Appellants towards statutory dues. The
Adjudicating Authority as well as the Appellate Authority/NCLAT
misconstrued the Regulations. [Para 25][831-G]
1.4 The Adjudicating Authority (NCLT) and the Appellate
Authority (NCLAT) have held that the claim of the State is
belated. Regulation 12 of the 2016 Regulations deals with the
time period for submission of a claim along with proof, as stipulated
in the public announcement under Section 15 of the IBC. The
time period is, however, not mandatory but only directory. [Para
39][834-G-H]
STATE TAX OFFICER (1) v. RAINBOW PAPERS LIMITED
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SUPREME COURT REPORTS
[2022] 13 S.C.R.
1.5 Section 31 of the IBC which provides for approval of a
Resolution Plan by the Adjudicating Authority makes it clear that
the Adjudicatin

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