Judgment Summaries (High Court) Ultra Tech Nathdwara Cement Ltd. v. Union Of India

  March 3, 2022

Case Summary

Ultra Tech Nathdwara Cement Ltd. v. Union Of India

W.P.(C) 9480/2019, High Court of Rajasthan, Decided on 07.04.2020

 

The petitioner filed this writ petition against several notices issued by the Central Goods and Services (‘GST’) tax department demanding several GST payments from the petitioner for the periods prior to the taking over of the corporate debtor, Binani Cements Limited by the petitioner pursuant to the approval of its resolution plan. The precise issue for determination in this case was whether an approved resolution plan is binding on the government department or not.

  • Approved Resolution Plan binding upon the government authorities

As per the amended Section 31 of the Insolvency and Bankruptcy Code, the central govt., state govt. or any other local authority to whom a debt is owed under any law, all are bound by the terms of a resolution plan approved by the Adjudicating Authority. The objective behind this provision is to ensure that no pending dues are raised by the government authorities after the approval of the resolution plan. The idea was to lend assurance to the prospective resolution applicants. As held in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, a successful resolution applicant cannot, after taking over the corporate debtor, be suddenly faced with undecided claims. It would amount to ‘a hydra popping up which would throw into uncertainty amounts payable by a prospective resolution applicant’. Therefore, all the claims (be it by the government or other creditors) have to be submitted beforehand to the resolution professional so that the prospective resolution applicants are aware of their costs and are not faced with unexpected demands/claims after successfully taking over the corporate debtor. The court agreed and reiterated the above holding of Essar Steel and held that the department (operational creditor) cannot approach the court with their claims post the approval of the resolution plan. This is particularly true since the power of judicial review of the court over a CoC approved resolution plan is limited. 

  • No right of audience to the government departments

One of the arguments raised by the department was that it was not given a right to be heard before the approval of the resolution plan by the committee of creditors. The court held that, no such right is required to be given to the state/central government, who are operational creditors, under the scheme of the Code. Only the financial creditors are given the right to vote on the resolution plans, in light of the ratio of Essar Steel and the provisions of the IBC.

 

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