The Hon’ble Himachal Pradesh High Court opined that since the provisions of the IBC had overriding effect on all laws in view of Section 238 of the IBC, it was not permissible for the Respondents to create a charge on the property of the Petitioner- Company during the currency of the moratorium.
It was ruled that the plea of the respondents that the tax dues claimed by them will have priority as a “Crown Debt”, therefore, cannot be accepted, and their action in continuing the said red entry/charge on account of dues recoverable from erstwhile management of the 1st petitioner- Company under the H.P. Vat Act, 2005, HPGST Act, 2017 and the CST Act, 1956, would be clearly illegal & arbitrary.
Brief Facts:
The present petition has been filed in respect of charge over the properties of Petitioner no.1 on account of dues recoverable from the erstwhile Management of the Petitioner No.1 under the Himachal Pradesh Value Added Tax Act, 2005
( ‘HP Vat Act’), the Central Sales Tax Act, 1956 (‘CST Act’) and Himachal Pradesh Goods and Services Tax Act,
2017 ( ‘HPGST Act’).
On account of default in adherence to the financial discipline by the erstwhile management of the Company, the State Bank of India had initiated Corporate Insolvency Resolution Process
of the petitioner-Company by filing petitioner under
Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) before the NCLT. A moratorium was imposed.
Thereafter, application for liquidation was filed. The sale of the Corporate Debtor as a going concern stood confirmed.
Contentions of the Petitioners:
It was argued that after approval of acquisition plan, it
became binding on all including respondents and any act contrary to the approved plan would be illegal, particularly, when none of the respondents had challenged the acquisition plan which had also been approved by the NCLT.
Further, all the claims of the Respondents have stood extinguished qua the properties of the Company.
Contentions of the Respondents:
It was argued that State Debts have priority over
rights of secured creditors. Further, Respondents had first charge over the properties of the Company.
Observations of the Court:
The Court opined that since the provisions of the IBC had overriding effect on all laws in view of Section 238 of the IBC, it was not permissible for the Respondents to create a charge on the property of the Petitioner- Company during the currency of the moratorium.
Further, the Respondents were estopped from continuing the red entry/charge on the properties of the Petitioner-company since they never objected to the acquisition plan submitted by the current management of the Petitioner-company.
It was ruled that the plea of the respondents that the tax dues claimed by them will have priority as a “Crown Debt”, therefore, cannot be accepted, and their action in continuing the said red entry/charge on account of dues recoverable from erstwhile management of the 1st petitioner- Company under the H.P. Vat Act, 2005, HPGST Act, 2017 and the CST Act, 1956, would be clearly illegal & arbitrary.
The decision of the Court:
The Hon'ble Court, after noting facts and circumstances accordingly allowed the petition.
Case Title: Su-Kam Power System Ltd. & Another v. State of Himachal Pradesh & Others
Coram: Hon’ble Mr. Justice M.S. Ramachandra Rao, Hon’ble Mr. Justice Satyen Vaidya
Case No.: CWP No.422 of 2024
Advocates for the Petitioner: Advs. Mr. Aalok Jagga and Mr. Vedhant Ranta
Advocates for the Respondent: Advs. Mr. Anup Rattan, Mr. Rakesh Dhaulta
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