The National Company Law Tribunal Bench at Mumbai comprising HV Subba Rao (Member, Judicial) and Chandra Bhan Singh (Member, Technical) passed the ruling that an attachment of Account by the Tax Authorities during the pendency of a Corporate Insolvency Resolution Process (CIRP) is violative of Section 14 (Moratorium) of the Insolvency and Bankruptcy Code.
Background
The present Interlocutory Application had been filed by the Liquidator against Respondent Dy. Commissioner of State Tax (Respondent No. 1) and Axis Bank Limited (Respondent No. 2) seeking direction from this Tribunal to unfreeze/ lift the attachment on the Bank Account of the Corporate Debtor maintained by Axis Bank
The applicant vides it’s a letter dated 27.02.2020 had communicated to the Axis bank about the initiation of the CIRP of the Corporate Debtor. The applicant had also vide letter dated 27.02.2020 requested the Axis Bank to remove the attachment/lien marked on the said Bank Accounts.
Findings of the Bench
Bench in relation to violation of section 14 noted that the Applicant has appraised the officials of Respondent No. 1 and 2. The Bench had no doubt in its mind that the attachment is violative of Section 14 of the Code and thus needs to be lifted.
It was further noted by the Bench that,
“That the Dy. Commissioner of State Tax had already submitted its claim before the liquidator vide its FORM -B dated 12.04.2021. The said claim has been accepted by the liquidator. The claim of the Respondent (Dy. Commissioner of State Tax) will be dealt in the manner as provided u/s. 53 of the IBC and therefore, Respondent No. 1 i.e Dy Commissioner of State Tax cannot continue to enforce its lien over the bank accounts of the Corporate Debtor”.
The Bench referred to the decision of Hon’ble NCLT, Principal Bench New Delhi in Om Prakash Agarwal Vs/ Tax Recovery Officer 4 and Another wherein in like circumstance, it was held that,
“the monies of the CD lying in the bank account shall be construed to be an asset of the CD even if an attachment order is passed against the same. It noted that section 178 of the Income-tax Act, 1961 has been amended to allow the Code to have an overriding effect and accordingly directed the Bank to defreeze the account”.
Reliance was also placed on Ram Ratan Modi (RP of Duncans Industries Ltd.) v. ICICI Bank (Darjeeling Branch). The Bench directed the Dy. Commissioner of State Tax (Respondent No. 1) and Axis Bank Limited (Respondent No. 2) to lift its lien/attachment over the said bank accounts bearing Nos. 186010200000383 and 186010200006019 maintained with Respondent No. 2 bank.
The Axis Bank Limited was further directed to unfreeze the bank account of the Corporate Debtor and allow the applicant to manage its operations. By the following order, the present petition was allowed.
Case Details
Case Title: Asis Global Ltd. v. Dy. Commissioner of State Tax
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