Srei Infrastructure Finance Limited ... vs The Kolkata Municipal Corporation And ...
2025 Latest Caselaw 41 Cal/2

Calcutta High Court

Srei Infrastructure Finance Limited ... vs The Kolkata Municipal Corporation And ... on 2 May, 2025

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          IN THE HIGH COURT OF JUDICATURE AT CALCUTTA

                  CONSTITUTIONAL WRIT JURISDICTION

                               ORIGINAL SIDE

                        RESERVED ON: 24.04.2025
                        DELIVERED ON: 02.05.2025

                                  PRESENT:

               THE HON'BLE MR. JUSTICE GAURANG KANTH

                           W.P.O. 1106 OF 2024

          SREI INFRASTRUCTURE FINANCE LIMITED AND ANR.

                                   VERSUS

          THE KOLKATA MUNICIPAL CORPORATION AND ORS.

Appearance:-

Mr. Sakya Sen, Sr. Adv.
Mr. Sankarsan Sarkar, Adv.
Mr. Aditya Kanodia, Adv.
Mrs. Shreya Trivedi, Adv.
                                                        .....For the Petitioners

Mr. Biswajit Mukherjee, Adv.
Mr. Gurudas Mitra, Adv.
Ms. Manisha Nath, Adv.

                                                    .....................For the KMC


                                 JUDGMENT

Gaurang Kanth, J.

1. In the present writ petition, the petitioner is assailing the notices dated

04.06.2024 (Annexure P-5), the supplementary bills dated 16.06.2024

(Annexure P-6), and the letter of intent and notice of demand both dated Page |2

16.11.2024 (Annexure P-7) issued by the respondent municipal

corporation against the petitioner No. 1 herein. Vide these documents,

the respondent municipal corporation retrospectively enhanced the

annual value of the property in question, w.e.f 2017 and raised the

enhanced property tax demands accordingly.

2. The facts leading to the present case are as follows:

3. It is the case of the petitioners that petitioner No. 1 is the absolute owner

of land measuring 43 Cottahs, 9 Chittacks, and 21 square feet, along

with a B+G+7 storied building having a super built-up area of 8,483.80

square feet, comprising the 1st to 7th floors (North-East Block), a

reception desk on the ground floor, and six open car parking spaces

located at the rear side of the ground floor of the building known as

Vishwakarma Building, situated at Premises No. 86C, Topsia Road

(South), Police Station - Tiljala, Kolkata (hereinafter referred to as the

"said premises").

4. Petitioner No. 1 is a Non-Banking Financial Company (NBFC) holding a

valid license from the Reserve Bank of India (RBI). On 04.10.2021, the

RBI superseded the Board of Directors of petitioner No. 1 and appointed

an administrator in respect of the said company.

5. Pursuant to an application filed by the RBI under the Insolvency and

Bankruptcy Code, 2016 (IBC), the Learned Adjudicating Authority was

pleased to admit the said application and, by an order dated 08.10.2021,

initiated the Corporate Insolvency Resolution Process (CIRP) in respect of Page |3

petitioner No. 1. By the same order, the administrator appointed by the

RBI on 04.10.2021 was continued as the administrator for petitioner no.

1. A moratorium under the IBC also came into effect on 08.10.2021. The

resolution plan proposed by the National Asset Reconstruction Company

Ltd. was approved by the Adjudicating Authority under the IBC on

11.08.2023.

6. On 04.06.2024, the petitioner received four separate notices issued by

the Respondent Municipality under various provisions of the Kolkata

Municipal Corporation Act, 1980, proposing to revise the annual

valuation of the said premises retrospectively under the Unit Area

Assessment method. According to the said notices, the proposed annual

values were as follows:

With effect from 01/2017: Rs. 45,45,030/-

With effect from 02/2021: Rs, 86,41,970/-

With effect from 02/2022: Rs. 1,22,15,300/-

With effect from 02/2023: Rs. 1,39,89,950/-

7. The petitioner submitted objections to the proposed revisions on

27.06.2024. However, it is the petitioner's case that the respondent

corporation, without duly considering the objections raised, finalized the

annual values as originally proposed in the notices dated 04.06.2024.

Subsequently, supplementary bills dated 16.07.2024 were issued on the

basis of the revised valuations. On or about 16.11.2024, the respondent

authorities affixed a letter of intimation demanding a total outstanding Page |4

amount of Rs. 70,15,637/-, along with interest and penalties, in relation

to the said supplementary bills.

8. Being aggrieved by the said demand, the petitioner has preferred the

present writ petition.

Arguments on behalf of the Petitioner

9. Learned Counsel for the petitioner submits that vide the impugned

notices, the respondent corporation sought to enhance the annual value

of the premises in question with retrospective effect from 2017. Prior to

the retrospective enhancement of the annual value of the premises in

question, the annual value of the said premises for the period from

01/2016 to 04/2022 was Rs. 7,38,500/- and for the period from

01/2023 to 04/2024 was Rs. 8,12,350/-. The petitioners have been

paying the property tax from time to time on the expected rent or annual

value system as per the demand raised by the respondent corporation.

10. Learned Counsel for the petitioner further submits that vide 4 separate

notices dated 04.06.2024, the respondent corporation enhanced the

annual value of the premises in question retrospectively w.e.f 2017. Out

of the 4 impugned notices, dated 04.06.2024, the first one was issued

under Section 174 of the KMC Act for the period from 01/2017 to

01/2021. The subsequent annual valuations are revisions of the

proposed annual valuation under Section 180(2) (ii) of the KMC Act.

Hence, if the 1st notice which was issued under Section 174 of the KMC Page |5

Act is bad in law by virtue of IBC, 2016, the subsequent revisions are

also illegal and not valid.

11. Learned Counsel further submits that, in view of Sections 31 and 32A of

the IBC, all claims up to the date of approval of the Resolution Plan

under the IBC i.e., up to 11.08.2023 stood extinguished by operation of

law. The impugned notices pertain to a period prior to 11.08.2023. Since

all such claims and demands of the respondents stood extinguished, the

impugned notices issued by the respondent corporation in respect of the

period prior to the approval of the Resolution Plan are not tenable in law.

12. Learned Counsel for the petitioner further submits that the IBC

contemplates and prescribes a specific mode and manner for lodging

claims in respect of a company undergoing the Corporate Insolvency

Resolution Process (CIRP). The respondent authorities, having failed to

avail themselves of such a process, are now attempting to arm-twist the

petitioners by saddling the new management with illegal demands

pertaining to past periods, even though such claims and demands stood

extinguished. The new management of petitioner No. 1, being the

National Asset Reconstruction Company Limited (NARCL), is entitled to

run the company with a clean slate. The impugned notices, therefore, are

contrary to the provisions of law, ex facie bad, invalid, and liable to be set

aside.

13. In support of these submissions, Learned Counsel for the petitioner relies

upon the judgments of the Hon'ble Supreme Court in CIT Vs Monnet Page |6

Ispat & Energy Ltd reported as 2018(18) SCC 786, Ruchi Soya

Industries Vs UOI reported as 2022 (6) SCC 243, Essar Steel India

Ltd, Committee of Creditors Vs Satish Kumar Gupta reported as

2020 (8) SCC 531, Ghanshyam Mishra & Sons Pvt Ltd Vs Edelweiss

Assest Reconstruction Co Ltd reported as 2021 (9) SCC 657, Vaibhav

Goel & Anr. vs. Deputy Commissioner of Income Tax, reported as

2025 SCC OnLine SC 592.

14. With these submissions, Learned Counsel for the petitioner prays for the

quashing of the impugned notices and subsequent demands issued by

the respondent corporation.

Arguments on behalf of the Respondent Municipality

15. Learned Counsel for the respondent corporation vehemently refutes the

submissions made on behalf of the petitioners. At the very outset, the

respondent corporation itself raised an issue of maintainability of the

present writ petition, contending that the present writ petition has not

been filed through proper authority.

16. Learned Counsel further submits that under the Unit Area Assessment

system, it is the statutory duty of the assessee to submit a self-

assessment return in terms of Section 182A of the Kolkata Municipal

Corporation Act, 1980. In the event of failure to file such return, the

Municipal Commissioner is empowered to make a suo motu assessment.

The writ petitioner failed to submit the self-assessment return as

required under Section 182A of the KMC Act, 1980. Consequently, the Page |7

respondent corporation, relying on various sources including leave and

license agreements entered into between the writ petitioner and its

tenants, initiated the process of fixing the annual value. As the petitioner

failed to submit its objections within the stipulated period, the proposed

valuation was finalized by operation of law.

17. Learned Counsel for the respondent corporation further submits that, by

not filing the self-assessment return under Section 182A of the KMC Act,

1980, the writ petitioner deliberately withheld material facts and figures,

thereby suppressing the true rental values with the intent to depress the

valuation and pay lesser tax. It is the contention of the respondent

corporation that the writ petitioner committed fraud upon the

Corporation, and hence, it is within the jurisdiction of the corporation to

revise the valuation retrospectively once the fraud came to light.

18. Learned Counsel for the respondent further submits that the respondent

corporation was not aware of the IBC proceedings and, therefore, could

not submit its claims prior to the approval of the Resolution Plan.

Moreover, the appropriate authority, while considering the reliefs,

waivers, and concessions sought by the Corporate Debtor, expressly

stated that:

"No reliefs, waivers, and concessions that fall within the domain of other Government departments/authorities are granted. The reliefs, waivers, and concessions that pertain to other Government authorities/departments shall be dealt with by the respective competent authorities/forums/offices, whether Government or Page |8

Semi-Government, of the State or Central Government, with regard to the respective reliefs, waivers, and concessions."

In view of the above, the respondent corporation submits that its

outstanding dues towards property tax cannot be treated as extinguished.

17. In light of these submissions, Learned Counsel for the respondent prays for

dismissal of the present writ petition.

Legal Analysis

19. This Court heard the arguments advanced by both the parties and

examined the documents placed on record.

20. The respondent corporation raised an objection qua the maintainability of

the present writ petition. Perusal of the record reveals that the present

writ petition has been filed by petitioner No. 1 through petitioner No.2

who is duly authorized by the Board of Directors of the petitioner No. 1 to

represent the petitioner No. 1 in the present proceedings. This Court

finds no infirmity in the said authorization and therefore, rejects the

preliminary objection raised by the respondent corporation qua the

maintainability of the present writ petition.

21. The main thrust of the argument advanced by the petitioner is that once

the Resolution Plan is approved by the competent authority, all claims up

to the date of such approval stand extinguished. Therefore, even

government dues cannot be recovered from the petitioner for the period

prior to the approval of the Resolution plan.

Page |9

22. Before examining the facts of the present case, this Court would like to

examine the law in this filed.

23. The Insolvency and Bankruptcy Code, 2016 (IBC) lays down the

framework for resolution plans. Section 30 provides for the submission of

a resolution plan. As per Section 30(1), a resolution applicant may

submit a resolution plan, along with an affidavit stating that he is eligible

under Section 29A, to the resolution professional. The plan must be

prepared based on the information memorandum in terms of Section 29.

Under Section 30(2), the resolution professional is required to examine

each resolution plan to ensure compliance with the requirements of

clauses (a) to (f) of that sub-section. Thereafter, in terms of Section 30(3),

the resolution professional must present the resolution plans that

conform to the requirements of sub-section (2) to the Committee of

Creditors (CoC) for its approval. Section 30(4) provides that the CoC may

approve a resolution plan by a vote of not less than 66% of the voting

share of the financial creditors, after considering its feasibility and

viability. As per Section 30(5), the resolution applicant may also attend

meetings of the CoC, though without voting rights unless the applicant is

also a financial creditor. Once approved by the CoC, the resolution

professional is required to submit the resolution plan to the Adjudicating

Authority in terms of Section 30(6).

24. Section 31 deals with the approval of a resolution plan. Under Section

31(1), if the Adjudicating Authority is satisfied that the resolution plan P a g e | 10

approved by the CoC meets the requirements of Section 30(2), it shall, by

order, approve the resolution plan. Once approved, the resolution plan

becomes binding on the corporate debtor and its employees, members,

creditors (including the Central Government, any State Government, or

any local authority to whom any debt, including statutory dues, is owed),

guarantors, and all other stakeholders involved in the resolution plan.

However, before granting approval, the Adjudicating Authority must

ensure that the resolution plan includes provisions for its effective

implementation. As per Section 31(2), if the Adjudicating Authority is not

satisfied that the resolution plan conforms to the requirements referred

to in Section 31(1), it may, by order, reject the resolution plan. Section

31(3) further provides that once a resolution plan is approved under

Section 31(1), the moratorium order passed under Section 14 shall cease

to have effect.

25. Section 238 of the IBC provides that the provisions of the Code shall

have effect notwithstanding anything inconsistent therewith contained in

any other law for the time being in force, or any instrument having effect

by virtue of any such law.

26. The Hon'ble Supreme Court, in Essar Steel India Ltd. (Supra), after an

elaborate and exhaustive analysis of various provisions of the IBC,

concluded that a successful resolution applicant cannot suddenly be

confronted with 'undecided' claims after the resolution plan submitted by

them has been accepted. Such a situation would be akin to a "hydra P a g e | 11

head" emerging, creating uncertainty regarding the amounts payable by a

prospective resolution applicant. All claims must be submitted to and

decided by the resolution professional, ensuring that the resolution

applicant is fully aware of the liabilities that need to be settled before

taking over and running the business of the corporate debtor.

27. The Hon'ble Supreme Court, in Ghanshyam Mishra & Sons Pvt. Ltd.

(Supra), examined the specific question of whether any creditor including

the Central Government, State Government, or any local authority is

bound by the resolution plan once it is approved by the Adjudicating

Authority under Section 31(1) of the Insolvency and Bankruptcy Code

(IBC). The Hon'ble Apex Court held that once a resolution plan is duly

approved under Section 31(1) of the IBC, the claims as provided in the

resolution plan shall be frozen and will be binding on the corporate

debtor and its employees, members, creditors (including the Central

Government, any State Government, or any local authority), guarantors,

and other stakeholders. As of the date of such approval, all claims not

included in the resolution plan shall stand extinguished, and no person

shall be entitled to initiate or continue any proceedings in respect of such

excluded claims. The Hon'ble Supreme Court further declared that all

dues, including statutory dues owed to the Central Government, any

State Government, or any local authority, if not included in the resolution

plan, shall stand extinguished, and no proceedings in respect of such P a g e | 12

dues for any period prior to the date of approval by the Adjudicating

Authority under Section 31 may be continued.

28. The Hon'ble Supreme Court followed Ghanshyam Mishra (Supra) very

recently in Vaibhav Goel & Anr Vs Deputy Commissioner of Income

Tax (Supra) and Electro Steel Steel Ltd (ESL Steel Limited Vs Ispat

Carrier Pvt Ltd reported as 2025 SCC Online SC 829 and reiterated

that even if any stakeholder is not a party to the proceedings before the

NCLT and if such stakeholder does not raise its claim before the interim

resolution professional/resolution professional, the resolution plan as

approved by the NCLT would still be binding on him.

29. Hence, in view of the settled position of law as discussed herein above, it

is evident that all dues, including statutory dues owed to the Central

Government, any State Government, or any local authority, if not

included in the resolution plan, shall stand extinguished, and no

proceedings in respect of such dues for the period prior to the date on

which the Adjudicating Authority grants its approval under Section 31 of

the IBC may be continued.

30. This being the legal position, this Court now proceeds to examine the

facts of the present case.

31. In the present case, the Resolution plan was approved by the NCLT,

Kolkata Bench on 11.08.2023. Admittedly the demand raised by the

respondent corporation is not part of the resolution plan approved by the P a g e | 13

NCLT, Kolkata Bench. In view thereof, all the liabilities towards the

respondent corporation prior to 11.08.2023 stands extinguished.

32. This Court also notes that the respondent municipality, vide the

impugned notices dated 04.06.2024, sought to retrospectively increase

the annual value of the premises in question under the unit area method

with effect from 2017, by exercising the powers vested in it under the

Kolkata Municipal Corporation Act, 1980. It is the petitioner's case that,

although no self-assessment return was ever filed, property tax was being

paid to the respondent corporation in accordance with the demands

raised by it. To substantiate this claim, learned counsel for the petitioner

relied upon the 'All Demand Details' pertaining to the premises in

question, bearing Assessee No. 110592206780. The said document

reveals that the petitioner was regularly paying property tax in

accordance with the demands raised by the respondent corporation up to

the date of approval of the Resolution Plan, i.e., 11.08.2023.

33. Be that as it may, in view of the settled legal position as laid down by the

Hon'ble Supreme Court in the aforementioned judicial precedents, the

demand raised by the respondent corporation up to the date of approval

of the Resolution Plan stands extinguished. As regards the subsequent

period, i.e., period after 11.08.2023, the respondent corporation is

entitled to make assessment in accordance with law.

34. Hence the present writ petition is allowed. All the outstanding statutory

dues of the respondent corporation pertaining to the period prior to the P a g e | 14

approval of the resolution plan stand extinguished. All the impugned

notices, supplementary bills and notices of demands raised by the

respondent corporation are hereby quashed.

35. The respondent corporation is at liberty to rework the liabilities of the

petitioner for the subsequent period (i.e., period after the approval of the

Resolution plan) in accordance with law. Needless to mention that while

doing the said exercise, the respondent corporation is expected to comply

with the principles of natural justice.

36. With these directions, the present writ petition is disposed of.

(Gaurang Kanth, J.)

Sakil Amed (P.A.)