Orissa High Court
M/S. Esl Steel Limited And Another vs The Union Of India And Others on 14 December, 2022
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.18771 of 2022
M/s. ESL Steel Limited and another .... Petitioners
Mr. C.R. Das, Advocate
-versus-
The Union of India and others .... Opposite Parties
Mr. Avinash Kedia, Junior Standing Counsel
CORAM:
THE CHIEF JUSTICE
JUSTICE M.S. RAMAN
ORDER
Order No. 14.12.2022
01. 1. Admittedly, the resolution plan in respect of the present
Petitioners was approved by the National Company Law Tribunal
on 17th April 2018.
2. As far as the impugned demand raised in the present writ
petition by the Customs Department, it pertains to the period prior
thereto.
3. With the resolution plan already having been approved, all
liabilities of the Petitioners prior to the aforementioned date of the
resolution plan would stand extinguished in terms of the judgment
of the Supreme Court of India in Ghanashyam Mishra & Sons
Private Limited v. Edelweiss Asset Reconstruction Company
Limited 2021 SCC OnLine SC 313 where it has been held as
under:
"93. As discussed hereinabove, one of the principal
objects of I&B Code is providing for revival of the
corporate debtor and to make it a going concern. The
I&B Code is a complete Code in itself. Upon
admission of petition under Section 7 there are
various important duties and functions entrusted to
RP and CoC. RP is required to issue a publication
inviting claims from all the stakeholders. He is
required to collate the said information and submit
necessary details in the information memorandum.
The resolution applicants submit their plans on the
basis of the details provided in the information
memorandum. The resolution plans undergo deep
scrutiny by RP as well as CoC. In the negotiations
that may be held between CoC and the resolution
applicant, various modifications may be made so as to
ensure that while paying part of the dues of financial
creditors as well as operational creditors and other
stakeholders, the corporate debtor is revived and is
made an ongoing concern. After CoC approves the
plan, the Adjudicating Authority is required to arrive
at a subjective satisfaction that the plan conforms to
the requirements as are provided in sub-section (2) of
Section 30 of the I&B Code. Only thereafter, the
Adjudicating Authority can grant its approval to the
plan. It is at this stage that the plan becomes binding
on the corporate debtor, its employees, members,
creditors, guarantors and other stakeholders involved
in the resolution plan. The legislative intent behind
this is to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with
any surprise claims. If that is permitted, the very
calculations on the basis of which the resolution
applicant submits its plans would go haywire and the
plan would be unworkable.
94. We have no hesitation to say that the words "other
stakeholders" would squarely cover the Central
Government, any State Government or any local
authorities. The legislature noticing that on account of
obvious omission certain tax authorities were not
abiding by the mandate of the I&B Code and
continuing with the proceedings, has brought out the
2019 Amendment so as to cure the said mischief. We
therefore hold that the 2019 Amendment is
declaratory and clarificatory in nature and therefore
retrospective in operation.
95. There is another reason which persuades us to
take the said view. Clause (10) of Section 3 of the I &
B Code defines "creditor" thus:
"3. (10) "creditor" means any person to whom a debt
is owed and includes a financial creditor, an
operational creditor, a secured creditor, an unsecured
creditor and a decree-holder;"
96. Clauses (20) and (21) of Section 5 of the I&B
Code define "operational creditor" and "operational
debt" respectively as such:
"5. (20) "operational creditor" means a person to
whom an operational debt is owed and includes any
person to whom such debt has been legally assigned
or transferred;
(21) "operational debt" means a claim in respect of
the provision of goods or services including
employment or a debt in respect of the payment of
dues arising under any law for the time being in force
and payable to the Central Government, any State
Government or any local authority;"
97. "Creditor" therefore has been defined to mean
"any person to whom a debt is owed and includes a
financial creditor, an operational creditor, a secured
creditor, an unsecured creditor and a decree-holder".
"Operational creditor" has been defined to mean a
person to whom an operational debt is owed and
includes any person to whom such debt has been
legally assigned or transferred. "Operational debt" has
been defined to mean a claim in respect of the
provision of goods or services including employment
or a debt in respect of the payment of dues arising
under any law for the time being in force and payable
to the Central Government, any State Government or
any local authority.
98. It is a cardinal principle of law that a statute has to
be read as a whole. Harmonious construction of
clause (10) of Section 3 of the I&B Code read with
clauses (20) and (21) of Section 5 thereof would
reveal that even a claim in respect of dues arising
under any law for the time being in force and payable
to the Central Government, any State Government or
any local authority would come within the ambit of
"operational debt". The Central Government, any
State Government or any local authority to whom an
operational debt is owed would come within the
ambit of "operational creditor" as defined under
clause (20) of Section 5 of the I&B Code.
Consequently, a person to whom a debt is owed
would be covered by the definition of "creditor" as
defined under clause (10) of Section 3 of the I&B
Code. As such, even without the 2019 Amendment,
the Central Government, any State Government or
any local authority to whom a debt is owed, including
the statutory dues, would be covered by the term
"creditor" and in any case, by the term "other
stakeholders" as provided in sub-section (1) of
Section 31 of the I&B Code."
4. The above decision has been followed by this Court in its
judgment dated 21st June 2021 in W.P.(C) No.8259 of 2019 (M/s.
Sree Metaliks Ltd. v. State of Odisha).
5. In that view of the matter, following the above decisions, the
Court quashes the demand challenged in the present writ petition.
The writ petition is accordingly disposed of.
6. Issue urgent certified copy of this order as per rules.
sd
(Dr. S. Muralidhar)
Chief Justice
(M.S. Raman)
Judge
S.K. Guin
