NATIONAL COMPANY LAW APPELLATE TRIBUNAL

PRINCIPAL BENCH, NEW DELHI

Comp. App. (AT) (Ins) No. 34 of 2024 & I.A. No. 105, 106, 990 of 2024

(Arising out of the Order dated 31.10.2023 passed by the National Company
Law Tribunal, Ahmedabad Bench in IA No. 735/NCLT/AHM/ 2023 in I.A.
No. 435/NCLT/AHM/2023 in CP(IB) No. 66/NCLT/AHM/2017)

IN THE MATTER OF:

Commissioner of State Tax Department

Having its address at: Office of the Assistant
Commissioner of State Tax Unit-15. 2nd Floor, Seva
Sadan Building, Lal Darwaja, Ahmedabad, Gujarat
Mail id: [email protected] …Appellant
Versus

Ramchandra Dallaram Chaudhary Liquidator of

M/s Anil Ltd.
Having office at: 9B, Vardan Tower, Lakhudi Circle,
Naranpura, Ahmedabad, Gujarat-380014. Email –
[email protected] …Respondent

Present

For Appellant: Ms. Aastha Mehta, Adv.

For Respondent: Mr. Ramji Srinivasan, Sr. Adv. with Mr. Atul
Sharma, Ms. Namrata Saraogi, Mr. Shivanshu
Kumar, Ms. Aditi Sharma, Mr. Vikram Choudhary,
Advocates
JUDGEMENT
(20.05.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal has been filed by Commissioner of State Tax

Department (in short Appellant) under Section 61(1) of the Insolvency &
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Comp. App. (AT) (Ins.) No. 34 of 2024

Bankruptcy Code, 2016 (in short ‘Code’) in Company Appeal (AT) (Insolvency)

No. 34 of 2024 against the Impugned Order dated 31.10.2023 passed by the

National Company Law Tribunal, Ahmedabad Bench (in short ‘Adjudicating

Authority’) in IA No. 735/NCLT/AHM/2023 in IA No. 435/NCLT/AHM/2023

in CP(IB) No. 66/NCLT/AHM/2017, whereby the Adjudicating Authority

rejected the application of the Appellant to treat its claim as Secured Creditor

during the liquidation under waterfall arrangement as stipulated in Section 53 of

the Code.

2. Mr. Ramchandra Dallaram Chaudhary is the Liquidation (in short

‘Respondent’ herein) of M/s Anil Limited (‘Corporate Debtor’).

3. Heard the Counsel for the Parties and perused the records made available

including the cited judgements.

4. It has been brought out that the Corporate Debtor was admitted into

Corporate Insolvency Resolution Process (in short ‘CIRP’) vide the Adjudicating

Authority its Order dated 23.08.2017 and moratorium came into effect same day.

5. The Resolution Professional published a public announcement on

28.08.2017 inviting claims from all by stipulating the last date of claim filing as

on 06.09.2017. It has been stated that in the public announcement, it was

indicated that the estimated date for closure of CIRP would be 19.02.2018.
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Comp. App. (AT) (Ins.) No. 34 of 2024

6. It is further submitted that due to no resolution of the Corporate Debtor, the

CoC decided to liquidate the Corporate Debtor and the Adjudicating Authority

approved the Liquidation vide its order dated 25.10.2018. Subsequent to this, the

Respondent again published public announcement on 27.10.2018 and last date of

claims submission was 24.11.2018 and further indicated that date of closure of

the liquidation process would be 20.05.2018.

7. It is a case of the Appellant that the prevailing moratorium under Section

14 of the Code ceased to have effect on 25.10.2018 and Section 33(5) of the Code

came into effect. The Appellant submitted that the CIRP came to close on

20.05.2018.

8. The Appellant submitted that he passed an order for attachment for

immovable properties of the Corporate Debtor vide attachment letter dated

16.10.2018 in terms of the Gujarat Vat Act, 2003 (in short ‘VAT Act’) for

outstanding dues pertaining to Assessment Year (in short ‘AY’) 2007 to 2017. It

was stated that the said attachment order dated 16.10.2018 was challenged by the

Respondent before the Appellant in I.A. No. 501 of 2022.

9. The Appellant stated that he submitted his claims to the Respondent on

03.11.2018 for the AY 1994-95, 95-96, 96-97 and 97-98 and AY 2014-15 for Rs.

5,45,96,65,301/- and the same was admitted by the Respondent. The Appellant

further stated that he filed an additional claims to the Respondent on 24.06.2020

for AY 2015-16 and 2016-17 for Rs. 4,55,75,67,058/-.

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Comp. App. (AT) (Ins.) No. 34 of 2024

10. It has been brought out that on 17.07.2020 the Respondent communication

admitted all the claims of Rs. 1001,72,32,359/- however, the Respondent vide his

letter dated 28.07.2020 stated that the attachment order was bad in law due to

moratorium of the Corporate Debtor and further stated that the alleged attached

properties belonging to the liquidation estate.

11. It is the case of the Appellant as per section 48 of the VAT Act the dues of

the Appellant have the first charge over the property of the Corporate Debtor and

hence the Appellant ought to have been treated as Secured Creditors.

12. It has been brought out that the Appellant filed I.A. No. 501 of 2020 before

the Adjudicating Authority and the Adjudicating Authority passed the Order

dated 22.11.2022 in I.A. No. 501 of 2020 filed by the Respondent challenged the

attachment order. The relevant portion of the order dated 22.11.2022 reads as

under :-

"Learned Counsel for respondent Commissioner of State Tax

states that they have considered the aspect of applicability of
the judgment passed by Hon'ble Supreme Court in Rainbow
Papers Limited, and on the assurance from the liquidator to
treat it as a secured creditor in view of the said judgment they
have lift the attachment within a specific time period. Let the
affidavit be filed within five days, and with the time line of
lifting the attachments within a week." (SIC.)

13. The Appellant elaborated that based on the Order of the Adjudicating

Authority dated 22.11.2022, it was understanding on his part that the claims
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Comp. App. (AT) (Ins.) No. 34 of 2024

would be considered in the category of Secured Creditors. The Appellant

submitted that to his shock the Respondent again sent a letter to the Appellant on

22.06.2023 and informed about the rejection of the Appellant’s claim for AY

1994 to 98 and for AY 2013 to 2017 and thereby admitting claims of the AY 2007

to 2012. The Respondent also sent a communication vide letter dated 26.06.2023

to the Appellant reiterating that the claims of the Appellant have been rejected.

14. The Appellant thereafter filed an I.A. No. 435 of 2023 seeking that he may

be declared as Secured Creditors for his entire claims.

15. The Appellant gave the background of the case and stated that the

Appellant had sent notices under Bombay Land Revenue Code (in short ‘BLRC’)

and Section 48 of the Gujarat Sales Tax Act 1969 (in short ‘Sales Tax Act’) for

the purpose of old Assessment years 1994 to 1998 attaching the immovable and

movable properties of the Corporate debtor for these old assessment years which

were much prior to the moratorium. The Appellant also submitted that notices

dated 24.09.2009, 12.02.2010, 12.12.2011 and 03.02.2012 under Section 152 read

with Section 200 of the BLRC were sent by him for attachment of movable and

immovable property of the Corporate Debtor for the said assessment years, which

had not been challenged by the Corporate Debtor.

16. It is the case of the Appellant that his claims are covered under the

Judgment of State Tax Officer Vs. Rainbow Papers Limited [(2023) 9 SCC 545]

and the Respondent could not have differentiated his claims for few Financial

Years as Secured Creditors vis-à-vis other financial years as Unsecured Creditors.

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Comp. App. (AT) (Ins.) No. 34 of 2024

17. The Appellant admitted that the Rainbow Paper (Supra) would not be

applicable his claims for the AY 1994 to 1998, however the same does not mean

that the Appellant is not a Secured Creditors for these years or such claims have

bee given up by the Appellant.

18. It is the case of the Appellant that his claims AY 2013-14, 2014-15, 2015-

16 and 2016-17 are not hit by the moratorium and are not violated by Section 14

and Section 33(5) of the Code and should have been treated as Secured Financial

Creditor under Section 33(1)(e) specially keeping in view the judgment of

Rainbow Paper (Supra). It is the argument of the Appellant that the AY are from

1st April till 31st March of the next year as liability are crystalized as on 1 st April

of the next year as such these liabilities are for a period prior to moratorium.

Further the claims of the Appellant of earlier AY being existing liabilities cannot

be hit by moratorium and they are protected and treated as Secured as per Section

48 of the VAT Act.

19. The Appellant submitted that the Adjudicating Authority erred in the para

13 of the impugned order which relies on the judgment of Paschimanchal Vidyut

Vitran Nigam Ltd v. Raman Ispat Pvt. Ltd. [(2019) SCC OnLine NCLAT 883]

however the said judgment which sought to clarify the Rainbow Papers (Supra)

and curtail its applicability is now interpreted in the review petition against

Rainbow Papers (Supra) in Sanjay Kumar Agarwal v. State Tax Officer [(2024)

2 SCC 362], on the ground that such subsequent decision cannot be a ground for
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Comp. App. (AT) (Ins.) No. 34 of 2024

review and co-ordinate bench ought not to have commented bench/It upon

decision of another co-ordinate bench.

20. The Appellant attempted to argue that his demands for the amount for AY

2013-14, 2014-15, 2015-16 and 2016-17 were sent after the date of closure of

CIRP and thereafter it cannot be said that the merely because the Respondent was

not able to adhere the timelines given the public announcement, the Appellant

should have not filed his claims or legal demands due to alleged moratorium

period.

21. The Appellant submitted that it is a failure of the Respondent not to

complete the CIRP or liquidation process within the stipulated time and therefore

the Appellant cannot be put to any adverse situation invoking continuing

moratorium. The Appellant also stated that his attachment are legal and valid as

per VAT Act and belong to the prior CIRP period hence should not have been

affected by the moratorium.

22. The Appellant pleaded that the Code does not provide the recovery

mechanism for tax which is covered by the VAT Act and therefore the Appellant

took actions according to VAT Act and in terms of Section 34(9) of the VAT Act,

audit assessments can be done anytime during a period of four years and as such

all his actions was legal according to the VAT Act.

23. The Appellant also assailed the Impugned Order wherein the Adjudicating

Authority alleged to have wrongly relied upon the Judgement of Hon’ble

Supreme Court of India in the case of Sundaresh Bhat, Liquidator ABG

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Comp. App. (AT) (Ins.) No. 34 of 2024

Shipyard v. Central Board of Indirect Taxes [(2023) 1 SCC 472] held as follows,

which has wrongly been followed in the present case,

“45. We are of the clear opinion that the demand notices to

seek enforcement of customs dues during the moratorium
period would clearly violate the provisions of Sections 14 or
33(5) of the IBC, as the case may be. This is because the
demand notices are an initiation of legal proceedings against
the corporate debtor. However, the above analysis would not
be complete unless this Court examines the extent of powers
which the respondent authority can exercise during the
moratorium period under the IBC.
47. Therefore, this Court in V.M. Deshpande case (S.V.
Kandoakar v. V.M. Deshpande, (1972) 1 SCC 438] held that
the authorities can only take steps to determine the tax,
interest, fines or any penalty which is due. However, the
authority cannot enforce a claim for recovery or levy of
interest on the tax due during the period of moratorium. We
are of the opinion that the above ratio squarely applies to the
interplay between the IBC and the Customs Act in this
context.
24. The Appellant submitted that in the present case there was no enforcement

of taxes but the demand notices are issued only as assessment made by the

Appellant which are legally payable dues by the Corporate Debtor and no further

actions were taken by the Appellant post the demand notices.

25. The Appellant emphasized that in terms of Section 47 A of the Sales Tax

Act, the Appellant gets power to recover the amount of tax or penalty as arrear of
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Comp. App. (AT) (Ins.) No. 34 of 2024

land revenue under BLRC. The Appellant pleaded that the import of these

Sections can be found in Section 46(1)(i) of the VAT Act and therefore, the

Appellant has first charge over the properties of the Corporate Debtor and assets

of the Corporate Debtor in accordance with the BLRC and not Sales Tax Act.

26. The Appellant assailed the conduct of the Respondent as he has admitted

the partial claims of the Appellant for the AY 2007-08, 2008-09, 2009-10, 2010-

11, 2011-12 and 2012-13 in terms of judgment of the Hon’ble Supreme Court of

India in the matter of Rainbow Paper (Supra) according to which dues of the

government are secured dues and has recognized as Secured Creditors by virtue

of Section 48 of the VAT Act. The Appellant further submitted that the decision

of Rainbow Paper (Supra) has been upheld in the revenue case of Sanjay Kumar

Agarwal Vs. State Tax Officer & Ors. [(2024) 2 SCC 362]. However, the

Respondent rejected the other claims of the Appellant on the ground that these

years are covered by old laws of Sales Tax Act hence there is no pari-materia

provisions like Section 48 of the VAT Act and therefore the Appellant was treated

as Unsecured Creditors.

27. It is a case of the Appellant that merely because the equivalent provision

of Section 48 of the VAT Act was not present in Sales Tax Act does not take away

his rights to be treated as Secured Creditors.

28. The Appellant pleaded that it is a spirit and the intention of the statute

which is important and not the wordings and prints and submitted that the spirit

of all the concerned acts and the Codes to treat the claims of the Appellant as
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Comp. App. (AT) (Ins.) No. 34 of 2024

Secured Creditors and had to be treated at par with land revenue claims and as

such the Respondent should have treated the Appellant as a Secured Financial

Creditor for his tax dues.

29. The Appellant further assailed the conduct of the Respondent who rejected

the claims of the remaining assessments years on the ground that these would be

hit by Section 14 of the Code. It is the case of the Appellant that the estimated

date of closure of CIRP was 19.02.2018 and thereafter the Appellant decided to

issue demand notices after giving dates and thus the new demand notices were

issued by the Appellant are not hit by Section 14 of the Code.

30. The Appellant stated that as per the scheme of the Code the CIRP is

expected to be completed within 330 days and as such the claims of the Appellant

were fully covered.

31. Concluding his remarks, the Appellant requested to allow his appeal and

set aside the Impugned Order.

32. Per-contra, the Respondent denied all the averments of the Appellant,

treating these as misleading, mischievous and without any merit.

33. The Respondent stated that the Appellant had only challenged the

communication issued by the Respondent to the extent of treatment of the claim

for the Assessment Years 2013-14 to 2016-17 and the decision taken by the

Respondent in relation to the claims for the period of assessment carried out under

the provisions of Gujarat Sales Tax Act, 1969 for the AY 1994-95 to 97-98 was
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Comp. App. (AT) (Ins.) No. 34 of 2024

not even under challenge before the Adjudicating Authority and therefore,

seeking such reliefs in the guise of the present Appeal is not maintainable.

34. In this connection, the Respondent cited Judgment of the Hon’ble Supreme

Court of India in the case of Bachhaj Nahar Vs. Nilima Mandal & Anr. in Civil

Appeal Nos. 5798-5799 of 2008, where it was held that the Applicant case seek

reliefs not pleaded.

We note the relevant para which reads as under :-

“ 10. The object of issues is to identify from the pleadings

the questions or points required to be decided by the courts
so as to enable parties to let in evidence thereon. When the
facts necessary to make out a particular claim, or to seek a
particular relief, are not found in the plaint, the court cannot
focus the attention of the parties, or its own attention on that
claim or relief, by framing an appropriate issue. As a result
the defendant does not get an opportunity to place the facts
and contentions necessary to repudiate or challenge such a
claim or relief. Therefore, the court cannot, on finding that
the plaintiff has not made out the case put forth by him, grant
some other relief. The question before a court is not whether
there is some material on the basis of which some relief can
be granted. The question is whether any relief can be granted,
when the defendant had no opportunity to show that the relief
proposed by the court could not be granted. When there is no
prayer for a particular relief and no pleadings to support
such a relief, and when defendant has no opportunity to resist
or oppose such a relief, if the court considers and grants such
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Comp. App. (AT) (Ins.) No. 34 of 2024

a relief, it will lead to miscarriage of justice. Thus it is said

that no amount of evidence, on a plea that is not put forward
in the pleadings, can be looked into to grant any relief.”

35. The Respondent submitted that he has acted completely as per law and

followed various sections of the Code and the relevant regulations. It is a case of

Respondent that he also kept in view the relevant judgments including Rainbow

Papers (Supra) therefore the Appellant could not have any grievance against the

rejection of claim which was not covered by the Code or by the Rainbow Papers

(Supra) .

36. The Respondent further submitted that he had issued the detailed letters to

the Appellant on 22.06.2023 and 26.06.2023 and clarified position of the various

claims of the Appellant which was in conformity that Rainbow Papers (Supra)

which were appreciated by the Adjudicating Authority in the Impugned Order.

37. It is the case of the Respondent that the Appellant was treated as Secured

Creditor to the extent that he was illegible and remaining portion of the claims

were not treated as Secured Creditors but these were treated as Unsecured

Creditors and would be also governed under Section 53 of the Code.

38. The Respondent assailed the conduct of the Appellant who attached the

assets of the Corporate Debtor during the moratorium and liquidation order

thereby violated under Section 14 of the Code and further assailed the conduct of

the Appellant who issued demand notice for the AY 2015-16 and 2016-17 during

moratorium violating Section 14 of the Code.

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Comp. App. (AT) (Ins.) No. 34 of 2024

39. It is the allegation of the Respondent that the Appellant suppressed material

facts and events in his own letter dated 23.06.2023 quo his acknowledgement,

unequivocal acceptance and undisputed admission of the factum that AY 1994-

95 to 1997-98, the Rainbow Paper (Supra) is not applicable since Sales Tax Act

had no provisions equivalent to Section 48 of the VAT Act., therefore, there is no

charge in properties of the Corporate Debtor.

40. The Respondent submitted that the Appellant further concealed the correct

facts and chosen not to place on record his own I.A. No. 735 of 2023 in which

the Impugned Order was passed, to mislead the judicial forum.

41. The Respondent submitted that the Appellant is trying to enlarge the scope

of the Appeal by bringing new issues averring that Sales Tax Act to be relied upon

to consider the Appellant as Secured Creditors for the AY 1994-95 and 1997-98,

despite non applicability of Rainbow Paper (Supra).

42. It is the case of the Respondent that the Appellant neither challenged the

treatment of old assessment year by the Respondent nor pleaded for consideration

before the Adjudicating Authority in I.A. No. 735 of 2023 and no reliefs were

sought by the Appellant from the Adjudicating Authority. Hence, at this stage,

such pleading need to be rejected.

43. The Respondent submitted that through I.A. No. 735 of 2023, the

Appellant, in fact, acknowledged and admitted that the treatment of its claim by

the Liquidator being correct on the rationale that the old Assessment orders were

under Section 67 of the Gujarat Sales Tax Act, 1969 and as the said enactment
 -14-
Comp. App. (AT) (Ins.) No. 34 of 2024

doesn't contain pari-materia stipulation akin to Section 48 of the Gujarat Value

Added Tax Act, 2003, creating a first charge on the payable amount, therefore the

decision of Apex Court rendered in case of Rainbow Paper Judgment would not

be applicable to claims the of old Assessment Years.

44. The Respondent admitted that in terms of the Judgement of Rainbow

Papers (Supra) few claims of the Appellant are covered under VAT Act, which

are to be treated as secured debts and same treatment has been given by the

Respondent.

45. It is strong pleading of the Respondent that the cases which are not covered

either by Section 48 of the VAT Act and by Rainbow Papers (Supra) could not

have been considered by him as Secured Creditors.

46. The Respondent took pains to explain that all remaining claims of the

Appellant have been admitted and treated, albeit, as Unsecured Creditors. The

Respondent gave detailed analysis, year by year, as the Respondent claims have

been classified and treated by the Appellant .

47. The Respondent also refuted the cited judgements of the Appellant during

pleadings as these are not applicable in the present appeal.

48. Concluding his remarks, the Respondent submitted that the appeal may be

dismissed with cost.

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Comp. App. (AT) (Ins.) No. 34 of 2024

Finding

49. The point which emerges from the pleadings is regarding treatment of

claims as Secured claims vis-a -vis Unsecured claims.

50. We note that the Adjudicating Authority in its Impugned Order dated

31.10.2023 has captured the details of the claims and treatment given by the

Respondent which reads as under :-

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Comp. App. (AT) (Ins.) No. 34 of 2024

This give bird’s eye view of Financial Year, total claims, which classified

as Secured and Unsecured Debts and reason for such classification by the

Respondent

51. After perused of all records and pleading of the parties, we can bifurcate

the Appellant’s claims into three period

(i) Tax dues arising out of AY 2007 to 2013:

There is no dispute between the Appellant and the Respondent as the

Respondent has treated all these claims as Secured Creditors as covered

under relevant statute.

(ii) Tax dues arising out of AY 1994 - 1995 and 1997 - 98:
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Comp. App. (AT) (Ins.) No. 34 of 2024

There is dispute regarding statues of such outstanding claims. The

Appellant claims these as Secured whereas the Respondent has treated

as Unsecured, since they are not protected by statues of relevant period.

(iii) Tax dues arising out of AY 2013-14 to 2016-17:

These are also disputed. The Appellant submitted that as per law, he

was entitled to carry on assessment since estimated CIRP period was

over, his claims should have been treated as Financial Creditor. On the

other hand, the Respondent stated that there are squarely covered during

moratorium period, hence illegal.

52. The Gujarat Sales Tax Act, 1969 does not contain any part-materia

stipulation akin to Section 48 of the Gujarat Value Added Tax Act, 2003,

therefore, the claim of the Appellant for the AY 1994-95 to 1997-98 were

considered by the Respondent as an unsecured dues and accordingly the

Appellant herein was declared as Unsecured Creditor by the Respondent vide

communication dated 22.06.2023 in relation to the said claim. The Appellant also

vide letter dated 23.06.2023 confirmed its status as Unsecured Creditor for the

aforesaid period.

53. The Respondent has considered the claim of the Appellant for the period

from AY 2007-08 to 2012-13 as a 'Secured Creditor'. As regards, the AY 2007-

08 the assessment order was passed on 17.03.2012, in relation to the AY 2008-09

the assessment order was passed on 20.09.2012, in relation to the AY 2009-10 the
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Comp. App. (AT) (Ins.) No. 34 of 2024

assessment order was passed on 15.06.2013, in relation to the AY 2010-11 the

assessment order was passed on 31.03.2015 and in relation to the AY 2012-13,

the assessment order was passed on 31.03.2017.

54. As all the assessment orders were passed before the initiation of CIRP of

the Corporate Debtor particularly before declaration of moratorium under the

provisions of the Code, the said claim for the aforesaid Assessment Year from

AY 2007-08, 2008-09, 2009-10, 2010-11 and 2012-13, were considered as a

Secured Creditor in view of the judgment passed by the Hon’ble Supreme Court

of India in the matter of Rainbow Paper (Supra).

55. The claims of the aforesaid duration is undisputed by the Appellant. It is

noted that the Appellant filed its claims for the AY 2013-14 wherein the

Assessment Order was passed on 30.03.2018 by the Appellant, AY 2014-15

wherein the Assessment Order was passed on 31.07.2018 by the Appellant, AY

2015-16 wherein the Assessment Order was passed on 29.11.2019 by the

Appellant and AY 2016-17 wherein the Assessment Order was passed on

23.03.2020 by the Appellant.

56. The CIRP of the Corporate Debtor came to be initiated vide order dated

23.08.2017 and accordingly moratorium was declared same day.

57. It has been brought to the notice of this Appellate Tribunal that pursuant

to the initiation of liquidation process of the Corporate Debtor, the effect of

moratorium is continued as per Section 33(5) of the Code which is also confirmed
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Comp. App. (AT) (Ins.) No. 34 of 2024

by the Hon'ble Supreme Court of India in the matter of Sundaresi Bhatt Vs.

Central Board of Indirect Taxes and Custom [(2023) 1 SCC 472].

58. Thus, it is undisputed that the Assessment Order dated 29.11.2019 for the

AY 2015-16 and the Assessment Order dated 23.03.2020 for the AY 2016-17

came to be passed by the Appellant during liquidation process of the Corporate

Debtor.

59. It is observed that during the course of proceeding of IA No. 435 of 2023,

the Adjudicating Authority vide its order dated 15.06.2023 directed the

Respondent to intimate the Appellant regarding their treatment as Secured

Creditor in view of Rainbow Paper (Supra). The Respondent in compliance of

the directions the Respondent vide its letter dated 22.06.2023 informed the

Appellant that in the light of judgement of Hon'ble Supreme Court in Rainbow

Papers (Supra), the State Tax Department has been considered as a "Secured

Creditor" with the admitted claim amount of Rs 42,99,15,943/- -as secured

portion under Section 53 of the Code and as per the relevant provisions of the

Liquidation Regulations, 2016 and the balance admitted claim amount of

Rs.958,73,16,448/- as unsecured portion under the category of Operational

Creditor under Section 53 of the Code

60. The Respondent submitted that pursuant to the letter dated 22.06.2023, the

Appellant vide its letter dated 23.06.2023 claims in respect of AY 1994-95 to

1997-98 would not fall within the preview of "Secured Creditor" in the light of

judgement of Hon'ble Supreme Court of India in Rainbow Papers (Supra) and

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Comp. App. (AT) (Ins.) No. 34 of 2024

further did not dispute the fact that assessment order with respect to claim of AY

2015-16 and 2016-17 were passed in Moratorium Period and further, the

Appellant requested the Respondent to consider the claim with respect to period

of AY 2013-14 and 2014-15 as "Secured claim”.

61. It seems that the Reply of the Appellant to the Respondent vide letter dated

23.06.2023 is very significant and directly connected to present appeal. Hence, it

would be desirable to look into same and the letter reads as under :-
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Comp. App. (AT) (Ins.) No. 34 of 2024
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Comp. App. (AT) (Ins.) No. 34 of 2024
 -23-
Comp. App. (AT) (Ins.) No. 34 of 2024

Hence the Appellant clearly acknowledged in Para 2 that AY 1994-95 to

1997 to 98 do not full as Secured Creditor.

“2. Considering the said calculation, the claim of the

department for AY 1994-95 to 97-98, undisputedly falls under
the Gujarat Sales Tax Act, 1969 and not under the Gujarat
Value Added Tax Act, 2003. Hence, for the said period State
Tax Department would not fall within the purview of
"Secured Creditor" as per the decision of the Hon'ble Apex
Court in the case of Rainbow Paper being Civil Appeal No.
1661 of 2020.”
(Emphasis Supplied)
Similarly the Appellant accepted that the issue AY 2014-15, 2015-16 and

2016-17 is post moratorium period :-

“5. It is necessary to further clarify that the claim of the

State Tax Department amounting to Rs.3,80,70,08,255/- for
AY 2014-15 accrued vide Assessment Order dated
31.07.2018 which is post the period of Moratoriums.
8. The department does not dispute the fact that for AY 2015-
16 and 2016-17, the assessment can be said to have been
carried out during the moratorium period which commenced
from the date when the Hon’ble Tribunal passed the
Liquidation order on 25.10.2018 which came to be passed in
I.A. 291 of 2018.
Thus, considering the abovementioned details the
department, hereby requests the Liquidator to consider the
state tax department for the period of AY 2013-14 and 2014-
15 as "secured creditor". On the same being duly considered.
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Comp. App. (AT) (Ins.) No. 34 of 2024

the state tax department shall lift the attachment in due

compliance the interim order passed by the Hon'ble National
Company Law Tribunal on 15.06.2023 in IA 435 of 2023 in
IA 501 of 2020..”
(Emphasis Supplied)

62. It seems from above that the Appellant knew his legal rights very well.

Only point of the Appellant is contained in Para 6, which reads as under :-

“6. The Notice for demand of amount assessed for AY

2013-14 and 2014-15 would not fall within the moratorium
period as mentioned by the Liquidator in the details provided
on 22.06.23 as the public announcement dated 28.08.2017
issued by the IRP, mentions the estimated dated of closure of
CIRP to be 19.02.2018 being 180 days from the date of
commencement of Insolvency process in terms of the
provisions of Section 12 of IBC 2016.”
(Emphasis Supplied)
This argument of the Appellant does not seem to be convincing and we are

not inclined to accept the pleadings of the Appellant on this account.

63. We observe that the Respondent vide its letter dated 22.06.2023 had

considered the claims for Assessment Year (2007-08 to 2010-11 & 2012-13) and

admitted the same as 'Secured' in view of the Judgment passed by the Apex Court

in Rainbow Paper (Supra).

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Comp. App. (AT) (Ins.) No. 34 of 2024

64. We understand that the assessment orders for the AY 2013-14 & 2014-15

was passed by the Appellant on 30.03.2018 & 31.07.2018, respectively after the

imposition of Moratorium under Section 14 of the Code i.e., 23.08.2017, which

tantamount to violation of Section 14 of the Code as Section 14(b) of the Code

prohibits transferring, encumbering. alienating or disposing of by the corporate

debtor any of its assets or any legal right or beneficial interest therein' from the

declaration of Moratorium. For this reason, the assessment order dated

30.03.2018 & 31.07.2018 is found to be in contravention of Section 14(b) of the

Code. The submission of the Appellant that the CIRP period ends on the

19.02.2018 as per estimated date of closure of CIRP provided in Form A 'Public

Announcement of the Corporate Debtor cannot be accepted.

65. It is also observed that the assessment orders for the AY 2015-16 & 2016-

17 came to be passed by the Appellant on 29.11.2019 & 23.03.2020, respectively

after passing of order of liquidation of Corporate Debtor i.e., 25.10.2018 which

was not permitted as per Section 33(5) of the Code which provides that Subject

to section 52, when a liquidation order has been passed, no suit or other legal

proceeding shall be instituted by or against the Corporate Debtor. Therefore, after

liquidation order has been passed by the Adjudicating Authority the moratorium

under Section 33(5) of the Code comes into effect which is further confirmed by

the Apex Court in the matter of Sundaresi Bhatt (Supra). The relevant portion

of this judgement reads as under :-

 -26-
Comp. App. (AT) (Ins.) No. 34 of 2024

“44. At the cost of repetition, we may note that the demand

notices issued by the respondent are plainly in the teeth of
Section 14 of the IBC as they were issued after the initiation
of the CIRP proceedings. Moratorium under Section 14 of the
IBC was imposed when insolvency proceedings were
initiated on 1-8-2017 [ICICI Bank Ltd. v. ABG Shipyard Ltd.,
2017 SCC OnLine NCLT 554] . The first notice sent by the
respondent authority was on 29-3-2019. Further, when
insolvency resolution failed and the liquidation process
began, NCLT passed an order on 25-4-2019 [Sunil Kumar
Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931]
imposing a moratorium under Section 33(5) of the IBC. It is
only after this order that the respondent issued a notice under
Section 72 of the Customs Act against the corporate debtor.
The various demand notices have therefore clearly been
issued by the respondent after the initiation of the insolvency
proceedings, with some notices issued even after the
liquidation moratorium was imposed.
45. We are of the clear opinion that the demand notices to
seek enforcement of customs dues during the moratorium
period would clearly violate the provisions of Sections 14 or
33(5) of the IBC, as the case may be. This is because the
demand notices are an initiation of legal proceedings against
the corporate debtor. However, the above analysis would not
be complete unless this Court examines the extent of powers
which the respondent authority can exercise during the
moratorium period under the IBC.”
(Emphasis Supplied)
 -27-
Comp. App. (AT) (Ins.) No. 34 of 2024

Hence, Assessment orders passed on 29.11.2019 & 23.03.2020 by the

Appellant after passing of liquidation order under VAT Act violates the

moratorium under provision of 33(5) of the Code.

66. We understand and appreciate that the Appellant during the moratorium

period could determine the tax, interest, fine or any penalty which is due,

however, the Appellant could not enforce his claims for recovery or levy of

interest on the tax due during the period of Moratorium. It has been brought out

that the Claims of Assessment Orders passed during the moratorium under

Section 14 & 33(5) of the Code, have been rightly considered and admitted as

'Unsecured' Operational Debt. It is significate to take into consideration that the

Appellant vide its own letter dated 23.06.2023 acknowledged the fact that for

A.Y. 2014-15, 2015-16 & 2016-17, the assessments were carried on during

moratorium.

67. It has been brough to notice that the Appellant passed attachment orders on

the property of the Corporate Debtor i.e., 16.10.2018 in alleged and contravention

of Section 14 of the Code & Regulation therein, even after order dated 15.06.2023

passed by Adjudicating Authority whereby, the Appellant was directed to lift the

attachment within ten days of receipt of such intimation from the Respondent,

however, till date, the Appellant continues illegally and unlawfully attachment on

the subject property of the Corporate Debtor.

 -28-
Comp. App. (AT) (Ins.) No. 34 of 2024

This obviously is not in consonance with the law .

68. We also find logic in the pleadings of the Respondent that allowing such

attachment over property during the subsistence of the moratorium, would

undermine resolution of the Corporate Debtor and well prejudice the interests all

stakeholders. This is found to be against the spirit of the Code.

69. We consciously note that the Appellant fairly conceded that his case to be

partly covered by the Rainbow Paper (Supra) and the same fact has not been

disputed by the Respondent. We also observe that the Respondent pleaded that

he has treated the claims as Secured Creditors which are protected under of the

VAT Act keeping in view of the Rainbow Paper (Supra) .

70. We understand from the information given by the parties that total 13

claims were submitted by the Appellant for the period 1994-95 onwards with total

tax dues amounting to Rs. 1001,72,32,359/- and the Respondent considered the

tax demands of Rs. 42,99,15,943/- relating to AY 2007-08, 2008-09, 2009-10,

2010-11, 2011-12, 2012-13 as Secured Creditors and the remaining claims of the

Appellant were accepted but not as Secured Creditors and have treated as

Unsecured Creditors which amount to Rs. 958,73,16,448/-. We find this to be in

accordance with the Code and judgment of the Courts.

71. As regards, the arguments of the Appellant that the CIRP/liquidation

process should have been completed within 330 days and therefore dues to

reasoning that the Appellant and conclude the resolution of the Corporate Debtor

the Appellant cannot be put to disadvantage. We are of the view that time period
 -29-
Comp. App. (AT) (Ins.) No. 34 of 2024

of 330 days prescribed in the Code is indicative and directory in nature and not

mandatory. In fact, large number of cases, due is several reasons, are not able to

be resolved within such stipulated period and if the contentions of the Appellant

is accepted then the Resolution Process of the Corporate Debtor, in most of the

cases, may not take off at all. Thus, the pleadings of the Appellant on this grand,

stand rejected.

72. We observe that there was a gap in the claims made by the Appellant

pertaining to AY 2011-12 which has not been claimed by the Appellant. A

pointed query was raised by us to the Appellant to explain the same particularly

whether there is no claim or the claim has been settled. However, we did not get

any answer to this from the Appellant.

73. Another pointed query was raised by this Tribunal to the Appellant as to

why such arrears were allowed to continue which pertaining to all almost 20 years

old way back from 1994-95. We also pointed out that in accordance with the

earlier BLRC and now Gujarat Land Revenue Record, or VAT Act, why the

Appellant allowed to accumulate such huge claims of more than 1000 Crores. We

also asked, as to what action the Appellant had taken to recover his dues from the

Corporate Debtor.

However, despite our repeated queries we did not get any concrete and

convincing reply.

74. Since, ratio of Rainbow Paper (Supra) has been used by both , we will go

through it and note the relevant paras. These reads as under :-

 -30-
Comp. App. (AT) (Ins.) No. 34 of 2024

“2. The short question raised by the appellant in this appeal

is, whether the provisions of IBC and, in particular, Section
53 thereof, overrides Section 48 of the GVAT Act which is set
out hereinbelow for convenience:
“48. Tax to be first charge on property.—
Notwithstanding anything to the contrary
contained in any law for the time being in force,
any amount payable by a dealer or any other
person on account of tax, interest or penalty for
which he is liable to pay to the Government shall
be a first charge on the property of such dealer, or
as the case may be, such person.”
29. As argued by the learned Solicitor General, the term
“secured creditor” as defined under IBC is comprehensive
and wide enough to cover all types of security interests,
namely, the right, title, interest or a claim to property,
created in favour of, or provided for a secured creditor by a
transaction, which secures payment or performance of an
obligation and includes mortgage, charge, hypothecation,
assignment and encumbrance or any other agreement or
arrangement securing payment or performance of any
obligation of any person.
30. The learned Solicitor General rightly argued that in view
of the statutory charge in terms of Section 48 of the GVAT
Act, the claim of the Tax Department of the State, squarely
falls within the definition of “security interest” under Section
3(31) IBC and the State becomes a secured creditor under
Section 3(30) of the Code.
 -31-
Comp. App. (AT) (Ins.) No. 34 of 2024

55. In our considered view, NCLAT clearly erred in its

observation that Section 53 IBC overrides Section 48 of the
GVAT Act. Section 53 IBC begins with a non obstante clause
which reads:
“53. Distribution of assets.—(1) Notwithstanding
anything to the contrary contained in any law
enacted by the Parliament or any State Legislature
for the time being in force, the proceeds from the
sale of the liquidation assets shall be distributed in
the following order of priority….”
56. Section 48 of the GVAT Act is not contrary to or
inconsistent with Section 53 or any other provisions of IBC.
Under Section 53(1)(b)(ii), the debts owed to a secured
creditor, which would include the State under the GVAT Act,
are to rank equally with other specified debts including debts
on account of workman's dues for a period of 24 months
preceding the liquidation commencement date.
57. As observed above, the State is a secured creditor under
the GVAT Act. Section 3(30) IBC defines “secured creditor”
to mean a creditor in favour of whom security interest is
credited. Such security interest could be created by operation
of law. The definition of “secured creditor” in IBC does not
exclude any Government or Governmental Authority.
58. We are constrained to hold that the appellate authority
(NCLAT) and the adjudicating authority erred in law in
rejecting the application/appeal of the appellant. As observed
above, delay in filing a claim cannot be the sole ground for
rejecting the claim.”
(Emphasis Supplied)
 -32-
Comp. App. (AT) (Ins.) No. 34 of 2024

75. From above, we note that the Rainbow Paper (Supra) held that tax dues

covered under section 48 of the VAT Act which clearly stipulate the Appellant’s

right over the assets of the Corporate Debtor as first charge. We also note this

similar provisions, however, was not available in Gujarat Sales Tax Act and

therefore, the tax claims were not treated as Secured Creditors. To the credit of

the Appellant, he fairly concluded that this period was not covered in the ratio of

Rainbow Paper (Supra).

Hence the Respondent classified remaining admissible outstanding dues as

Unsecured debts. The Adjudicating Authority, therefore, also passed the

Impugned Order accordingly based on Resolution Plan put up for approval by

CoC through the Respondent.

We do not find any infirmity in the Impugned Order on this account.

76. In view of above detailed discussions, we do not find any merit in the

appeal. The appeal stands dismissed. No Costs. Interlocutory Application(s), if

any, are Closed.

[Justice Rakesh Kumar Jain]

Member (Judicial)

[Mr. Naresh Salecha]

Member (Technical)

[Mr. Indevar Pandey]

Member (Technical)
Sim