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An order by National Company Law Appellate Tribunal (NCLAT) is likely to become guiding principle for Resolution Professionals in pending cases of Insolvency and Bankruptcy Code (IBC) having statutory tax such as GST dues.
A recent order by Chennai bench of NCLAT made it clear that revision of Goods and Services Tax’s assessment order is beyond RP jurisdiction and not sustainable under law.
Tribunal’s observation
The appellant Bijoy Prabhakaran Pulipra is RP for Corporate Insolvency Resolution Process (CIRP) of Kerala-based PVS Memorial Hospital Private Ltd moved to NCLAT against an order by National Company Law Tribunal (NCLT). The key issues here were challenging the assessment order before appropriate forum and making change in tax demand made. Based on the submission and facts presented, the Appellate Tribunal observed that IBC is a complete code in itself.
Section 25 of the Code provides the duties of the Resolution professional. Section 28 makes the provision for approval of the Committee of creditors for certain actions in the CIRP.
It acknowledged that the Committee of creditors (CoC) is empowered to exercise its commercial wisdom in the Corporate Insolvency Resolution Process. However, it clarified that under the exercise of commercial wisdom, it cannot exercise judicial power.
It added that CoC has no role in the acceptance or rejection of the claim. Acceptance or rejection of a claim is under the duties of IRP/Resolution Professional, and the aggrieved party can agitate the same before the Adjudicating Authority. For this reason, the CoC has also recommended filing an Appeal before the appropriate forum.
Clarification
“We consider that the Resolution professional committed an error in exercising their power and exercised the powers of GST Authorities under the pretext of Regulation 14 of the Code, which is not sustainable in Law,” the Tribunal said. It emphasied that the GST amount is an amount of tax levied under the assessment order as per the Goods and Service Act, 2017. “It cannot be edited or reduced by the Resolution Professional himself. Even if the IRP/Resolution Professional was aggrieved by the said Order, they should have filed the Appeal,” it said. It clarified that any revision of assessment orders also cannot be made under the pretext of Section 238 of IBC. Section 238 of Insolvency and Bankruptcy Code cannot be read as conferring any appellate or adjudicatory jurisdiction in respect of issues arising under other statutes.
Ashish Kumar Singh, Partner with Capstone Legal said, “The NCLAT has rightly clarified that the Insolvency Professional cannot usurp the role of the statutory authority under the GST Act to decide the demand of tax. This judgment can be relied upon by Resolution Professionals because almost all pending cases under IBC have an element of statutory taxes.”
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