A Division Bench of the Hon’ble Supreme Court of India (SC), comprising of Hon’ble Ms. Justice Indira Banerjee and Hon’ble Mr. Justice A.S. Bopanna, dealt with the interplay between the provisions of Section 53 of the IBC and Section 48 of the Gujarat Value Added Tax, 2003 (GVAT Act), in State Tax Officer (1) v. Rainbow Papers Limited. The SC, vide its judgement dated 06.09.2022, ruled as follows: –
- If a resolution plan is ex facie not in conformity with law and/or the provisions of IBC and/or the Rules and Regulations framed thereunder, then such a resolution plan would have to be rejected. If a resolution plan altogether ignores the statutory claims of any state government or a legal authority, the Adjudicating Authority is bound to reject the said resolution plan.
- Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could also be created by operation of law. The definition of secured creditor in the IBC does not exclude any government or governmental authority.
- 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) of the IBC, and the State becomes a secured creditor under Section 3(30) of IBC.
- The Committee of Creditors cannot secure their own dues at the cost of statutory dues owed to any government or governmental authority or, for that matter, any other dues.
- There was no obligation on the part of the State to lodge a claim in respect of statutory dues, for which recovery proceedings have also been initiated.
- The time period for submission of claims, as provided in Regulation 12 of the CIRP Regulations, 2016, is directory in nature. Hence, delay in filing a claim cannot be the sole ground for rejecting such claim.