Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.

Pradeep M.R Versus Ravindra Beleyur, Resolution Professional of Merchem Limited and others


Court / Forum : National Company Law Appellate Tribunal
Citation : Company Appeal (AT) (Insolvency) No. 306, 307, 315 and 554 of 2019
Coram : Justice Jarat Kumar Jain, Mr. Balvinder Singh, Member (Technical) and Dr. Ashok Kumar Mishra, Member (Technical)
Subject : Section 61 of the Insolvency and Bankruptcy Code, 2016
Date of Decision : 2020-07-29

Brief Facts

  • CA(AT) (Insolvency) 306 of 2019 The Appellant has approached the Appellate Tribunal on the grounds that the Resolution Plan of the Resolution Applicant is a sale of assets under the guise of Resolution Plan due to the following reasons:
    • no provision for payment of statutory dues related to employees/workmen such as gratuity, provident fund etc. has been made in the ‘Resolution Plan’ and it is discriminatory as against the employees and workmen of the Corporate Debtor.
    • the mass retrenchment/termination of the employees and workmen through Resolution Plan is without following the due procedure of law.
  • CA(AT) (Insolvency) 307 of 2019
    The Appellant is the absolute owner of the Corporate Debtor’s factory and had entered into a Licence Agreement with Corporate Debtor on October 1, 2011 and the Corporate Debtor has agreed to pay a sum of Rupees towards licence fee payable either a lump sum or such other instalments being Rs.16,50,000 towards building and Rs.38,58,000 towards plant and machinery. He is aggrieved that the Licence fee for the CIRP period forms part of IRP costs and should have been paid in full while this has not been considered and similarly the financial debt has not been paid. The Appellant is insisting that the Resolution Applicant has handed over the building and other apartments only on June 17, 2019 and his dues of Rs.82,65,000 along with additional 5 months licence fee at the rate of Rs. 5 Lakhs per month has yet to be paid.
  • CA(AT) (Insolvency) 315 of 2019
    The Appellant is the Promoter and Director of the Corporate Debtor and had extended personal guarantees to the loans of Corporate Debtor and has mortgaged several of his properties including of his wife’s properties to raise loans for the Corporate Debtor. He was restructuring the Company but, in the meantime, CIRP was initiated. He has also stated that he has the reservations over the viability and feasibility of Resolution Plan approved as the Resolution Applicant has sought several concession and exemption like allowing setting up off of brought forwarded losses and unabsorbed depreciation for computation of Taxable Profits as per Income Tax Act, 1961, directing to provide reasonable opportunity to the jurisdiction principal Commissioner of Income tax for allowing this set off and also claiming certain other benefits apart from exemption under Stamp Duty Act and waivers by other government authorities.
  • CA(AT) (Insolvency) 554 of 2019
    The Appellant is an Operational Creditor and he is working in the field of Mechanical fabrication work. He has carried out the work last being in 2016 and have dues against the Corporate Debtor. Due to the discrimination between operational creditors and financial creditors he is getting an amount of Rs. 34,862 out of dues of over Rs.84,00,000.

Issues

  1. Whether the setting up off losses under Income Tax Act, 1961 is subject to scrutiny by the Income Tax Department?
  2. Whether the license fee for the CIRP period forms part of IRP costs and should have been paid in full?
  3. Whether the Resolution Plan of the Resolution Applicant is a sale of assets under the guise of Resolution Plan?
  4. Whether the Operational Creditor (Appellant) is entitled to any dues for the work carried out by him for the corporate debtor?

Decision

  • Issue 1: Setting up off losses under Income Tax Act, 1961 is subject to scrutiny by the Income Tax Department and the Insolvency and Bankruptcy Code, 2016 lays down that the Resolution Plan should be in compliance with the law laid down. CA(AT) (Insolvency) 315 of 2019
  • Issue 2: The payment of licence fee to the building owner where the CIRP has been carried out and business was running on a “going concern basis” for the period till CIRP was continued or they have handed over the building to the building owner whichever is earlier and the same is to be restricted to his Income Tax Returns so far filed. This cost needs to be included in CIRP costs. (CA(AT) (Insolvency) 307 of 2019)
  • Issue 3 and 4: Does not find any merit and the appeals bearing nos. CA(AT) (Ins) No.306 of 2019 and CA(AT) Ins No. 554 of 2019 are accordingly dismissed.

Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.