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Synopsis

The National Company Law Tribunal in Mumbai has recently rejected the GST claim of an operational creditor while observing that interrupting the Corporate Insolvency Resolution Process (CIRP) by delayed claims would set the clock back.

“The Resolution Plan has been approved by the CoC as on 04.12.2019 and also has been submitted to this Tribunal for necessary approval on 20.12.2019 under Section 30 of the Code. Any interruption in the CIRP process at this stage by including the delayed claim would amount to setting the clock back. It would be complete disruption of the CIRP and the timelines stipulated therein,” the tribunal observed.

The National Company Law Tribunal (NCLT) bench in Mumbai, consisting of Judicial Member Kuldeep Kumar Kareer and Technical Member Shyam Babu Gautam, heard an application from an operational creditor. The creditor sought directions for the resolution professional to make a Goods and Services Tax (GST) payment of Rs. 60.34 lakhs.

The operational creditor had purchased H.R. coil worth Rs. 3,35,24,713 from the corporate debtor in July 2017. The corporate debtor raised an invoice, including 18% GST of Rs. 60,34,448, resulting in a total invoice amount of Rs. 3,95,59,162. The operational creditor paid fully for the invoices, including GST, supported by ledger records and bank statements reflecting a total cost of Rs. 3,95,00,000.

The operational creditor had claimed the Input Tax Credit (ITC) for the GST paid on the invoice. However, the corporate debtor failed to file the GSTR-3B, which led to the GST department issuing a notice to reverse the ITC.

The tribunal reviewed the documents and found that the Insolvency proceedings of the Corporate Debtor were publicly announced on the Insolvency and Bankruptcy Board of India (IBBI) website on 09.04.2019. Additionally, the announcement was published in newspapers, including the Free Press Journal and Navshakti, on 10.04.2019, both of which have wide circulation in Mumbai.

The tribunal also noted that the operational creditor did not submit its claim within the timeframe specified in the public announcement. Furthermore, it failed to adhere to the deadline set forth in Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This regulation allows claims to be filed on or before the 90th day from the insolvency commencement date.

In its order, the tribunal explained the importance of public notice and said that,

“The purpose of issuing public notice is to make all the interested parties/stakeholders aware of the initiation of the CIRP of the Corporate Debtor and the information memorandum which is issued subsequently, after the collection and collation of claims of the Operational and Financial Creditors to provide the Resolution Applicant so that a legally and financially sound Resolution Plan for the Corporate Debtor is received,” the order reads.

Advocate Priyanka Jain appeared for the Operational Creditor. 

Practising Chartered Accountant Ayush Rajani appeared for the Resolution Professional.

Case title: Abnco Vie Win Ent Private Limited vs Steamline Industries Limited