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"Any passing reference of the impugned judgment made by the bench of the equal strength could not be a ground for review," a division bench has said.
The Supreme Court has dismissed a review petition filed against its 2022 judgment wherein it had held that if the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan.
A bench of Justices AS Bopanna and Bela M Trivedi was hearing five review petitions filed by petitioners aggrieved by the same judgment.
In the impugned judgment top Court had further held that if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 of the IBC.
A bench of Justices Indira Banerjee and AS Bopanna had further held that the Committee of Creditors, which might include financial institutions and other financial 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.
While dismissing the review petitions, the Supreme Court has opined that a party cannot take recourse to observations made by a bench of equal strength to seek review of a judgment.
The bench further said that it is well-settled proposition of law that a co-ordinate bench cannot comment upon the discretion exercised or judgment rendered by another co-ordinate bench of the same strength.
"If a bench does not accept as correct the decision on a question of law of another bench of equal strength, the only proper course to adopt would be to refer the matter to the larger bench, for authoritative decision, otherwise the law would be thrown into the state of uncertainty by reason of conflicting decisions," the bench said.
Under IBC, secured creditors such as banks and financial institutions get priority in getting repaid through the resolution process, however unpaid dues to vendors, suppliers and government dues are treated as operational credit, and they fall lower in the so-called waterfall mechanism.
The counsel for the review petitioners/ intervenors placing heavy reliance on the observations made by a two-judge bench of the apex court in 'Paschim Anchal Vidyut Vitran Nigam Limited vs Raman Ispat Private Limited and Others' of July 17 2023, submitted that the court in the impugned judgment had failed to consider the waterfall mechanism contained in Section 53, as also failed to consider other provisions of the IBC.
The bench, however, said, "The submissions made that the court in the impugned decision had failed to consider the waterfall mechanism as contained in Section 53 and failed to consider other provisions of IBC, are factually incorrect."
Case Title: SANJAY KUMAR AGARWAL vs. STATE TAX OFFICER (1) & ANR
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