Shri Ramchandra Dallaram Choudhary, IRP of Neesa Leisure Ltd. Vs.Commissioner of Income Tax - AA ordered for removal of attachment of Income Tax Authorities

 NCLT Ahmedabad (18.06.2020) in Shri Ramchandra Dallaram Choudhary, IRP of Neesa Leisure Ltd. Vs.Commissioner of Income Tax [IA 562 of 2019 in CP(IB) No. 127/7/ NCLT/ AHM/2017] held that; the time is the essence of the code and CIRP has to be completed in time bound manner and, as such, if the attachment of Bank Account is not removed by the Income Tax Commissioner in that event the very object of the IB Code will get "frustrated, more so when the respondent (s) have already filed his/ their claim before the RP.

 

Excerpts of the order;

# 1. The instant application is filed under section 60 (5) of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IB Code”)by the applicant with following prayer;

• This Hon'ble Tribunal may please to pass an order to remove attachment/ lien marked by Income Tax Department, Centre Circle (2) Ahmedabad on all the Bank accounts of Corporate Debtor, M/s Neesa Leisure Limited. 

# 2. The Ld. Lawyer of the applicant submitted that this Hon'ble Tribunal admitted CP(IB) No. 127/NCLT/AHM/2017 vide order dated 26.04.2019 and CIRP process is initiated against the Corporate Debtor. 

# 3. In view of the order passed on 26.04.2019 for initiation of CIRP, the Management and Affairs of the Corporate Debtor vested with Interim Resolution Profession as per clause (a) of sub-section (1) of section 17 of Insolvency and Bankruptcy Code, 2016. 

# 4.  That the Ld. Lawyer of the applicant further submitted that Bank Accounts of the corporate debtor maintained with various Banks are attached by Income Tax Department under section 226 (3) of Income Tax Act, 1961and are seized/ frozen by other various authorities of the Department of the Government such as Service Tax Department etc., 

# 5. The Ld. Lawyer of the applicant stated that the statutory dues of the Income Tax Department are Operational Debt for which Income Tax Department has already submitted a claim of their dues with Interim Resolution Profession, and same shall be settled as per section 30(2) of IB Code for the payment of the Operational Creditor and in accordance with of section 53 of the IB Code. 

# 6. Heard the applicant and also gone through the records and documents, non- appeared from the side of the respondent i.e. the Commissioner of Income Tax though the notice has been sent on several occasion, Consequent upon which the matter has been heard in absence of the respondent. It is a matter of record as also stated by the applicant that the Bank Accounts of the Corporate Debtor has been seazed/ frozen by the Income Tax Department. 

# 7.  It is also matter of record that the Income Tax Department has already filed a claim for their dues with IRP/RP in support of the contention the applicant has annexed the Annexure -E which is in Form “B” so submitted by one Mr. Bhanwarlal Meena, Assistant Commissioner of Income Tax, Central Circle-2(2), Ahmedabad, Room No. 309, Aayakar Bhawan, Ashram Road, Ahmedabad. Wherein, the total outstanding amount along with interest shown as Rs. 2,19,83,81,353/- computed upto  Insolvency Commencement Date i.e. 26.04.2019. 

# 8.  Admittedly, the above dues are Operational Debt, as such, the respondent fall under the category of Operational Creditor. For the sake of brevity, the definition of Operational Creditor and Operational Debt reproduce herein below;

• Section 5 (20) “Operational Creditor” means a person to whom an operational debt is owned and includes any person to whom such debt has been legally assigned or transferred. 

• Section 5 (21) "Operational Debt" means a claim in respect of the provisions of goods and services including employment or a debt in respect of the payment of dues arising under any law for time being in force and payable to the Central Government, any State Government or any local authority. 

# 9. In view of the above the claim of the respondent is/are Operational Debt, since, the respondent has already put their claim before IRP/RP their right to attach/ freeze the bank Account is ceased. 

# 10. Further, section 238 of IB Code have overriding effect over all other law which read as under; 

• Section 238 “Provision of this code to override other Laws- The Provisions of this code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for time being in force or any instrument having effect by virtue of any such law.” 

# 11. In view of the above, the notice of the Income Tax Department under section 226(3) of Income Tax Act, 1961 shall now not held good and the IB Code shall subsist and therefore the lien so made by Income Tax Department does not hold good. 

# 12.  On perusal of the record it is found that on several occasion IRP of the Corporate Debtor issued a letter as well reminder to the Assistant Commissioner of Income Tax (Respondent NO. 1) for removing the attachment of the Bank Accounts maintained with the Axis Bank as narrated hereinabove in para no. 4 but so far the respondent has not taken any step to remove the attachment. 

# 13. It is to be remembered that the time is the essence of the code and CIRP has to be completed in time bound manner and, as such, if the attachment of Bank Account is not removed by the Income Tax Commissioner in that event the very object of the IB Code will get "frustrated, more so when the respondent (s) have already filed his/ their claim before the RP. 

# 14. Hence, under the facts and circumstances as narrated above the application so filed by the applicant under section 60(5) is allowed and respondent is directed to remove attachment/ lien marked by Income Tax Department Central Circle 2(2). 

# 15. Accordingly, instant applicant is allowed and stands disposed off. 

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