The National Company Law Tribunal (NCLT) ruled that any company that has initiated CIRP can be obligated to pay the taxes from the date of initiation of CIRP, if the Corporate Debtor is to be run as a going concern.
The ruling was made by the Tribunal while considering an application filed by Kiran Global Chem Limited, under Section 60(5) of the IBC, 2016. The respondents consisted of the Asst. Commissioner (ST) and 12 others.
M/s. Kiran Global Chem Limited filed an MA, seeking permission to the Corporate Debtor to have access to its GST Portal Account to file GST Returns during the period of CIRP and to allow the Applicant to pay the net GST liability from the date of commencement of CIRP till its completion disregarding non-payment of arrears dues of GST for the period prior to commencement of CIRP.
The Respondents countered the request pointing that the no provision has been set out in GST Act to accept current dues before clearing past dues.
The Tribunal after hearing the arguments further noted that, “As to the dues of the pre-admission period, the creditors, including Tax authorities, are entitled to make a claim against the Corporate Debtor as mentioned in the Insolvency and Bankruptcy Code”.
The Tribunal clarified that, “Since law is clear that Tax authorities fall within the ambit of the Operational Creditor, as to the pre-admission claims are concerned, they are at liberty to make their claims before the Resolution Professional instead of insisting upon the Resolution Professional to pay the pre-admission dues before accepting the tax liabilities arising during the CIRP period”.
The Tribunal also added that since Section 238 of the Insolvency and Bankruptcy Code have overriding effect on all other laws which are in contravention to the provisions of the IBC, RI cannot raise an objection as to the absence of provisions in the GST Act or in its software to accept such accounts, the business happening in the market after initiation of CIRP through debtor company will come to stand still and in such situation, no company under CIRP can function as a going concern.
The Tribunal board consisted of B. S.V. Prakash Kumar and S. Vijayaraghavan.