Income Tax Department not a Secured Operational Creditor: NCLAT
Dismissing an appeal filed by the Income Tax Department, the NCLAT held that the Income Tax Department is not a Secured Operational Creditor
Answering in the negative to whether the Income Tax Department is a secured operational creditor, the Principal Bench of the National Company Law Appellate Tribunal (NCLAT) dismissed the appeal of the Department. The National Company Law Appellate Tribunal (NCLAT) has ruled on Company Appeal (AT) (Insolvency) No. 1302 of 2023, filed by the Income Tax Department against the approval of...
Answering in the negative to whether the Income Tax Department is a secured operational creditor, the Principal Bench of the National Company Law Appellate Tribunal (NCLAT) dismissed the appeal of the Department.
The National Company Law Appellate Tribunal (NCLAT) has ruled on Company Appeal (AT) (Insolvency) No. 1302 of 2023, filed by the Income Tax Department against the approval of the Resolution Plan for M/s. Midland Polymers Ltd.
The appeal contested the allocation of only Rs.5 lakhs to the Income Tax Department, which had filed a claim amounting to Rs. 26,06,41,424/- during the Corporate Insolvency Resolution Process (CIRP).
The appeal stemmed from an order dated August 18, 2023, by the Adjudicating Authority (National Company Law Tribunal), Indore Bench. The Adjudicating Authority had approved the Resolution Plan, filed by G. Madhusudhan Rao, the Resolution Professional of M/s. Midland Polymers Ltd.
The Income Tax Department, acting as an Operational Creditor, had filed a claim of Rs. 26,06,41,424/-. However, the Resolution Plan allocated only Rs.5 lakhs to the Appellant, the decision contested in the present appeal.
During the hearing, the Appellant-Income Tax Department represented by Maithili Mehta argued that their claim was partially accepted due to a pending appeal against the assessment order. They asserted their status as a secured operational creditor, citing the judgment of the Supreme Court in State Tax Officer vs. Rainbow Papers Limited.
The Respondents, represented by Rohit Rathi and Yashas RK, countered this argument.
After considering the submissions, the NCLAT concluded that the amount of Rs.5 lakhs allocated to the Income Tax Department was justified.
The Tribunal noted that, “The amount of Rs.5 lakhs which was allocated the Appellant being operational creditor, Appellant was entitled for allocation of the amount which is not less than the amount which the Appellant would have been paid in event the Corporate Debtor is liquidated. It is not shown that the amount of Rs.5 lakh is below the amount which the Appellant was entitled in the event of liquidation of the Corporate Debtor. We, thus, are of the view that no error can be found out in allocation of Rs.5 lakhs in the Resolution Plan.”
The NCLAT bench Justice Ashok Bhushan (Chairperson), Barun Mitra (Member, Technical) and Arun Baroka (Member, Technical) thus clarified that the Appellant-IT Department did not qualify as a secured operational creditor based on relevant statutory provisions.
Consequently, the NCLAT dismissed the appeal, reaffirming the Resolution Plan.
To Read the full text of the Order CLICK HERE
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