🧠 HeadNote & Summary
(2021) taxcode.in 26 HC
IN THE HIGH COURT OF GUJARAT
Shri Nirav Tarkas Liquidator of Stratus Foods Pvt. Ltd.
v.
Office of The Chief Commissioner
R/Special Civil Application No. 6714 of 2021
Decided on 07-Oct-21
Ms. Justice Sonia Gokani and Mr. Justice Rajendra M. Sareen
Add. Info:
For Appellant(s): Mr. Jaimin R Dave (7022), Ms. Aaksha K Sajnani(11281) and Ms. Hirva R Dave(10742),
For Respondent(s): Mr. Nikunt K Raval(5558)
Judgment/Order:
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. By way of the present petition under Article 226 of the Constitution of India, the petitioner seeks to challenge the action on the part of the respondent authority terming the same as illegal, arbitrary and highhanded whereby the application of the petitioner for grant of registration under the Goods and Services Tax Act, 2016 (hereinafter referred to as ‘the GST Act’) had been rejected on a completely nongermane ground and he has made to run from post to pillar without appreciating that he is performing statutory function and is in requirement of the GST registration for the purpose of his duties under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the Code’).
2. An operational creditor namely M/s. Umiya Trading filed Insolvency Application being Company Petition (I.B.) No. 03 of 2017 under Section 9 of the Code to initiate the Corporate Insolvency Resolution process against the corporate debtors before the National Company Law Tribunal (hereinafter referred to as ‘NCLT’).
2.1. The NCLT admitted the application vide order dated 10.04.2017 and Corporate Insolvency Resolution Process commenced against the Stratus Foods Private Limited which is a Company registered under the Companies Act, registered at Vadodara. The Company was engaged in the business of industrial catering in the district of Vadodara under the name and style of Cloud Cooking.
2.2. The petitioner has been appointed as an Interim Resolution Professional (‘IRP’ for short) of the Stratus Foods Private Limited and in the first meeting of the creditors dated 18.05.2017, the appointment of the petitioner was confirmed as a Resolution Professional (‘RP’ for short).
2.3. The petitioner has averred in the petition that the petitioner made efforts to revive the Stratus Foods Private Limited during the period of Corporate Insolvency Resolution Process, however, no plan has been received from any prospective resolution applicant, therefore, a committee of creditors passed a resolution for liquidation of Stratus Foods Private Limited on 06.01.2018.
2.4. The petitioner filed I.A. No. 489 of 2018 in Company Petition (I.B.) No. 03 of 2017 before the NCLT as required under Section 33(1)(a) of the Code with a prayer to initiate liquidation proceedings against the Stratus Foods Private Limited. The NCLT on 31.01.2019 appointed the petitioner as a liquidator and initiated the liquidation proceedings. Thus, he is under an obligation to liquidate the corporate debtors within a period of one year from the liquidation commencement date as required under the Regulation 44 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The order of liquidation was transcribed on 14.02.2019 and the certified copy was obtained on 14.02.2019. Therefore, on or before 14.02.2020 the petitioner was required to complete the process of liquidation.
2.5. The public announcement was issued regarding the commencement of liquidation process and claims were invited from the creditors of the Stratus Foods Private Limited. According to the petitioner, all the assets and machineries of the company were disfunctional. The machineries were to be overhauled and required to be serviced to make them functional again. The valuation of assets which are intended to be sold, the recoveries to be made on behalf of the company had needed to be completed, however, the entire process of liquidation could not be completed, therefore, the extension of time was sought before the NCLT and the same was allowed from 01.02.2020 to 31.01.2021.
2.6. It is the say of the petitioner that he carried out auction of assets of the company-in-liquidation by way of e-auction and its advertisement also has been published in the various news papers. The details of which have been provided in para 2.14 and 2.15 of the petition.
2.7. On 02.12.2020, an application had been made being Application No. 242000217737TRN before the respondent for grant of registration under the GST Act to enable him to collect GST on sale of assets. The respondent sought various clarifications about the details of authorized signatory and principal place of business on 03.12.2020. The petitioner complied with the notice and supplied the additional information, however, vide communication dated 11.12.2020, the respondent rejected the application for grant of GST registration on the ground that he did not apply in accordance with the Notification No. 11/2020 – Central Tax [G.S.R. 194(E)/F. NO. 20/06/03/2020-GST dated 21.03.2020 amended by Notification No. 39/2020-CENTRALTAX [G.S.R. 273(E)/F.NO.CBEC-20/06/04/2020-GST] dated 05.05.2020.
2.8. According to the petitioner, the respondent appreciated the Notification No. 39/2020 dated 05.05.2020 under the process which deals with the registration by Resolution Professionals or Interim Resolution Professionals during the Corporate Insolvency Resolution period. This notification do not obligate the liquidator of the company undergoing liquidation process to make an application for registration within one month or before 30.06.2020.
2.9. An appeal was preferred before the Appellate Authority on 15.12.2020. On various occasions, the petitioner visited the office of the respondent to resolve the issue and obtain the GST registration to carry out the work of liquidation which is a time bound process as the period of liquidation was coming to an end.
2.10. The petitioner on 27.01.2021 while visiting the office of the respondent, produced the IBBI Circular No. IP-15011/1/2019-IBBI dated 07.03.2019 which categorically states that the IRP/RP/Liquidator is an officer of the Court. He was asked to once again apply for the registration and hence, aggrieved petitioner is before this Court seeking following reliefs: –
“(a) Your Lordships may be pleased to direct Respondent Authority to grant registration under Goods and Services Tax Act, 2016 and allot GSTIN number qua M/s. Stratus Foods Private Limited (under liquidation) forthwith;
(b) Pending hearing and final disposal of this petition, Your Lordships may be pleased to direct Respondent Authority to grant temporary registration under Goods and Services Tax Act, 2016 and allot temporary GSTIN number qua M/s. Stratus Foods Private Limited (under liquidation) forthwith;
(c) Any other and further relief, which is just and proper, may kindly be granted as may be deemed expedient by this Hon’ble Court in the facts and circumstances of the case;
(d) Award cost of the present petition.”
3. This Court issued notice on 11.06.2021 and the affidavit-in- reply is filed by the respondent – Principal Commissioner, Central GST and Central Excise, Vadodara-I.
3.1. On the ground of alternative remedy, the question is raised of maintainability of the petition. There is an appeal provided and hence, when the time limit prescribed for the application for registration has not been followed, he is not entitled. According to the respondent, the petitioner had not uploaded the compete order of NCLT dated 31.01.2019 to support the status, but, he only had uploaded the first page of NCLT order where his name and designation as a liquidator was mentioned. The application was also not preferred within the stipulated time period as provided under the Notification No. 11/2020. The proof of address of liquidator’s office also is a must.
3.2. The primary ground for rejection was non-furnishing of the required documents. According to the respondent, the petitioner also had never clarified as to whether he was acting as IRP/RP or liquidator. His preferring of appeal is also questioned on the ground that no provisional acknowledgment for submission of form of appeal which contains Acknowledgment Receipt Number (‘ARN’ for short) has been attached, evidencing filing of the appeal.
3.3. It was also not specified as to whether he has visited which section of the office of the Chief Commissioner and to whom he has met. It is also further the stand of the respondent that he failed to furnish his address of office. He has not properly responded to the query raised by the department and chose to ignore the same. Non-furnishing of the requisite documents is the reason and the respondent has acted as per the notification as the application has been filed belatedly. It is not about his intent but when the law prescribed for grant of registration does not permit, the respondent cannot allow the same.
3.4. Reliance is placed on Rule 108 of CGST Rules, 2017 which provides the manner in which the same needs to be preferred.
3.5. There are disputed questions of facts which cannot be gone into in the writ jurisdiction under Article 226, according to the respondent. Reliance is also placed on the decision of Commissioner of Income Tax and Others vs. Chhabil Das Aggarwal [(2014) 1 SCC 603] to urge that the writ petition should not be entertained when alternative remedies are available.
4. Affidavit-in-rejoinder is filed questioning and challenging every contentions raised by the respondent.
5. Noticing the urgent nature of issue, with the consent of both the sides, the matter has been taken up for final hearing at the admission stage where we have heard learned advocate Ms. Aaksha Sajnani with learned advocate Mr. Jaimin Dave appearing for the petitioner and learned Standing Counsel Mr. Nikunt Raval for the respondent who both, along the line of the pleadings, argued before this Court fervently.
6. We noticed with dismay that this is a petition preferred by the liquidator who was initially appointed as IRP and thereafter by virtue of the committee of the creditors’ meeting on 18.05.2017 became Resolution Professional and eventually became the liquidator in I.A. No. 489 of 2018 in Company Petition No. 03 of 2017 before the NCLT on 31.01.2019. As a liquidator, he performed the functions which are different than the ones to be performed by the IRP and RP under the provisions of Insolvency and Bankruptcy Code, 2016.
6.1. It is the specific stand of the petitioner that the Notification No. 11/2020 dated 21.03.2020 as amended by Notification No. 39/2020 dated 05.05.2020 would not apply in case of the petitioner for he being a liquidator as they are applicable qua IRP and RP. It is to be remembered that under Regulation 32 of IBBI (Liquidation Process) Regulations, 2016, petitioner was under an obligation to make an attempt to sell the business of company-in-liquidation as a going concern or on slump sale basis and if the liquidator is unable to sell the business in either way of clause (e) or (f) of the Regulation 32, within 90 days from the liquidation commencement date, he is required to sell the assets of the company under liquidation by other methods.
6.2. The applicability of the GST arises when the liquidator is unable to sell the business of company-in-liquidation as a going concern or on slump sale basis. Thus, it is necessitated for the liquidator to obtain the registration under the GST Act when the assets of the company-in-liquidation are to be sold on a stand alone basis after attempting to sell the business as a going concern or on slump sale basis.
6.3. Section 25 of the GST Act provides that a person who is liable to be registered under the Act is under an obligation to apply for registration within 30 days from the date on which he becomes liable to register and if a person who is liable to be registered, fails to obtain registration, the proper officer may without prejudice to any action which may be taken under this Act or any other law for the time being in force, may proceed to register the said person in such a manner as may be prescribed. In other words, the proper officer has been given a discretion to register such person in such a manner as prescribed, in the event of any delay in obtaining the registration on its own. The proper officer can additionally impose penalty in accordance with law under Section 122 of the GST Act also.
6.4. The petitioner is an appointee of National Company Law Tribunal and is not required to run from the post to pillar for the grant of registration under the GST Act. He already had approached the concerned officer and therefore, when he was denied the same on the ground of issue of limitation, he had preferred an appeal, however, the respondent authority when conveyed him to apply afresh, he has chosen to approach this Court.
6.5. The petitioner has made available the order of liquidation passed by the NCLT on 31.01.2019, therefore, to say that he never clarified that he was acting as a liquidator is not a sustainable premise. The Court also cannot be oblivious that for non-allotment of GST Registration Number, the petitioner had approached the Appellate Authority on 15.12.2020. The appeal being inefficacious, no insistence can be made of invocation of the discretion of this Court under Article 226 of the Constitution.
7. According to this Court, once an application was moved for obtaining the registration under GST before the respondent authority, the denial of registration under the GST is completely on an ill conceive ground. Not only the authority concerned had not distinguish between the IRP/RP and liquidator but, both have different functions and even otherwise, if all of them are considered as the persons authorized under the provisions of Insolvency and Bankruptcy Code, 2016, applying even the notifications 11/2020 and 39/2020 in case of the present petitioner, the authority could not have disregarded the prevalence of the pandemic due to COVID-19 virus.
7.1. He was appointed as IRP on 10.04.2017. Thereafter, he was appointed as RP on 18.05.2017 by virtue of the first committee meeting of the creditors’ and his appointment as a liquidator was on 31.01.2019. He received a copy on 14.02.2019. His process of liquidation was to be completed on 14.02.2020 therefore, he already started functioning from 17.02.2019 whereby he announced commencement of liquidation process against the company and invited the creditors. As various functions which had been carried out including the valuation of the assets which are required to be sold in accordance with the Regulation 35 of the Regulations 2016, the process of liquidation since was not completed, he sought the extension and the same had been granted from 01.02.2020 to 31.01.2021. His application is of 02.12.2020. The authority concerned could not have overlooked the fact that from March, 2020 pandemic due to COVID-19 was at its peak and the lock-down had paralyzed every system.
8. The Notification No. 11/2020 under the heading ‘Registration’ States thus: –
“Registration
2. The said class of persons shall, with effect from the date of appointment of Interim Resolution Professionals/Resolution Professionals, be treated as a distinct person of the corporate debtor, and shall be liable to take a new registration (hereinafter referred to as the new registration) in each of the States or Union Territories where the corporate debtor was registered earlier, within thirty days of the appointment of the Interim Resolution Professionals/Resolution Professionals or by 30th June, 2020, whichever is later.
Provided that in cases where the Interim Resolution Professionals/Resolution Professionals has been appointed prior to the date of this notification, he shall take registration within thirty days from the commencement of this notification, with effect from date of his appointment as Interim Resolution Professionals/Resolution Professionals.”
8.1. The amended Notification No. 39/2020 states thus: –
(i) in the first paragraph, the following proviso shall be inserted, namely: –
“Provided that the said class of persons shall not include those corporate debtors who have furnished the statements under section 37 and the returns under section 39 of the said Act for all the tax periods prior to the appointment of IRP/RP.”;
(ii) for the paragraph 2, with effect from the 21st March, 2020, the following paragraph shall be substituted, namely: –
“2. Registration: – The said class of persons shall, with effect from the date of appointment of IRP/RP, be treated as a distinct person of the corporate debtor, and shall be liable to take a new registration (hereinafter referred to as the new registration) in each of the States or Union Territories where the corporate debtor was registered earlier, within thirty days of the appointment of the IRP/RP or by 30th June, 2020, whichever is later.”
9. Therefore, the Notification No. 11/2020 which had been amended by Notification No. 39/2020 on 05.05.2020 says that for the purpose of registration, the class of persons with effect from the date of appointment on IRP/RP be treated as distinct person of corporate debtor and shall be liable to take a new registration in each of the State or Union Territories where the corporate debtor was registered earlier within the 30 days of the appointment of the IRP/RP or by 30.06.2020 whichever is later.
9.1. Here since the appointment of the IRP/RP was much earlier and there was no requirement for him to approach the authority concerned and it is only after his appointment as a liquidator on 31.01.2019 and when he could not complete the process of liquidation on 14.02.2020, he approached the concerned authority after getting extended the liquidation period upto 31.01.2021 enabling him to continue the said process. Even if the liquidator is bracketed in the class of persons where he is not explicitly mentioned, then also, his not having approached by 30.06.2020 would not debar him from making a request for registration. Such a request had gone from him when the need arose on 02.12.2020. It was within the time period when the extension was made. It is ultimately a notification in exercise of the powers conferred by Section 148 of the Central Goods and Services Tax Act.
10. This Court notices that the Circular No. 138/08/2020- GST dated 06.05.2020 issued by the Government of India, Ministry of Finance, Department of Revenue has made certain clarifications in respect of the challenges faced by the registered persons in implementation of provisions of the GST Laws, since the IRPs/RPs were facing difficulties in obtaining the registration during the period of lock-down. The Court makes a note of the fact that the period has been extended upto 30.06.2020, instead of insisting for the registration within 30 days from the appointment of the IRP/RP.
10.1. There are other clarifications which are not necessary to be discussed at this stage. Suffice to note that all contentions raised by the respondent authority are absolutely technical and having no substance what so ever. The petitioner as an Official Liquidator has fulfilled all the demands of furnishing the necessary documents and testimonials and therefore, if there were more such requirement, the same could have been asked for, however, to deny merely on the ground of his not having specified of his being a liquidator or for that matter, a very negligible and minor aspect, deserves the disapproval of the Court. It is not to be forgotten by the respondent authority that the registration under the GST Act is a must for the liquidator to operate and fulfill the obligations in his capacity as a liquidator as required under the statute. It is the NCLT which has appointed the liquidator who could not have been asked to run from the post to pillar and approached this Court by adopting highly technical and deprecated complexity in awarding the GST Registration Number.
10.2. As rightly pointed out by the petitioner, wherever there is a requirement, Section 25 requires the proper officer to register such person in such a manner as may be prescribed, if he is otherwise liable to be registered. Thus, in case of any delay in obtaining the registration, Section 25(8) obligates the proper officer to proceed to register such person. He may impose a penalty in accordance with Section 122 of the GST Act, however, this non-grant of registration for fulfilling the official duty for the sell of business of the company-in-liquidation as a going concern/slump sale basis or on standalone basis deserves the indulgence with a specific direction to the highest authority under the GST Regime to stop having hypertechnical approach and instead make it more user friendly. If the government official appointed by the NCLT gets entangled in the web of proceedings/circulars/ clarifications/rules, it leaves much to be desired so far as the common man is concerned.
10.3. He was aware of need of registration. However, in his fairness, learned Senior Standing Counsel Mr. Raval has not made any fuss and has urged that this Court may appropriately direct the authority concerned.
11. We recognize the fact that the liquidator could have approached the concerned authority well in time, however, if he has not done it because of the various details that he needed to gather and collate, he could not have been sent from the post to pillar.
12. With the forgoing discussion, this petition is ALLOWED directing the respondent authority to grant registration under the Goods and Services Tax Act, 2016 and allow the GST Number qua M/s. Stratus Foods Private Limited within two (2) weeks from the date of receipt of writ of this order. He shall also enjoy immunity so far as the action of approaching the authority beyond the period of six months is concerned.
(SONIA GOKANI, J)
(RAJENDRA M. SAREEN,J)
Original judgment copy is available here.
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