NCLAT Holds Various Tax Departments in the Country as Operational Creditors



NCLAT Holds Various Tax Departments in the Country as Operational Creditors

New Delhi: On Wednesday, March 20, the National Company Law Appellate Tribunal held that the Government departments entitled for dues arising out of existing law are now permitted to initiate insolvency resolution process against such companies to have their dues cleared.

A two-member bench headed by Justice S J Mukhopadhaya observed that since operational debt in normal course meant a due arising during the operation of the company.

It held the Income Tax department of the Central Government, the Sales Tax department of the State Government and other local authorities as operational creditors of the debt-ridden companies and the statutory dues fall within the meaning of operational debt.

The directive was given during the hearing of various appeals moved by the various departments against the previous decision of different benches of the Tribunal.

In one of the appeals, the Maharashtra Sales Tax department moved the Tribunal against the decision of the Resolution Professional of Raj Oil Mills Limited allowing the Company to conduct a meeting of the Committee of Creditors (CoC) without including the tax department.

Another appeal pertained to the Principal Director General of Income Tax of Mumbai challenging a ruling of the NCLT Mumbai bench alleging that it had approved a resolution plan for Raj Oil Mills Limited giving a maximum of Rs 2.58 crore to the department against the total claim of Rs 338 crore.

The Mumbai department claimed that the settlement for 1% of the ‘crystallized demand’ was against the mandate of Income Tax Act of 1961. However, as the successful resolution applicant had proposed to repay all the Rs 338 crore dues of the tax department over the next three years, the plea was been disposed-off by the Appellate Tribunal.

 

Committee of Creditors (CoC)
Income Tax Department
National Company Law Appellant Tribunal (NCLAT)
Sales Tax department

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