Leo Edibles & Fats Limited vs. The Tax Recovery Officer & Ors. - Attachment of the property of CD under Liquidation.

 High Court Hyderabad (26.07.2018) in Leo Edibles & Fats Limited vs. The Tax Recovery Officer & Ors.  [Writ Petition No. 8560 of 2018] held that; this Court holds that the first respondent cannot claim any priority merely because of the fact that the order of attachment dated 27.10.2016 issued by him was long prior to the initiation of liquidation proceedings under the Code

Excerpts of the order;

(Page-3) The petitioner company’s grievance is with regard to the action of the Sub-Registrar, Erragadda, Hyderabad, in refusing to register its purchase of immovable property in the liquidation proceedings relating to VNR Infrastructures Limited, Banjara Hills, Hyderabad, under the Insolvency and Bankruptcy Code, 2016 (for brevity, ‘the Code’). Refusal in this regard by the registration authorities was at the behest of the Income-tax Department, which claimed a charge over the immovable property sold, pursuant to the attachment proceedings of the Tax Recovery Officer (Central), Income-tax Department, Hyderabad, the first respondent herein.

(Page-7) In his letter dated 08.01.2018, the fifth respondent pointed out to the first respondent that as per Section 33 of the Code, the order of the NCLT would result in a moratorium on the initiation or continuation of legal proceedings by or against the corporate debtor and as per Section 53 of the Code, the Government’s dues would be at the fifth position in terms of priority of repayment. The fifth respondent accordingly called upon the first respondent to submit its claim and to immediately cancel the attachment order issued earlier.

The first respondent filed a counter-affidavit pointing out that the attachment of the subject property belonging to VNR Infrastructures Limited, Hyderabad, for recovery of Income-tax arrears was made on 28.10.2016, long before commencement of proceedings under the Code before the NCLT. He further stated that a tax recovery certificate was received from the Deputy Commissioner of Income-tax, Central Circle-I(3), Hyderabad, on 07.09.2016 in relation to recovery of the tax arrears from VNR Infrastructures Limited to the tune of Rs.101,60,55,000/-. Upon receipt of the said certificate, the first respondent served notice in Form No.ITCP-1 under Rule 2 of the Second Schedule to the Act of 1961 on 30.09.2016, which was duly served on the assessee company on 05.10.2016. Thereunder, it was directed to pay the demanded amount within fifteen days. As the assessee company failed to do so, the order of attachment under Rule 48 of the Rules in the Second Schedule to the Act of 1961 in Form No.ITCP-16, attaching the subject property, along with other properties of the assessee company, was issued on 28.10.2016. The receipt of a copy of the same was acknowledged by the District Registrar, Hyderabad (South), on 28.10.2016. The first respondent admitted receipt of the letter dated 08.01.2018 from the fifth respondent informing him of his appointment as the liquidator for VNR Infrastructures Limited, vide order dated 21.09.2017 of the NCLT in C.A.No.142 of 2017 in C.P.(IB) No.12/10/Hdb/2017. The first respondent claimed that as the tax recovery proceedings were prior in point of time to the proceedings initiated under the Code, the moratorium under Section 33 of the Code would not have any effect. He concluded by stating that the recovery proceedings initiated by the Income-tax Department were in accordance with law and that the provisions of the Code would have no application thereto. He asserted that the petitioner company had not made out any case for interference in so far as he was concerned and prayed for dismissal of the writ petition.

(Page-15) Part V of the Code deals with ‘Miscellaneous’ provisions under Sections 224 to 255. Section 238 stipulates that the provisions of the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Section 247 deals with ‘Amendments to the Income-tax Act, 1961’ and provides that the said Act shall be amended in the manner specified in the Third Schedule. The Third Schedule to the Code provides that in sub-section (6) of Section 178 of the Act of 1961, after the words ‘for the time being in force’, the words and figures ‘except the provisions of the Insolvency and Bankruptcy Code, 2016’ shall be inserted.

(Page-18) However, after its amendment in terms of Section 247 of the Code read with the Third Schedule thereto, it now reads to the effect that the provisions of Section 178 shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force, except the provisions of the Insolvency and Bankruptcy Code, 2016.

(Page-19) In the light of the aforestated statutory schemes obtaining under the Code and the Act of 1961 respectively, it is clear that the Income-tax Department does not enjoy the status of a secured creditor, on par with a secured creditor covered by a mortgage or other security interest, who can avail the provisions of Section 52 of the Code. At best, it can only claim a charge under the attachment order, in terms of Section 281 of the Act of 1961.

(Page-20) Reference, in this regard, may be made to ANANTA MILLS LTD. (IN LIQUIDATION) V/s. CITY DEPUTY COLLECTOR, AHMEDABAD1, wherein the Gujarat High Court observed that the purpose of attachment appeared to be to prevent private alienations of the property but the attaching-creditor does not acquire, by merely levying attachment, any interest in the property. The Court referred to PREM LAL DHAR V/s. OFFICIAL ASSIGNEE2, wherein the Privy Council had reserved its opinion on the question whether attachment created a lien or charge or conferred a title, but opined that since then, the crystallized position was that attachment in this country merely prohibits private alienation by the person(s) whose property is attached but creates no interest in the property in favour of the attaching-creditor. The Court also considered the effect of attachment prior to the commencement of winding-up proceedings and whether such attachment could continue on the property even in the hands of the purchaser, who bought the property through the official liquidator free of all encumbrances. The Court considered the question whether attachment levied on properties of a company, without any further action being taken, would survive, after the Court makes a winding-up order and the liquidator proceeds to act under Sections 466(1) and 467(1) of the Act of 1956. The final conclusion of the Court was that attachment simpliciter of the properties of a company, which was subsequently ordered to be wound up, without any further action being taken would be of no consequence or effect against the official liquidator and the property could be disposed of by the official liquidator, wholly ignoring the attachment.

(Page-21) It may be noticed that in so far as an assessee company in liquidation is concerned, Section 178 of the Act of 1961 provides for a priority in appropriation of the amounts set aside by the liquidator for clearance of the tax dues. However, it may be noted that liquidation of a company could be under the provisions of different enactments. In so far as liquidation of a company under the Code is concerned, Section 178 of the Act of 1961 stands excluded by virtue of the amendment of Section 178(6) with effect from 01.11.2016, in accordance with the provisions of Section 247 of the Code read with the Third Schedule appended thereto. Therefore, in the event an assessee company is in liquidation under the Code, the Income-tax Department can no longer claim a priority in respect of clearance of tax dues of the said company, as provided under Sections 178(2) and (3) of the Act of 1961. In the context of liquidation of an assessee company under the provisions of the Code, the Income-tax Department, not being a secured creditor, must necessarily take recourse to distribution of the liquidation assets as per Section 53 of the Code. Section 53(1) provides the order of priority for such distribution and any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State in respect of the whole or any part of the period of two years preceding the liquidation commencement date comes fifth in the order of priority under Clause (e) thereof.

(Page-24) As rightly pointed out by Mr.Vadeendra Joshi, learned counsel, Section 178(6) of the Act of 1961 starts with a non-obstante clause but by virtue of the amendment made thereto, vide Section 247 of the Code, exclusion of the said provision in so far as liquidation proceedings under the Code are concerned forms an exception to Section 178(6) of the Act of 1961. Learned counsel would also point out that the provisions of Sections 220 and 222 of the Act of 1961 do not start with any non-obstante clause and therefore, they would necessarily be subject to the overriding effect of the Code, by virtue of Section 238 thereof. We find merit in this submission.

On the above analysis, this Court holds that the first respondent cannot claim any priority merely because of the fact that the order of attachment dated 27.10.2016 issued by him was long prior to the initiation of liquidation proceedings under the Code against VNR Infrastructures Limited, Hyderabad. It may be noted that Section 36(3)(b) of the Code indicates in no uncertain terms that the liquidation estate assets may or may not be in possession of the corporate debtor, including but not limited to encumbered assets. Therefore, even if the order of attachment constitutes an encumbrance on the property, it still does not have the effect of taking it out of the purview of Section 36(3)(b) of the Code. The said order of attachment therefore cannot be taken to be a bar for completion of the sale effected by the fifth respondent under the provisions of the Code. The first respondent necessarily has to submit the claim of the Income-tax Department to the fifth respondent for consideration as and when the distribution of the assets, in terms of Section 53(1) of the Code, is taken up.

(Page-25) The writ petition is accordingly allowed declaring the legal position as aforestated. The fourth respondent shall entertain and register the sale transaction effected by the fifth respondent in favour of the petitioner company, if not already done. The first respondent is at liberty to submit its claim before the fifth respondent, who shall duly consider the same in accordance with the priorities stipulated under Section 53(1) of the Code.

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Tapadia Polyesters Pvt. Ltd. Vs. Sales Tax Officer & Anr. - We thus are of the view that even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate.

 NCLAT (22.08.2023) In Tapadia Polyesters Pvt. Ltd. Vs. Sales Tax Officer & Anr. [Company Appeal (AT) (Insolvency) No. 362 & 366 of 2023. (2023) ibclaw.in 556 NCLAT] held that

• We thus are of the view that even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate.

Excerpts of the Order;    

22.08.2023: Heard Learned Counsel for the Appellants as well as Learned Counsel for the Respondent.

# 2. Company Appeal (AT) Ins. No. 362 of 2023 has been filed by the Liquidator challenging the Order dated 10th February, 2023.

# 3. Company Appeal (AT) Ins. No. 366 of 2023 has been filed by the Auction Purchaser who claims to be Successful Bidder in the Auction held on 25.09.2021.

# 4. These two Appeals have been filed against the same impugned Order dated 10th February, 2023 passed by the Adjudicating Authority in I.A. No. 1300/MB/C-I, 2020.

# 5. Brief facts of the case necessary to be noticed for deciding these two Appeals are:-

i. Corporate Insolvency Resolution Process for the Corporate Debtor-Linkson International Limited commenced on 06.10.2017.

ii. There were dues of Sales Tax Department of the State of Maharashtra on the Corporate Debtor and to recover the dues of the Sales Tax Department of the State of Maharashtra, the Attachment Orders were passed on 28th May, 2015 attaching the assets of the Corporate Debtor. The Attachment Order continued, however the asset could not be sold by the Sales Tax Department.

iii. Liquidation commenced on 20th July, 2018 in which liquidation proceedings, the claim was filed by the Sales Tax Officer, which claim to the extent of Rs. 101.87 Crore was admitted by the Liquidator. In the Liquidation Proceeding, the Liquidator proceed to issue Auction Notice on 01st August, 2021 and Tapadia Polyesters Pvt. Ltd. was declared the Successful Bidder on 25.09.2021.

iv. I.A. No. 1300 of 2020 was filed by the Liquidator before the Adjudicating Authority praying for direction to the Respondents-Sales Tax Officer to release the attachment on all three properties so as to enable the Applicant to continue the auction/private sale of the assets. The said Application were opposed by the Sales Tax Department and the Adjudicating Authority by the Impugned Order passed on 10th February, 2023 rejected the Application.

v. Aggrieved by the said order, these two Appeals have been filed.

# 6. Learned Counsel for the Liquidator challenging the Order contends that Sales Tax Department cannot be held to be Secured Creditor and the Properties attached by the Department is part of the Liquidation Asset hence the Adjudicating Authority ought to have lifted the Attachment to proceed further with the Liquidation Process. Learned Counsel for the Liquidator has relied on the Judgment of this Tribunal in C.A. (AT) Ins. No. 246 of 2022, “Department of State Tax, Through the Dy. Commissioner of State Tax Vs. Zicom Saas Pvt. Ltd. & Anr” decided on 07.02.2023.

# 7. Learned Counsel appearing for the Successful Bidder challenging the Order contends that the properties were mortgaged to the Punjab National Bank and charge of the PNB was registered with the Ministry of Corporate Affairs and at best the Sales Tax Officer will have Second Charge. It is submitted that even if it is assumed that Sales Tax Department was secured creditor, they have not exercised their right under Section 52 of the Code to proceed with the assets. The assets become part of Liquidation Assets. He further referred to Regulation 21A of Liquidation Process Regulations, 2016. He submits that assets being part of the liquidation assets, Liquidator has rightly declared the Appellant Successful Bidder.

# 8. Learned Counsel appearing for the State Tax Department refuted the submissions of Learned Counsel for the Appellants and submits that attachment which was made of the properties under Section 35 of Maharashtra Value Added Tax Act was never challenged by the Appellant and although the right of Appeal is given under Section 35(6) but they having never exercised the right, the said order of attachment became final. He further submits that the Adjudicating Authority has rightly relied on Judgment of the Hon’ble Supreme Court in M/s Embassy Property Development Pvt. Ltd. Vs. State of Karnataka & Ors. holding that the issue of attachment having become final cannot be brought before the Adjudicating Authority under Section 60(5) of the Code. He has relied on the portion of the Judgment which has been relied on by Learned Adjudicating Authority in paragraph 25 of the Order. Learned Counsel further submits that attachment being continued, the Adjudicating Authority has rightly rejected the Application of the Liquidator.

# 9. We have considered the submissions of Learned Counsel for the parties and have perused the record.

# 10. There is no dispute between the parties regarding the sequence of the events. There is also no dispute that properties of the Corporate Debtor were attached by the Sales Tax Department on 28.05.2015. Attachment was made prior to initiation of CIRP and continued even during the Liquidation Process that is why the Liquidator filed an Application for release of the attachment.

# 11. We may first notice the submission of Learned Counsel for the Respondent relying on the Judgment of the Hon’ble Supreme Court in ‘M/s. Embassy Property Development Pvt. Ltd.’. In paragraph 25 of the Impugned Order, the relevant portion of the Judgment of the Hon’ble Supreme Court which has been relied by Learned Adjudicating Authority is as follows:

• “25. The Respondent has relied on the Judgment of the Hon’ble Apex Court in M/s Embassy Property Development Pvt. Ltd. Vs. State of Karnataka & Ors wherein it was held as under:

• “The only provision which can probably throw light on this question would be Sub-section (5) of Section 60, as it speaks about the jurisdiction of the NCLT. Clause (c) of Sub-section (5) of Section 60 is very broad in its sweep, in that it speaks about any question of law or fact, arising out of or in relation to insolvency resolution. But a decision taken by the government or a statutory authority in relation to a matter which is in the realm of public law, cannot, by any stretch of imagination, be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Clause (c) of Sub-section (5).

• Let us take for instance a case where a corporate debtor had suffered an order at the hands of the Income Tax Appellate Tribunal, at the time of initiation of CIRP. If Section 60(5)(c) of IBC is interpreted to include all questions of law or facts under the sky an Interim Resolution Professional/ Resolution Professional will then claim a right to challenge· the order of the Income Tax Appellate Tribunal 40 (7j-rL before the NCLT, instead of moving a statutory appeal under Section 260A of the Income Tax Act, 1961. Therefore the jurisdiction of the NCLT delineated in Section 60(5) cannot be stretched so far as to bring absurd results. (It will be a different matter, if proceedings under statutes like Income Tax Act had attained finality, fastening a liability upon the corporate debtor, since, in such cases, the dues payable to the Government would come within the meaning of the expression “operational debt” under Section 5(21), making the Government an “operational creditor” in terms of Section 5(20). The moment the dues to the Government are crystalised and what remains is only payment. the claim of the Government will have to be adjudicated and paid only in a manner prescribed in the resolution plan as approved by the Adjudicating Authority, namely the NCLT.”

# 12. There cannot be dispute to the preposition laid down by the Hon’ble Supreme Court in the said Judgment. Hon’ble Supreme Court while giving reference of an Order suffered by the Corporate Debtor took the view that Order of the Income Tax Appellate Tribunal which has become final could not have been called in question. There cannot be any dispute to the preposition that orders passed by the Statutory Authorities which have become final against the Corporate Debtor cannot be questioned and the said order can be questioned under the relevant statute only. Present is not a case where the Liquidator has questioned the attachment order. Attachment Order has become final and Attachment continued till date. The question is of consequence of the attachment on the assets of the property. Learned Counsel for the Successful Bidder has rightly relied on Section 52 of the IBC and Regulation 21A of Liquidation Process Regulations. Section 52 and Regulation 21A are as follows:

“Section 52: Secured creditor in liquidation proceedings.- (1) A secured creditor in the liquidation proceedings may—

(a) relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified in section 53; or

(b) realise its security interest in the manner specified in this section.

(2) Where the secured creditor realises security interest under clause (b) of sub-section (1), he shall inform the liquidator of such security interest and identify the asset subject to such security interest to be realised.

(3) Before any security interest is realised by the secured creditor under this section, the liquidator shall verify such security interest and permit the secured creditor to realise only such security interest, the existence of which may be proved either—

(a) by the records of such security interest maintained by an information utility; or

(b) by such other means as may be specified by the Board.

(4) A secured creditor may enforce, realise, settle, compromise or deal with the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it.

(5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected therewith in taking possession of, selling or otherwise disposing off the security, the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force.

(6) The Adjudicating Authority, on the receipt of an application from a secured creditor under sub-section (5) may pass such order as may be necessary to permit a secured creditor to realise security interest in accordance with law for the time being in force.

(7) Where the enforcement of the security interest under sub-section (4) yields an amount by way of proceeds which is in excess of the debts due to the secured creditor, the secured creditor shall—

(a) account to the liquidator for such surplus; and

(b) tender to the liquidator any surplus funds received from the enforcement of such secured assets.

(8) The amount of insolvency resolution process costs, due from secured creditors who realise their security interests in the manner provided in this section, shall be deducted from the proceeds of any realisation by such secured creditors, and they shall transfer such amounts to the liquidator to be included in the liquidation estate.

(9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53.”

Regulation 21A: Presumption of security interest.- (1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II:

Provided that, where a secured creditor does not intimate its decision within thirty days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.

(2) Where a secured creditor proceeds to realise its security interest, it shall pay –

(a) as much towards the amount payable under clause (a) and sub-clause (i) of clause (b) of sub-section (1) of section 53, as it would have shared in case it had relinquished the security interest, to the liquidator within ninety days from the liquidation commencement date; and

(b) the excess of the realised value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date:

Provided that where the amount payable under this sub-regulation is not certain by the date the amount is payable under this sub-regulation, the secured creditor shall pay the amount, as estimated by the liquidator:

Provided further that any difference between the amount payable under this sub-regulation and the amount paid under the first proviso shall be made good by the secured creditor or the liquidator, as the case may be, as soon as the amount payable under this sub-regulation is certain and so informed by the liquidator.

(3) Where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.]

[Explanation.- It is hereby clarified that the requirements of this regulation shall apply to the liquidation processes commencing on or after the date of the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019.]

# 13. The argument that even if it is assumed that Sales Tax Department is secured creditor, it has not exercised its right under Section 52, the assets will be part of the Liquidation Estate as per the statutory provisions has substance. Further, Learned Counsel has rightly pointed out to the fact that charge is registered of the PNB as first charge holder. The judgment of this Tribunal in “Department of State Tax, Through the Dy. Commissioner of State Tax Vs. Zicom Saas Pvt. Ltd. & Anr” as has been relied by Learned Counsel for the Liquidator, the provisions of Section 37 of Maharashtra Value Added Tax Act, 2002 which is the provision applicable in the present case have been considered and the Judgment of the Hon’ble Supreme Court in “State Tax Officer Vs. Rainbow Papers Limited” was also taken note and relied on. After quoting the provisions of GVAT Act, Section 48 which was relied in “Rainbow Papers Limited” and Section 37 of MVAT Act, following was stated in paragraphs 9 to 10:

• “9. When we compare the provisions of Section 48 of the provision of Gujarat Values Added Tax which was relied in “Rainbow Papers Limited” and the Provisions of Section 37 which is sought to be relied on in the present Appeal, distinction between the provisions is clear. Section 37 specifically uses the expression “subject to any provision regarding creation of first charge in any central act”. The provision itself contemplated thus that Section 37 was subject to any provision in Central Act. The IBC Section 53 itself provides waterfall mechanism which may be treated to be law which has been contemplated under Section 37 of the MVAT Act, 2002.

• 10. We thus are of the view that the Judgement of the Hon’ble Supreme Court in “Rainbow Paper Limited” relied by Learned Counsel for the Appellant is distinguishable. The Appellant having been treated as Operational Creditor allocation of amount in the Resolution Plan cannot be said to be in violation of Section 30 (2)(b). We thus are of the view that no ground has been made to interfere with the Impugned Order.”

# 14. The above supports the submission of Liquidator that the Respondent Department cannot be treated as secured creditor of the Corporate Debtor. We thus are of the view that even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate.

The Adjudicating Authority committed error in rejecting the I.A. filed by the Liquidator relying on the Judgment of Hon’ble Supreme Court in “M/s. Embassy Property Development Pvt. Ltd.” which judgment has no application in the facts of the present case. We thus are of the view that the Order of the Adjudicating Authority in the Appeal cannot be sustained. Order dated 10th April, 2023 is set aside. I.A. No. 1300 of 2020 filed by the Liquidator is allowed. Let attachment be released by the Respondent so as to take further steps in the liquidation. Both the Appeals are allowed accordingly.

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Mr. P. Eswaramoorthy Liquidator Vs. The Deputy Commissioner of Income Tax (Benami Prohibition) - The Prohibition of Benami Property Transactions Act, 1988’, cannot be claimed, before an `Adjudicating Authority’ (`Tribunal’), under the I & B Code, 2016.

NCLAT (13.03.2023) In Mr. P. Eswaramoorthy Liquidator of M/s. Senthil Papers and Boards Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax (Benami Prohibition) [Comp. App (AT) (CH) (INS.) No. 188 & 189 of 2022] held that;

• To put it precisely, `issues’/`disputes’, pertaining to an `Attachment’, effected under The Prohibition of Benami Property Transactions Act, 1988’, cannot be gone into, by an `Adjudicating Authority’ (`Tribunal’), under the I & B Code, 2016.

• The Prohibition of Benami Property Transactions Act, 1988’, cannot be claimed, before an `Adjudicating Authority’ (`Tribunal’), under the I & B Code, 2016.

• The other vital fact that emerges is that, the `Liquidation Period’, began, prior to the `Date of the Provisional Attachment Order’, and this points out clearly that, no `malafide’ or `ill will’, can be attributed to the `Respondent / Department’, in any manner.

Insolvency and Bankruptcy Code, 2016.

# Section 33. Initiation of liquidation. -

XXXXX

(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:

Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority,

Excerpts of the order; 

Background:

The `Appellant / Petitioner’ (`Liquidator’ of `M/s. Senthil Papers and Boards Private Limited’), has preferred in the instant Comp. App (AT) (CH) (INS.) No. 188 of 2022, on being dissatisfied with the `impugned order’ dated 29.03.2022 in MA/1373/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, passed by the `Adjudicating Authority`, (`National Company Law Tribunal’), Division Bench – II, Chennai.

Comp. App (AT) (CH) (INS.) No. 189 of 2022 :

# 2. The `Appellant / Petitioner’ (`Liquidator’ of `M/s. Senthil Papers and Boards Private Limited’), has preferred in the instant Comp. App (AT) (CH) (INS.) No. 189 of 2022, on being dissatisfied with the `impugned order’ dated 29.03.2022 in MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, passed by the `Adjudicating Authority`, (`National Company Law Tribunal’), Division Bench – II, Chennai.

# 3. Earlier, the `Adjudicating Authority’ (`National Company Law Tribunal’, Division Bench – II, Chennai), while passing the `impugned order’ dated 29.03.2022 in MA/1372/2019 & MA/1373/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017 (Filed under Section 60 (5), read with Rule 11 of NCLT Rules, 2016), at Paragraphs 16 to 19, had observed the following:

• 16. “Heard the Counsels for both the Parties, and perused the documents on record including the judgements, memos and written statements. The Corporate Debtor was ordered for Liquidation vide Order dated 14.02.2019 by this Adjudicating Authority. It is seen from the Orders of the Respondents that the Provisional attachments were made on 01.11.2019. At this juncture it is pertinent to note that the period of moratorium starts with the initiation of the CIRP and ends in two circumstances: either on the commencement of Liquidation or upon the approval of a resolution plan. In the present case, the Liquidation period has commenced before the date of in which the provisional attachment was made which indicates that the Respondents herein had not acted in violation of the moratorium. Further, the question of violation of Section 32A does not arise at all as there is no sale of property of the Corporate Debtor consequent to any Resolution Plan.

• 17. Moreover, the provisional attachment made by the Respondents comes under the statute of Prohibition of Benami Property Transaction Act, 1988 which in itself has stipulated the due process with respect to attachment of property under Section 7 of the same. The contention of the Applicant that both being special act The Insolvency and Bankruptcy Code, 2016 should prevail over The Prohibition of Benami Property Transaction Act, 1988 as per the general principle for construction does not hold in the instant case.

• 18. However, in the present circumstances, as there is nothing to stop the Applicant / Liquidator herein to proceed under the relevant provision to revive the provisional attachment. And that, this Adjudicating Authority having not found any conflict between the two statutes as there is no bar in selling the property of the Corporate Debtor solely on the ground that the Corporate Debtor is under Liquidation. And that the Liquidator is also not barred by the code to add the said property into the liquidation estate. The applicant / Liquidator herein is open to approach the appropriate forum to raise the attachment or any other relief as per the provisions of the said act.

• 19. Further, the reliance placed by the Applicant / Liquidator in the matter of Gujarat Urja Vikas Nigam Ltd. vs. Amit Gupta and in Tata Consultancy Services Ltd. vs. Vishal Ghisulal Jain to substantiate that the Insolvency Bankruptcy Code, 2016, should prevail in the event of inconsistency cannot be relied IN the instant case as stated supra, this Adjudicating Authority is of the view that there is no inconsistency to be drawn.’’

‘and `Dismissed’ these `Petitions’.

Glimpse of The Prohibition of Benami Property Transactions Act, 1988: Benamidar:

# 43. Section 2 (10) of The Prohibition of Benami Property Transactions Act, 1988, defines `Benamidar’ meaning, `a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name’.

Attachment:

# 44. Section 2 (5) of the Act 1988, defines `Attachment’ meaning, `the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act’.

Benami Property:

# 45. Section 2 (8) of the Act 1988, defines `Benami Property’ meaning, `any property which is the subject matter of a `Benami Transaction’ and also includes the proceeds for such property’.

Benami Transaction:

# 46. Section 2 (9) of the Act 1988, defines `Benami Transaction’ meaning,

(A) a transaction or an arrangement__

(a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

(b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by—

(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;

(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified by the Central Government for this purpose;

(iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;

(iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or

(B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or

(C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;

(D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;

Explanation.—For the removal of doubts, it is hereby declared that benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), if, under any law for the time being in force,—

(i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property;

(ii) stamp duty on such transaction or arrangement has been paid; and

(iii) the contract has been registered.’’

Person:

# 47. Section 2(24) of the The Prohibition of Benami Property Transactions Act, 1988 (Act 45 of 1988), defines `Person’, intend to include;

(i) “an individual;

(ii) a Hindu undivided family;

(iii) a company;

(iv) a firm;

(v) an association of persons or a body of individuals, whether incorporated or not;

(vi) every artificial juridical person, not falling under sub-clauses (i) to (v);’’

Property:

# 48. Section 2(26) of the Act, 1988, defines `Property’ meaning assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.

Classification of Benami Transactions:

# 49. The Hon’ble Supreme Court of India in the matter of Meenakshi Mills Ltd. v. CIT, reported in AIR 1957 SC at Page 49, had classified `Benami Transactions’, into `Genuine’ or `Real’ and `Sham’ Transactions, the `distinguishing feature’, being an `intention’ of `Transferor’ or `Vendor’, to actually give `Possession’, to the `Purchaser’, in `whatever name’ or `Retain’ the `Title’ and `Beneficial Interest’, to himself.

# 50. Further, in the aforesaid decision, it is observed as under:

• “The word ‘benami’ is used to denote two classes of transactions which differ from each other in their legal character and incidents. In one, the usual class, the sale is genuine and title is transferred but the real transferee is not the ostensible transferee but another and in the other, where the term is inaccurately applied, the sale to the benamidar is fictitious and the title of the transferor is not intended to pass. The fundamental difference between these two classes is that while in the former title vests in the transferee, in the latter it remains with the transferor, and when a dispute arises the question as to who paid the consideration becomes relevant only with respect to the former class while in the latter the only question is whether any consideration was paid at all.’’

# 51. Moreover, the concept of `Benami’, is explained by the Hon’ble Supreme Court of India in Thakur Bhim Singh (Dead) by Lrs. v. Thakur Kan Singh, reported in 1980, 3 SCC, Page 72, and the same is as under:

• “Two kinds of benami transactions are generally recognized in India. Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner. The second case which is loosely termed as a benami transaction is a case where a person who is the owner of the property executes a conveyance in favour of another without the intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner. The difference between the two kinds of benami transactions referred to above lies in the fact that whereas in the former case, there is an operative transfer from the transferor to the transferee though the transferee holds the property for the benefit of the person who has contributed the purchase money, in the latter case, there is no operative transfer at all and the title rests with the transferor notwithstanding the execution of the conveyance. One common feature, however, in both these cases is that the real title is divorced from the ostensible title and they are vested in different persons. The question whether a transaction is a benami transaction or not mainly depends upon the intention of the person who has contributed the purchase money in the former case and upon the intention of the person who has executed the conveyance in the latter case. The principle underlying the former case is also statutorily recognized in Section 82 of the Indian Trusts Act, 1882 which provides that where property is transferred to one person for a consideration paid or provided by another person and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must hold the property for the benefit of the person paying or providing the consideration. This view is in accord with the following observations made by this Court in Meenakshi Mills, Madurai v. The Commissioner of Income-Tax, Madras [1956] S.C.R. 691 at p. 722.’’

Attachment of Property:

# 52. Section 24 of The Prohibition of Benami Property Transactions Act, 1988, enjoins the `Initiating Officer’, to `Attach’, the `Benami Property’, only provisionally that too, with `prior Approval’ of the `Approving Authority’.

# 53. Section 24(2) of the Act, 1988, provides for an `Issuance of Notice’, as per Section 24(1) of the Act for the `Benamidar’, as well as the `Beneficial Owner’, in consonance with Section 11 that the `Authorities’, shall be guided by the `Principles of Natural Justice’.

# 54. Section 24(5) of the Act, 1988, obliges the `Initiating Officer’, to make a reference of the case to the `Adjudicating Authority’, within 15 days of `Provisional Attachment’, ordered by him.

# 55. Rule 5 of The Prohibition of Benami Property Transaction Rules, 2016 (Appendix III) provides, that the `Initiating Officer’, shall provisionally `Attach’, any `Property’, in the manner provided in 2nd Schedule of Income-tax Act, 1961.

Adjudication of Benami Property:

# 56. To be noted, that Section 26 of the Act, 1988, clarifies that

(a) While `Attachment’, can be made on prima facie coming to the conclusion in regard to the Benami Nature of Property, it cannot be confiscated without an `Adjudication’.

(b) Sub-section 1 (2), protects an innocuous purchaser of `Benami Property’, who made the `Purchase’, for an adequate consideration, without having knowledge of its `Benami’ nature, before the `Notice’, under Section 24(1) of the Act.

(c) Sub-section 2(3) of the Section 26 of the Act, provides for `Vesting’ of Confiscated Benami Property. Section 27 of the Act, pertains to `Confiscation’ and `Vesting’ of `Benami Property’.

Non-obstante Clause:

# 57. It is pointed out that there should be a clear `inconsistency’, between the two, before giving an `Overriding Effect’, to the `Non-obstante Clause’, as per decision in R.S. Raghunath v. State of Karnataka, reported in AIR 1992, SC Page 81 at Spl Pg. 89.

# 58. If one finds, `two or more enactments’, operating in the same field and each containing a `Non-obstante Clause’, stating that its provisions will have effect `not-withstanding anything inconsistent’ therewith, contained in any other `Law’, for the time being `inforce’, then, one is to see the `Purpose’ and `Policy’, underlying `two enactments’, and `language’, used in them.

# 59. A `Non-obstante Clause’, may be used as a `Legislative Device’, to `Modify’, the `ambit’ of `provision’ or `Law’, mentioned in `Non-obstante Clause’.

# 60. Ordinarily, there is a `Close Approximity’, between the `Non-obstante Clause’, and `enacting part’ of the `Section’, and `Non-obstante Clause’, may throw some light, as to the `Scope’ and `Ambit’ of `enacting part’, in case of its `ambiguity’ (vide Aswini Kumar Ghose v. Arabinda Bose & Anr., reported in AIR 1952 SC Page 369, Page 390), but, when `enacting part’, is cleared its `Scope’, cannot be cut down or `enlarged’, by `resort’ to `Non-obstante Clause’.

# 61. A `Conflict’, between the `two Special Acts’, which both contain `not-withstanding clauses’, can also be `resolved’, by looking, which is more `special’, than the `other’, in addition to the consideration that the `Conflict’, arose because of a `provision’ added later in the `act’, which is more `special’.

Principle of Election:

# 62. Where there is `no repugnancy’ or `inconsistency’, between the `two remedies’, `Principle of Election’, will not `Apply’, in the considered opinion of this `Tribunal’.

Income Tax Dues:

# 63. The `Income Tax Dues’, are like `Crown Debts’, as per decision of the Hon’ble Supreme Court of India in Principal Commissioner of Income Tax v. Monnet Ispat and Energy Ltd. (2018) 211 Comp Cas 99 (SC).

Liquidator:

# 64. There is no `two opinion’ of a `pivotal fact’ that the `Liquidator’s actions’, are to be under the `parental supervision’ of an `Adjudicating Authority’ (`Tribunal’). A `Liquidator’, has `no unfettered powers’, to `discharge’, his `duties’, but, he is to `perform’, his `functions’, in a `reasonable’ and `prudent’ manner.

# 65. A `Tribunal’ / an `Appellate Tribunal’, will not `interfere’, in a Liquidator’s action / decision, and will interfere when he has not acted in a `Bonafide’ manner or he acted, in a way that `no reasonable Liquidator’, could have acted. He cannot involve `Aliens’, while dealing with the `Liquidator’s Affairs’.

Appraisal:

# 66. At the outset, this `Tribunal’ points out that the `Appellant’/`Liquidator’ of M/s. Senthil Paper & Boards Private Ltd., Coimbatore, had filed an MA/1373/2019 in MA/1130/CAA/2019 in CP/612/IB/CB/2017, before the `Adjudicating Authority’ (`Tribunal’), seeking the `Reliefs’ of `Interim Stay’, of the `Order’ of `Provisional Attachment’ dated 01.11.2019, made in File No. IO/PBPT/Senthil Papers & Boards / 216, pending consideration of the above Application, and to set aside the `Order of Provisional Attachment’, dated 01.11.2019, made in the aforesaid File.

# 67. The Appellant / Petitioner / Liquidator, had preferred MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017 (before the `Adjudicating Authority’ / `Tribunal’), seeking to (a) grant Interim Stay, over the operations of the `Provisional Attachment Order’, dated 01.11.2019, made in File No. IO/PBPT/Senthil Papers & Boards / 210, and (b) Set aside the `Order of Provisional Attachment’, dated 01.11.2019, made in the aforesaid File.

# 68. According to the Appellant / Liquidator / Petitioner, the `Adjudicating Authority’, had admitted CP/612/IB(CB)/2017 against M/s. Senthil Papers and Boards Private Limited and ordered the initiation of `CIRP’, declaring `Moratorium’, with respect to `Corporate Debtor’.

69. It transpires that the Appellant / Liquidator, had placed the `proposed Resolution Plans’, before the `Committee of Creditors’, during the 9th CoC Meeting, that took place on 02.11.2018. After due consideration of the `Resolution Plans’ submitted, the `CoC’, had rejected the `Resolutions Plans’, and consciously had resolved to prefer an `Application’ for `Liquidation’ of the `Corporate Debtor’, before the `Adjudicating Authority’. In MA/604/2018, filed by the `Appellant / Liquidator /Petitioner’, under Section 33 (2) of the I & B Code, 2016, for `Liquidation’ of the `Corporate Debtor’, a `Liquidation Order’, was passed on 14.02.2019.

# 70. It is brought to the fore, that the Liquidation of the Corporate Debtor, was commenced on 14.02.2019. The Ex-Director / Shareholder of the Corporate Debtor, had preferred an `Appeal’, i.e., Comp. App (AT) (INS.) No. 432 of 2019, before the `Appellate Tribunal’, and the `Appellate Tribunal’, was pleased to `Disposed of’, the `Appeal’, on 03.05.2019, by making the following observations:

• “In view of the observations aforesaid, we hold that the Liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members of the Corporate Debtor or the Creditors or a class of creditors like `Financial Creditor’ or `Operational Creditor’ approach the Company through the liquidator for compromise or arrangement by making proposal of payment to all the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the will move an application under Section 230 of the Companies Act, 2013, before the `Adjudicating Authority’ i.e., National Company Law Tribunal, Chennai Bench, in terms of the observations as made in above.’’

# 71. It comes to be known that one Mr. O. Arumugasamy, an Ex-Director / Shareholder, had placed a Scheme of Compromise /Arrangement (under Section 230 of the Companies Act, 2013) with the Liquidator on 10.07.2019, etc. After the receipt of `Revised Scheme’, the `Appellant / Petitioner / Liquidator’, preferred MA/1130/CCA/2019 in CP/612/IB(CB)/2017, for convening the `Meeting’ of both `Secured and Unsecured Creditors’, in regard to the proposed Scheme and the said `Application’, was `Allowed’ on 08.11.2019, by the `Adjudicating Authority’.

# 72. It appears that the Appellant / Petitioner / Liquidator (pending the Liquidation Proceeding), had received a `Notice’ dated 01.11.2019, from the Respondent, to `Show Cause’, as per Section 24(1) of the The Prohibition of Benami Property Transactions Act, 1988, as to why the `Property’ being the proportionate share of the Land, owned by the `Corporate Debtor’, out of the total extent of 889.82 Acres, where the factory of the `Corporate Debtor’, was located, should not be treated as `Benami Property’, and that, any `Reply’ ought to be provided on or before 21.11.2019. The Respondent, also had issued a `Provisional Attachment Order’ dated 01.11.2019, as per Section 24(3) of the Act, 1988.

# 73. The Appellant / Petitioner gave his `Reply’ dated 20.11.2019, pointing out that the `Notice’, issued was not warranted against the `Assets’ of the `Corporate Debtor’, and as to how the `Provisional Attachment’ of the `Assets’ of the `Corporate Debtor’, by the `Respondent’, was not Sustainable.

# 74. According to the Appellant / Petitioner / Liquidator, the `Notice’ to `Show Cause’ dated 01.11.2019, mentioned that during the course of such proceedings, various incriminating documents and loose sheets were found and seized, as per which during the period of demonetisation, Rs.400/- Crores in `Old High Denomination Notes’, were given to Senthil Group, Coimbatore, for the purchase of the Paper Mill in Coimbatore District, belonging to Smt. Sasikala, through her Intermediaries, etc.

# 75. The crystalline stand of the Appellant / Liquidator is that, there was no Cash Inflows into the Company, either in the form of Cash or Cheque, from the Promoters of the Company or others, and the same is evidenced from the Disclosure on `Specified Bank Notes’, given by the `Statutory Auditor’, in his `Report’ for the Financial year 2016-17, filed with the `Ministry of Corporate Affairs’. To support the fact that there was no Cash Flows into the Corporate Debtor, the `Appellant’ / `Petitioner’, had enclosed the Copy of the Audited Balance Sheets for the Financial Years 2016-17, 2017-18 and 2018-19, Income Tax Returns for the Years 2016- 17, 2017-18 and 2018-19 and the Bank Statements from October 2016 to March 2017 of the Corporate Debtor.

# 76. The prime plea of the Appellant / Petitioner / Liquidator is that, when the Charge on the Assets was subsisting, it is not known, as to how, such transactions could have been made and any transaction sought to be made, during the subsistence of Charge by the `Suspended Director’, `Promoters’ and `Boards’, is void. Further, the `Assets’ sought to be attached, continued to stand in the name of the `Corporate Debtor’, which the `Creditors’, are entitled to.

# 77. According to the Respondent / Department, during 2017, search actions (under the Income Tax Act, 1961), were initiated in respect of Smt. V.K. Sasikala and Others and that resting upon the materials emanated during search proceedings, information relating to certain Transactions was sent to the Office of DCIT, Respondent, vide Letter dated 17.05.2019, by the JDIT (Inv.) (OSD), Unit-2(1), Chennai, and the information reflected that numerous incriminating documents and loose sheets for found and seized, which showed among other things that during the Demonetisation period, Rs.400/- Crores in `Old High Denomination Notes’, were given to Senthil Group, Coimbatore, for the purchase of a Paper Mill, in Coimbatore District, belonging to Senthil Group, by Smt. Sasikala, through her Intermediaries.

# 78. Later, a Service Apartment at Room No.302, Shylee Nivas Service Apartments, Nutech Lushington, Old No. 41, New No. 76, Block-II, 1st Main Road, CIT Nagar, Nandanam, Chennai – 35, was searched on 18.11.2017 (based on source information), during which many Original Memorandum of Understandings, Land Documents, Share Certificates, etc., were found and seized.

# 79. It is the stand of the Respondent that the seized material included Share Certificates of M/s. Saradha Papers and Boards Private Limited (Erstwhile name of M/s. Senthil Papers and Boards Private Limited) in the names of Shri. T.N. Vetrivel, Shri. A. Senthil Kumar, Shri. O. Arumugasamy, Shri. T.N. Mariya Gouder and Shri. M. Palanisamy.

Further, a `Memorandum of Understanding’, mentioning the details of `Sale of Assets’ of M/s. Senthil Papers and Boards Private Limited, along with its Paper Mill 830 Tonnes Per Day, running business and 15 MW cogeneration Power Plant, etc., where M/s. Senthil Paper and Boards Pvt. Ltd. is located and 7,74,538 sq.ft. construction on it and also the details of Transfer of entire Equity Share of M/s. Senthil Papers and Boards Pvt. Ltd., was also seized from the Service Apartment.

# 80. That apart, Senthil Group was also covered by a Search, as per Section 132, under the Income Tax Act, 1961, and Mr. A. Senthil Kumar, MD of M/s. Senthil Papers and Boards Pvt. Ltd., admitted on oath that they had received Cash in OHD’s to the tune of Rs.400 Crores through Mr. S. Senthil, Advocate, towards the Sale of the above Company.

# 81. In the instant case, it is quite evident that the Respondent / Department had attached the `Property’ of the `Corporate Debtor’, as per the ingredients of the Provisions of `The Prohibition of Benami Property Transactions Act, 1988’. Therefore, an `Attachment’ effected, under `The Prohibition of Benami Property Transactions Act, 1988’, is to be assailed under the relevant provisions of the said Act, 1988, and in fact, the `I & B Code, 2016’, only pertains to questions concerning the `Insolvency Resolution’ or `Liquidation Proceedings’ of the `Corporate Debtor’. Viewed in that perspective, the `Attachment’, made as per Section 24(3) of `The Prohibition of Benami Property Transactions Act, 1988’, cannot be a `subject matter’ of `proceedings’, under Section 60(5) of the I & B Code, 2016, in the considered opinion of this `Tribunal’. To put it differently, the `Adjudicating Authority’ (`National Company Law Tribunal’), is not the proper `FORA’, to determine the controversies, revolving around the `Attachment’ of the `Property’, under `The Prohibition of Benami Property Transactions Act, 1988’, as held by this `Tribunal’. As such, it is held by this `Tribunal’, that the filing of the instant Comp. App (AT) (CH) (INS.) Nos. 188 and 189 of 2022, by the `Appellant / Petitioner / Liquidator’, per se are `not Maintainable’, in the `eye of Law’.

# 82. At this stage, this `Tribunal’, pertinently points out that the `Onus’, has to be strictly discharged by adducing legal evidence of the `Definitive Character’, which would either directly prove the fact of `Benami’ or `establish’ circumstances unerringly and reasonably, raising an inference of that fact, as per decision of the Hon’ble Supreme Court of India in Jaydayal Poddar (Deceased) V. Mst. Bibi Hazra & Ors. (1974) 1 SCC, Page 3.

# 83. It cannot be gainsaid that the `Benami Transactions’, are not confined to `purchases only’, and can extend to other `Modes of Transfer’, as well. The `Burden’ to establish `Benami’, lies on a `Person’, who asserts so. The relevant circumstances were (i) Source of Consideration (ii) The nature of Possession of Property (iii) The Motives, if any (iv) The position of the Parties (v) The custody of Title Deed and (vi) The conduct of Parties in dealing with the Property, after Sale.

# 84. An existence of `Fiduciary Relationship’, is to be determined on the basis of facts and circumstances of the individual case, as per decision of the Hon’ble Supreme Court of India in Marcel Martins V. M Printer & Ors., AIR 2012 1987.

# 85. In so far as the `Revocation of the Attachment’, effected by the `Respondent / Department’ is concerned, `The Prohibition of Benami Property Transactions Act, 1988’, has a `Viable’, `Effective’ and `Efficacious Hierarchy’, to be `resorted to’, and the `Appellant’, is to take `Recourse’, to that `Remedy’. Even an `Appeal’, is provided, under the Act, 1988, for `Redressal’ of `Grievances’, suffered by an `Aggrieved Person’, as opined by this `Tribunal’.

# 86. A mere running of the eye of the ingredients of Section 60(5) of the Code, clearly indicates that it is not an all pervasive Section, conferring `Jurisdiction’, to an `Adjudicating Authority’ (`Tribunal’), to determine any questions, relating to the `Corporate Debtor’. One cannot fall back upon Section 60(5) of the I & B Code, 2016, for seeking `remedy’, concerning the matter, relating to `The Prohibition of Benami Property Transactions Act, 1988’, in the earnest opinion of this `Tribunal’.

# 87. In so far as the `Annulling’ of the `Assessment Order’, issued under the Income Tax Act, 1961, and the `Notice of Demand’, dated 31.12.2019, issued under the Income Tax Act, 1961, the said Act, enjoins an `Appeal’, being preferred against an `Assessment Order’, under the relevant provision of the Income Tax Act, 1961.

# 88. It is to be remembered that a `Moratorium’, under Section 14 of the I & B Code, 2016, does not affect the `Provisional Attachment Order’, passed under `The Prohibition of Benami Property Transactions Act, 1988’. The object of the `Act 1988’, is to `Prohibit the Benami Transactions’, and the `right’ to `redeem’ / `recover’, the `Property’, held `Benami’, for matters connected therewith or incidental thereto.

# 89. However, the preface to the I & B Code, 2016, shows that it is meant to consolidate and amend the `Laws’, relating to `Reorganisation and Insolvency Resolution of Corporate Persons, Partnership Firms and Individuals’, in a time bound method, ofcourse, for `Maximisation of Values’, etc.

# 90. A closure scrutiny of `The Prohibition of Benami Property Transactions Act, 1988’, and the `I & B Code, 2016’, clearly exhibit that they do operate in their own field and without any simmering doubt, this `Tribunal’, without any `haziness’, holds that an `element of public interest’, is involved in `PBPT Act’.

# 91. Only when a Resolution Plan was approved by the `Adjudicating Authority’ (`Tribunal’), Section 32A of the I & B Code, 2016, gets attracted. In reality, an `Adjudicating Authority’ (`Tribunal’), cannot traverse upon matters which is beyond its `scope’. To put it precisely, `issues’/`disputes’, pertaining to an `Attachment’, effected under `The Prohibition of Benami Property Transactions Act, 1988’, cannot be gone into, by an `Adjudicating Authority’ (`Tribunal’), under the I & B Code, 2016. In short, the `Appellant / Liquidator’, cannot take umbrage, either under the ingredients of Section 32A, coupled with Section 60(5) of the I & B Code, 2016.

# 92. One cannot brush aside a candid fact, when a particular enactment / statute, showers certain `rights’, `obligations’, `determination of remedies’, then, `recourse’ to be done by a person and also that a public law remedy, under `The Prohibition of Benami Property Transactions Act, 1988’, cannot be claimed, before an `Adjudicating Authority’ (`Tribunal’), under the I & B Code, 2016, as held by this `Tribunal’.

# 93. It cannot be lost sight off, `Section 67 of The Prohibition of Benami Property Transactions Act, 1988’, provides for a non-obstante clause, which runs to the following effect:

• 67. “Act to have overriding effect.__ The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.’’

# 94. In the instant case, it transpires that the `Respondent / Department’, had effected the `Provisional Attachments’, on 01.11.2019. As a matter of fact, the `Liquidation Order’, in respect of the `Corporate Debtor’, was passed by the `Adjudicating Authority’ (`Tribunal’), on 14.02.2019. The other vital fact that emerges is that, the `Liquidation Period’, began, prior to the `Date of the Provisional Attachment Order’, and this points out clearly that, no `malafide’ or `ill will’, can be attributed to the `Respondent / Department’, in any manner.

# 95. Moreover, the aspect of `Invocation of Section 32A of the I & B Code, 2016’, does not arise on any score, because of the fact that there was no `Sale of Property’ of the `Corporate Debtor’, based on any `Resolution Plan’.

# 96. As a matter of fact, in ITA.No.1043/2019-20, filed by the Appellant (M/s. Senthil Papers and Boards Private Limited, Coimbatore – 18), Represented by the `Liquidator’, on 31.03.2022, an `Order’, was passed, wherein, at Paragraph 6.4, 6.5 and 7, it is observed as under:

• 6.4. “As the entire addition of Rs.400 Crore, were confirmed in the hands of the Directors of the appellant company in proportionate to their shareholding pattern it is considered and opined that there is no need to make any decision in respect of the same amount in the hands of the appellant company which was added protectively.

• 6.5. In this background, by considering the fact about the confirmation of addition in the hands of the Directors, the grounds raised by the appellant company upon the issue of addition of Rs.400 Crore in the hands of the company protectively are allowed. 

• 7. In the result, the appeal is treated as allowed.’’

# 97. It is brought to the notice of this `Tribunal’, on behalf of the `Respondent / Department’ that, as against the said `Order’, dated 31.03.2022, passed in CIT (A), the Income Tax Department, had filed an `Appeal’, before the `Income Tax Appellate Tribunal’, bearing No. 503/Chny/2022, and the same is pending. No wonder, in `Law, an `Appeal’, is a continuation of `Original Proceedings’.

# 98. Be that as it may, in the light of foregoing qualitative and quantitative discussions, this `Tribunal’, taking note of the divergent contentions advanced on either side, considering the fact that `Liquidator’, cannot bypass a remedy, provided under `’The Benami Transactions (Prohibition) Act, 1988′, in assailing the `Order’, passed by the `Adjudicating Authority’, before the `Appellate Tribunal’, under the `PBPT Act, 1988’, keeping in mind of the surrounding facts and circumstances of the case, in a holistic fashion, comes to a resultant conclusion that the view arrived at, by the `Adjudicating Authority’ (`National Company Law Tribunal’, Division Bench – II, Chennai), in dismissing the MA/1373/2019 and MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, through its `Impugned Order’, dated 29.03.2022, is free from `Legal Infirmities’. Consequently, the `Appeals’, fail.

Disposition:

In fine, the Comp. App (AT) (CH) (INS.) Nos. 188 and 189 of 2022, are `Dismissed’. No costs. The connected pending `Interlocutory Applications’, if any, are `Closed’.

Before parting with the case, this `Tribunal’, makes it quite clear that the `Dismissal’ of the aforesaid `Appeals’, will not `preclude’ the `Appellant / Liquidator / Petitioner’, to `approach’, the `Competent Forum’, for `Redressal’ of his grievances, seeking necessary `reliefs’, thereto, as deemed fit in the subject matter in issue, in the manner known to `Law’, and in accordance with `Law’, if he so desires / advised.

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