M/s. Regional Provident Fund Commissioner (Compliance), Exployee Provident Fund Vs. M/s. Excel Glass Limited - The applicant knowingly flouted the moratorium order and proceeded with the proceedings under sections 7Q and 14B of the Employees provident funds and Miscellaneous Provisions Act 1952, thus committed an offence punishable under section 74(2) of IBC, 2016.

NCLT Kochi (02.08.2023) In M/s. Regional Provident Fund Commissioner (Compliance), Exployee Provident Fund Vs. M/s. Excel Glass Limited (Under Liquidation) and another  [IA(IBC)/127/KOB/2023 IN IBA/258/CB/2019] held that;

• Rule 16 IBBI of (Liquidation process) Regulation 2016, makes it clear that even if the claim is filed during the CIRP period, the same shall be updated but admittedly no claim is filed by the applicant after the order of liquidation or updated the claim submitted during CIRP period.

• The applicant knowingly flouted the moratorium order and proceeded with the proceedings under sections 7Q and 14B of the Employees provident funds and Miscellaneous Provisions Act 1952, thus committed an offence punishable under section 74(2) of IBC, 2016.

Excerpts of the Order;    

This application is filed under Section 60(5) (c) of the Insolvency & Bankruptcy Code, 2016 by Regional Provident Fund Commissioner, EPFO,  Kochi against the corporate debtor and its Liquidator seeking the following reliefs:

• a. To set aside the Annexure A10 issued by the 2nd Respondent dated 16/08/2022 rejecting the claim of the Applicant

• b. To direct the 2nd Respondent to pay off the entire claim amount of Rs.19,06,277/- (Rupees Nineteen Lakhs Six Thousand Two Hundred and Seventy-Seven Only) on first priority from and out of the liquidation assets/estate of the Respondents

• c. To direct the 2nd Respondent to accept the claim of the Applicant:

• d. To direct the Respondents for the payment of cost thereof.

# 1. The Corporate Debtor, M/s. Excel Glass Limited (hereinafter referred to as CD) was admitted into CIRP by NCLT Chennai bench vide order dated 26.03.2019 and subsequently put to liquidation by this bench vide order dated 21.10.2019. Thereby, Mr. Ravindra Chaturvedi, RP was appointed as liquidator. The liquidator made public announcement of liquidation on 24.10.2019 inviting claims to be submitted by 20.11.2019.

# 2. The applicant states that it is a statutory body and by virtue of section 6, 6A, and 6C of the EPF & MP Act (hereinafter referred to as “EPF Act”) read with EPF and Pension Scheme, the CD is liable to make contributions to the PF without delay and in event of default shall be liable for penal damages. It is stated that the CD committed default in making PF contributions and recovery certificates were issued on 09.09.2015 and 13.05.2020, for damages including interests for period 03/2010 to 09/2011, and 12/1997 to 12/2018 respectively, under section 14B and Section 7Q of EPF Act. It is stated that inquiry proceedings were initiated and summons issued to CD on 22.05.2019 owing to belated remittance of PF contribution for period of 12/1997 to 02/2010 and 01.04.2014 to 31.12.2018. Even though a representative of CD appeared for hearing on 16.07.2019, no reply or cause was shown against the proceedings in consequence, the CD was directed to pay sum of Rs. 9,50,649/- and Rs. 5,93,318/- towards damages and interest to the EPFO.

# 3. Meanwhile on 02.07.2019, the applicant received notice of CIRP, and thereafter applicant submitted the Annexure A5, CIRP claim in Form B for an amount of Rs. 19,05,030/- based on aforesaid recovery certificates for damages and interests under EPF Act. It is stated that the liquidator/erstwhile RP has not rejected the claim so far. Further, it is stated that the enforcement officer under EPF Act, conducted an inspection on 24.01.2020 and reported vide Annexure A8 that the CD has not remitted PF dues for period of January 2019 to December 2019. It is stated that the liquidator has filed the list of stakeholders which includes claims from workmen to the tune of Rs.5,44,59,509/- which was taken on record by this Tribunal on 10.08.2020.

# 4. The applicant states that the EPFO on 13.10.2020 determined the dues under section 7A of EPF Act to the tune of Rs.900/- for period of January 2019 to December 2019. It is stated that the liquidator had appeared in the VC hearing did not raise any dispute and the sum of Rs. 900/- was paid by the liquidator on 20.02.2022. It is stated that the liquidator has disregarded the previous claims of the EPFO and in response to recovery measures, he had replied vide Annexure A10 that the CD is under liquidation and all the claims were already received and processed and list filed before this Tribunal and further that the claim of EPFO has not been received. The applicant states that the contention of liquidator is incorrect and claim of EPFO is submitted vide Annexure A5 to the liquidator. It is stated that the applicant further issued letters to liquidator on 22.08.2022 and 16.12.2022 claiming amount of Rs.19,06,277/- including earlier claim in Annexure A5 also stating that the dues need to be settled as the same falls outside the purview of liquidation estate as per section 36(4)(iii). The applicant states that as per section 36(4)(iii) the amount due to workmen or employee from PF and gratuity fund falls outside liquidation estate and is to be settled from the assets of CD before distribution of assets to stakeholders under section 53 IBC. The applicant states that in spite of raising the claim vide Annexure A5 and correspondence letters, the liquidator failed to reject the same. It is contended that the applicant submitted the claim on time and only vide Annexure A10 letter the liquidator informed the position of claims. It is further stated that the liquidator despite participating in the proceedings of EPFO and being served show cause notice before liquidation proceedings failed to follow the statutory provisions of EPF Act. It is further stated that the EPFO has first charge over assets of CD/ liquidation estate as per section 11 of EPF Act. The applicant also attacks the conduct of the liquidator by invoking section 17 and 18 IBC, which state the duties of IRP and his responsibility to comply with all laws in force. It is stated that the liquidator/RP was duty bound to check and settle the claims of EPFO under law and failed to comply the same.

# 5. On the respondent side, it is stated that the application is not maintainable. R2 states that the applicant EPFO has not filed their claim after initiation of liquidation as liquidation makes fresh cause of action which requires the claimant to file claim again once filed during CIRP or not. The only claim filed by the EPFO was Annexure A5 claim in Form B on 14.08.2019 was during the CIRP. Thereafter the liquidation order was passed on 21.10.2019 and a public announcement in newspapers were made on 24.10.2019. It is stated that the liquidator vide Annexure A10 has not rejected or accepted the claim of the applicant as he has not filed any valid claims in liquidation. Even if it assumed that Annexure A10 communication issued on 16.08.2022 is a rejection of claim in liquidation, the same had to be appealed before this Tribunal within 14 days as per section 42 of IBC or in this instant case by condoning a delay of 196 days. 

# 6. It is further contended by the liquidator that the claim which is impugned arises out of the order dated 30.07.2019 under section 14B of EPF Act which was passed during the moratorium period in CIRP and also without giving opportunity to CD to defend. It is further stated that the applicant having participated in CIRP should have submitted his claim in liquidation. The liquidator state that the stand taken by the applicant that the sum of Rs. 9,50,649 and Rs. 5,93,318 being damages and interest under section 14b and 7q of EPF Act cannot be regarded as coming under section 36(4)(iii) of the IBC, i.e outside purview of liquidation estate. It is stated that the exclusion in the section is provided for sums due to any workmen or employee from the PF, Pension and Gratuity Fund and the said claim of EPFO cannot be regarded as sum due to workmen or employee but only in nature of penalty and damages charged by EPFO due to delay in remittance of PF dues and shall in no way go into the accounts of workmen or employees. The liquidator states that the benefit under this section is for employees/workmen and cannot be passed to EPFO which is a statutory body. It is hence contended that the sum dues payable to PF, pension or gratuity out of liquidation proceeds shall not be exempted as per section 36(4) and the same cannot be settled as outside the liquidation estate. The liquidator further state that the amount to be excluded from the liquidation estate are only those amounts which company retains in a separate account for purpose of PF contributions from the employer/employee under section 16A of EPF Act.

# 7. Finally, with regard to applicant’s contention that the EPFO dues are to be settled in priority to other debts, it is stated that the IBC as per section 238 has overriding effect over EPF Act and the provisions of EPF Act cannot be given weightage. It is further stated by the liquidator that he had in fact paid the dues assessed for period January 2019 to December 2019 i.e., Rs.900/- to EPFO on 23.03.2021 despite same being adjudicated during moratorium period only to buy peace. It is stated that the EPFO were aware of the liquidation proceedings and had communicated the fact that the liquidation claims were not received vide Annexure R-2(a)(Colly) communications on various dates. 

# 8. The points for consideration are:

(1) Whether Annexure A10 letter dated 16.08.2022 can be construed as a claim rejection order of the 2nd respondent?

(2) Whether the Recovery certificates Annexures A3 & A4 dated 30.07.2019 are valid in law?

(3) Whether the claim amount of Rs.19,05,030/-Claimed in Annexure A5 is to be excluded from the liquidation estate under section 36(4)(a)(iii) of IBC 2016?

# 9. Point No.1: The corporate debtor was admitted into CIRP on 26.03.2019, the second respondent was appointed as IRP then as RP. The applicant filed its claim on 20.08.2019 (Annexure A5) subsequently liquidation order was passed against the 1st respondent/corporate debtor on 21.10.2019, the second respondent was appointed as liquidator, claims were invited by the liquidator but no claim was submitted by the applicant after the order of liquidation. Rule 16 IBBI of (Liquidation process) Regulation 2016, makes it clear that even if the claim is filed during the CIRP period, the same shall be updated but admittedly no claim is filed by the applicant after the order of liquidation or updated the claim submitted during CIRP period.

# 10. On the applicant side relies upon Annexure A5 this is the claim submitted by the applicant during the CIRP period.Thus, it is made clear no claim has been presented by the applicant during the liquidation proceeding and the applicant also taken a stand that there is no need to file any claim, if this is the stand of the applicant then the question of rejection of claim does not arise at all. Annexure A10 is the letter dated 16.08.2022 addressed by the second respondent to applicant informing that no claim of EPFO was received, in the letter the second respondent given the details of the liquidation order and claims received by him and approval of list by this Authority. The applicant also has not filed this application under section 42 of IBC 2016, the specific provision available in IBC 2016 to prefer an appeal against the rejection of claim order, but this application is filed under the residuary provision of section 60(5) of IBC 2016. In the scenario the contention of the applicant that Annexure A10 is a rejection order, the same shall be set aside is unsustainable.

# 11. Point No.2: The applicant claims a sum of Rs.19,05,030/- under Annexure 5 on the basis of three recovery certificate as follows:

(i) Recovery certificate dated 09.09.2015 for a sum of Rs.4,11,063/- (Rs.1,57,588/- under section 7Q and a sum of Rs.2,53,475/- under section 14B of EPF Act 1952) /-

(ii) (ii) Recovery certificate dated 30.07.2019 under section 14B of EPF Act 1952 for a sum of Rs.9,50,649/-

(iii) Recovery certificate dated 30.07.2019 under section 7Q of EPF Act 1952 for a sum of Rs.5,93,318/-

# 12. The first respondent corporate debtor was admitted into CIRP on 26.03.2019, the moratorium was declared and came into effect on the same day under section 14 of IBC 2016. Under section 14(1)(a) of IBC 2016 institution or continuation of proceeding against the corporate debtor by any authority is prohibited. In this case, the applicant initiated the proceeding under section 14B and 7Q of EPF Act 1952 after the corporate debtor admitted into CIRP, the fact that the corporate debtor was admitted into CIRP was informed to the applicant  by the second respondent in his letter dated 02.07.2019 forwarding the copy of the CIRP order. The applicant even after the receipt of the CIRP order, continued the proceeding and passed the order on 24.07.2019 and issued Recovery certificates dated 30.07.2019. The Apex court in Sundaresh Bhatt Liquidator of ABG shipyard vs Central Board of Indirect Taxes and Customs 2022 Live Law (SC) 715. observed as follows:

• 44. Therefore this Court held that the authorities can only take steps to determine the tax, Interest, fines, or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.

# 13. In the supra citation the Apex court observed that the customs authorities under the Customs Act during the period of moratorium can only take steps to determine the tax, interest, fine or any penalty which is due. However, the authority cannot transgress such boundary and proceed to initiate a recovery in violation of section 14 or 33(5) of IBC, 2016. The above citation squarely applicable to this case.

# 14. The applicant knowingly flouted the moratorium order and proceeded with the proceedings under sections 7Q and 14B of the Employees provident funds and Miscellaneous Provisions Act 1952, thus committed an offence punishable under section 74(2) of IBC, 2016. This section is criminal in nature falls under Chapter VII under the heading Offences and Penalties, under section 236 (1) of IBC, 2016 special court alone have jurisdiction. Further under section 236 (2) of IBC, 2016 cognizance of the offence can be taken only on the compliant of IBBI or Central Government. Hence the 2nd respondent is granted liberty to approach the IBBI to proceed against the applicant’s erred officials in this regard.

# 15. For the reasons stated above it is declared that the recovery certificates dated 30.07.2019 are invalid and Void ab initio.

# 16. Point No.3: On the applicant side submitted that the applicant need not file any claim request because the amount payable to the workmen and employee is excluded from the liquidation estate as provided under section 36(4)(a)(iii) of IBC 2016. As already held that the claim in respect of recovery certificates dated 30.07.2019 are void, in respect of claim in pursuance of the recovery certificate dated 09.09.2015 no claim has been filed. In respect of applicability of section 36(4)(a)(iii) of IBC 2016 is concern it is applicable only if the separate fund kept under section 16A of EPF Act 1952, this position is clarified by NCLAT in Parameshwara Udpa R.P. Vs. Assistant PF Commissioner Company Appeal (AT)(CH) N0.231 of 2021 dated 23.09.2022 held as follows:

• Therefore, taking benefit of the ratio of above discussions in `Godiwala Case’, this `Tribunal’ answers the aforesaid issue in the negative. Therefore, the `Resolution Professional’ is not duty bound to make adequate provisions for ‘Provident Fund’ when the `Corporate Debtor’ did not have separate `Provident Fund Account’. It is again reiterated that the `Resolution Professional’ has to deal with the `Claims’, if any, on this `account’, in terms of Section 53 of the I & B Code 2016, if warranted, and provided as per `Law’.

# 17. The amount payable to the workmen or employee has protection under section 36(4)(a)(iii) of IBC 2016, but the same cannot be extended to the interest and damages covered under sections 7Q and 14B of the Employees Provident Funds and Miscellaneous Provisions Act 1952, The applicant here claims a sum of Rs.19,05,030/- towards penalty and damages under sections 7Q and 14B of EPF Act 1952 these are the amount payable to the applicant department/organization, will not be paid to the workmen or employees hence this interest and damages comes under Government dues as defined under section 53 (1) (e) (i) of IBC 2016. The NCLT-Bengaluru in Shri Addanki Haresh Liquidator vs Recovery Officer, Employees Provident Fund organization, I.A.No.232 of 2022 in C.P.(IB) No.320/BB/2019 dated 20.07.2023, (2023) ibclaw.in 385 held that the damages levied by Respondent Organization under Section 14B of the EPF & MP Act 1952 which are dues of Government and will be paid in order of priority under Section 53 of IBC, 2016. In our case entire claim amount of Rs.19,05,030/- is covered under sections 7Q & 14B of the Employees Provident Funds and Miscellaneous Provisions Act 1952, payable to the organization hence section 36(4)(a)(iii) of IBC 2016 is not applicable, the same cannot be excluded from the liquidation estate.

# 18. In view of the answers arrived to the points, in consequence, this application is Dismissed.

# 19. The Registry is hereby directed to send e-mail copies of the order forthwith to all the parties and their counsel for information and for taking necessary steps. 

# 20. Let the certified copy of the order be issued upon compliance with requisite formalities.

# 21. File be consigned to records.

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Mr. Vijaykumar V. Iyer . Vs. Chowgule SBD Private Limited and Ors. - Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

NCLT Mumbai-1 (24.01.2023) In Mr. Vijaykumar V. Iyer . Vs. Chowgule SBD Private Limited and Ors.   [IA No. 1772/MB/C-I/2022 and  IA No. 167/MB/C-I/2022 and IA No. 2164/ MB/C-I/ 2021  In C.P (IB) No. 292/MB/C-I/2017 ] held that;

• From the above discussion, we hold that the respondent could  only initiate assessment or re-assessment of the duties and other levies.  They cannot transgress such boundary and proceed to initiate  recovery in violation of Sections 14 or 33(5) of the IBC.

• Once moratorium is imposed in terms of Sections 14 or 33(5) of the  IBC as the case may be, the respondent authority only has a limited  jurisdiction to assess/determine the quantum of customs duty and  other levies. The respondent authority does not have the power to  initiate recovery of dues by means of sale/confiscation, as provided  under the Customs Act.  

• After such assessment, the respondent authority has to submit its  claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods  prescribed under the IBC, before the adjudicating authority.  

• In any case, the IRP/RP/liquidator can immediately secure goods  from the respondent authority to be dealt with appropriately, in terms  of the IBC.

• The said sale consideration shall be distributed by the Liquidator in terms  of Section 53 of the Code. Further, as on the date of approval by the  Adjudicating Authority, all such claims which are not a part of statement  of claims, shall stand extinguished and no person will be entitled to  initiate or continue any proceedings in respect to a claim which is not a  part of the statement of claims.

Excerpts of the order; 

1. This Court convened through video conferencing.  

Backdrop of facts 

2. The Corporate Debtor was Liquidated vide Order dated 14.01.2019,  pursuant to which the Mr. Vijaykumar Iyer was appointed as the  Liquidator. The aforesaid Order was assailed before the Hon’ble  NCLAT wherein it was directed that the Liquidator must ensure that the  Corporate Debtor remains a going concern and conclude the process  under Section 230 of the Companies Act. Since, no compliant scheme  was received by the Liquidator, the Liquidator issued a public  announcement for submission of Expression of Interest issued in 6  newspapers.  

3. Accordingly, the Liquidator filed IA No. 3702 of 2019 for Liquidation of  the Corporate Debtor by sale of assets, collectively as a yard, in parcel of  assets, or each asset on standalone basis. This Tribunal passed an Order dated 18.12.2020 directing the Liquidator to take appropriate steps for  liquidation of the Corporate debtor, including sale of assets collectively  or in parcels or individually. 

4. It is submitted that in view of the Order dated 18.12.2020, the Liquidator  undertook all the measures to sell the Corporate Debtor as a going  concern basis, however, despite several rounds of e-auctions conducted  from time to time, the assets stored at the Leased Premises are yet to be  sold. 

5. The Order dated 18.12.2020 was challenged before the Hon’ble NCLAT  in three appeals being Company Appeal (AT)(Ins) 140 of 2021,  Company Appeal (AT)(Ins) 165 of 2021, Company Appeal (AT)(Ins)  243 of 2021 by various aggrieved parties. The said appeals were  dismissed by the common Order dated 08.12.2021 with directions to the  Liquidator to try and Liquidate the Corporate Debtor within 6 weeks  from date of the Judgment. 

IA 1772 of 2022 

Submissions made by the Applicant 

6. The reliefs sought by the Applicant are as follows: 

• i. Direction to the secured creditors to provide to the Bidder,  upon issuance of Sale Certificate by the  Liquidator/Applicant, all the necessary documents for release of charges including duly executed charge release  forms and to handover the originals of all title documents/  deeds that were deposited with them by the Corporate  Debtor or its shareholders in connection with the  Mangalore Shipyard Assets deleting all  encumbrances/charges mentioned in the assets secured to  them. 

• ii. Direction that, from the date of the Sale Certificate, all  encumbrances, attachments, liens, charges, security  interests, liabilities, claims and obligations in relation to the  Mangalore Shipyard Assets shall stand released irrevocably,  without any obligation on the Bidder and from the date of  Sale Certificate, the Mangalore Shipyard Assets shall vest  with the Bidder free from any security interest,  encumbrance, lien, attachment, claim, counter claim, or  charge whatsoever. 

• iii. Direction that, from the date of the sale certificate, any and  all the legal proceedings (including any show cause, notice,  adjudication proceedings, assessment proceedings,  regulatory orders etc.), arbitration or other legal, judicial,  regulatory or administrative proceedings, in relation to the Mangalore Shipyard Assets, initiated before any court,  tribunal or authority by or on behalf of any creditor or  governmental authorities, to enforce any rights or claims  against the company shall be withdrawn, abated, settled  and/ or extinguished with effect from the date of the Sale  Certificate and the Bidder shall no longer be required to  make any payments in relation to such  litigations/proceedings. Further direction to all the  stakeholders of the company (including creditors and  governmental authorities), for not pursuing such  litigations/ proceedings after the issuance of Sale Certificate  and withdrawing all existing litigations/proceedings,  wherever pending. 

• iv. Direction that, from the date of the sale certificate, all claims  by any government authority or department (including but  not limited to the customs department, Department of Ports and Inland Water Transport, Government of Karnataka)  pertaining to Mangalore Shipyard assets or any liabilities or  obligations owed or payable by the Company to any  government authority or department (including but not  limited to taxes, liabilities, interest, penalties, duties, etc.), whether direct or indirect, whether admitted or not, due or  contingent, asserted or un-asserted, crystallized or un crystallized, known or unknown, secured or unsecured,  disputed or undisputed, in relation to any period prior to the  date of Sale Certificate, shall stand permanently  extinguished and no such claim, liability etc. shall be  recoverable in any form or manner whatsoever from the  Bidder and the payment of Sale consideration by the Bidder  into the liquidation account is a full and final settlement by  the bidder towards such claims, liabilities etc. 

• v. Direction that, from the date of the sale certificate, all the  governmental and regulatory departments providing essential services to the Mangalore Shipyard Assets, such as  electricity, water, port authorities, etc. and all the critical  suppliers and vendors shall continue to give full support to  the Bidder without arm twisting the Bidder for any liabilities  of the Company Pertaining to the period prior to the date of  the sale certificate. 

• vi. Direction to the relevant governmental and regulatory  departments that the environmental clearances and the  electricity connection/permissions obtained for the Mangalore shipyard assets shall be transferred in the name  of the bidder without any demand for the liabilities of the  Company pertaining to the period prior to the date of the  sale certificate. 

• vii. Direction that, from the date of the Sale Certificate, the  Bidder shall be entitled to the benefit of Section 32A of the  Code and all the actions taken against the Mangalore  Shipyard Assets for an offence committed prior to the  commencement of its corporate insolvency resolution  process of the Company, shall cease and the Bidder shall not be prosecuted for such an offence. Further, no action  shall be taken or continued against the Mangalore Shipyard  Assets in relation to any offence committed prior to the  commencement of the corporate insolvency resolution  process of the Company. 

• viii. Direction to the Karnataka Maritime Board / Department  of Ports and Inland Water Transport, Government of  Karnataka, (i) that with effect from the Transfer Date, the  lease deed(s) for the Mangalore shipyard Land shall not be  terminated or cancelled on account of any non-compliance  or breach of the terms of the lease deed by the Company, pertaining to the period prior to the Transfer Date, and (ii)  that the leasehold rights in the Mangalore Shipyard land  shall be transferred to the Bidder with the lease rentals in  accordance with the Guidelines / Notifications framed by  the Government of Karnataka. 

• ix. Direction to the Customs Department, Mangalore that the  Mangalore Shipyard be de-bonded and custody /  attachment of the Confiscated Assets on account of  liabilities of Company pertaining to the period prior to the  Transfer Date, be released and the Bidder be allowed  peaceful possession of the Confiscated Assets. 

7. The Applicant submits he conducted multiple rounds of e auction  pertaining to sale of the Corporate Debtor as a going concern basis and  set of assets of the Corporate Debtor. The details of sale of parcel of assets  of the Corporate Debtor are as follows:

Date of Public   announcement	Date of e-auction	Description of Parcel  Sold
10.08.2021	06.09.2021	Kolkata Shipyard
21.09.2021	26.10.2021	Assets located at  Bhandarli and Ghodbunder yard
01.11.2021	24.11.2021	Assets located in Goa

8. The Applicant submits that the Order dated 18.12.2020 passed by this  Tribunal in IA No. 3702 of 2019 was challenged before the Hon’ble  NCLAT in Company Appeal (AT)(Ins) No. 140 of 2021, Company  Appeal (AT)(Ins) No. 165 of 2021, Company Appeal (AT)(Ins) No. 243  of 2021. The said Appeals were disposed off by the Appellate Tribunal  vide its Judgement dated 08.12.2021 while granting a total of 6 weeks to  the Applicant for sale of the Corporate Debtor as a going concern.  

9. The Applicant submits that no proposal was received for the acquisition  of the Corporate Debtor after expiration of 6 weeks. Hence, the  Applicant proceeded to conduct the liquidation process by way of private  sale of assets of the Corporate Debtor. 

10. Pursuant thereto, the Applicant proceeded with issuance of a public  announcement for conduct of private sale process on 09.02.2022.  However, on account of failure of the said round of private sale process,  the Applicant issued public announcement on 21.03.2022 for inviting  bids for the Corporate Debtor as a whole on going concern basis  (excluding parcels of assets of already sold) and for remaining shipyards  individually, including all the Corporate Debtor’s assets, rights and privileges and duties etc. associated with such shipyard in parcels i.e., the  Parcel 2 (Dabhol yard), Parcel 3 (Ratnagiri Yard) and Parcel 4  (Mangalore Yard).  

11. As per the EOI the interested bidders were required to submit the EOI  on or before 08.04.2022 and submit a binding and unconditional EMD  on or before 20.05.2022. The sale was to be governed in term of the  process document dated 21.03.2022. 

12. The Respondent No.1 herein submitted its EOI on 04.04.2022 along  with necessary documents as stipulated in the process document. The  Respondent No.1 was granted access to virtual data room.  

13. The Respondent submitted its bid on 20.05.2022 for the Parcel 4 assets  of the Corporate Debtor i.e. Mangalore Shipyard including leasehold  interest pertaining to leasehold land, sheds, warehouse and hull shops,  plant and machinery, inventory and other movable items on an ‘as is  where is basis’ (“Mangalore Shipyard Assets”). The said bid was  accompanied by the EMD by way of Bank Guarantee. 

14. The Applicant and the Private Sale Committee invited the Respondent  to present the details of its proposal before it on 23.05.2022, pursuant to  said presentation made before the private sale committee several rounds  of negotiations were undertaken with the Respondent whereby the  Respondent offered to submit its revised bid. It is noted that final bid was submitted by the Respondent on 08.06.2022  

15. The Liquidator, in consultation with and after seeking inputs from the  stakeholders, considered the bid dated 20.05.2022 and subsequently  amended and submitted on 08.06.2022, for an amount of  Rs.75,00,06,000/- (Rupees Seventy Five Crore and Six Thousand Only) towards purchase of Parcel 4 (the “Final Bid”). 

16. The Respondent was declared as the successful bidder as per the process  documents for Parcel 4 i.e. Mangalore Shipyard. Subsequently, the  Letter of Intent (“LOI”) was issued to the Respondent on 11.06.2022 for  successful acceptance of the bid for Parcel 4 of the assets of the Corporate  Debtor. The said LOI was accepted and counter signed by the  Respondent. 

17. In terms of the proposed payment schedule, the Respondent is now  required to infuse partial sale consideration of Rs.7,50,00,000/- (Rupees  Seven Crore Fifty Lakh Only) within a period of 30 days from the date  of issuance of LOI, into the escrow account. After, the Respondent has  taken all the necessary steps outlined in the Final Bid, the said sum of  Rs.7,50,00,000/- shall be transferred into the Liquidation Account and  the balance consideration of Rs.67,50,06,000/- into the Liquidation  Account. 

18. The Applicant submits that the Respondent has deposited Rs. 7,50,00,000/- out of the total sale consideration into the escrow account  as proposed in the Final Bid.

Submissions made by the Respondent No.1: 

19. At the outset, it is submitted that the Respondent supports the present  Application. The Respondent further submits that all the  reliefs/concessions/waivers sought in the Application are necessary for  effective sale and transfer of Mangalore Shipyard.  

20. The reliefs are sought by the Respondent for acquisition of the Parcel 4  of the Corporate Debtor on a clean slate basis.  

Submissions made by the Respondent No.2: 

21. It is submitted that Parcel 4 was sold to the Respondent No.1 on  04.04.2022 which is 15 months after the Order Terminating the lease was  issued by the Respondent No.3. The said Termination Order was  communicated on 15.01.2021. 

22. Further, it is contended that the present sale of Parcel 4 is a lot wise sale  and not sale as a going concern or business of the Corporate debtor being  sold as going concern. Hence, the Applicant’s averment of clean slate  basis is misplaced as the sale is on “as is where is basis”. 

23. Moreover, it is submitted that reliefs sought are merely to evade the  contractual liabilities, liabilities towards payment of insolvency  resolution costs and liquidation process costs and obligations towards 

Respondent No.2 and 4.  

24. Regulation 32 and Regulation 33 read with Schedule I (Mode of Sale),  clause 12 of Insolvency and Bankruptcy Board of India (Liquidation  Process) Regulations, 2016 lays down that a successful bidder to pay the  sale consideration within 90 days from being declared as the highest  bidder while any payment made after 30 days from such declaration up  to the period of 90 days shall attract 12% interest.  

25. We have considered the para-wise reply of Respondent No.2 to the reliefs  sought by the Respondent No.1 qua the sale of Parcel 4 i.e. Mangalore  Shipyard. 

IA 167 of 2022 

26. The Government of Karnataka vide Order No. PWD 16 PSP 2008, dated  10 May 2010 has sanctioned 20.94 acres of Port land for 30 years for the  construction of ship building yard at Mangalore Port Limits as per Sl.  No.7 of schedule F" at INR 15/- per 10 square meters per month, as per  the Rules ("Land B") (Land A and Land B are collectively referred to as  "Leased Premises"). While allotment of Land B was done, no lease deed  was entered into for Land B. It is pertinent to note that while the lease  agreement was not executed for Land B, the lease rent was paid for both  the land parcels A and B upto 2013 and for part of the CIRP period. 

27. After commencement of Liquidation, the Liquidator had issued public announcement on 19.01.2019 inviting creditors to file their claim within  30 days from liquidation commencement date.  

28. Accordingly, the Respondent No.2 herein filed its claim form dated  04.02.2019 with the Liquidator on 05.02.2019 to an extent of  Rs.21,03,55,543/- (Rupees Twenty-One Crore Three Lakh Fifty Five  Lakh and Five Hundred and Forty Three Only) towards lease rentals  under License No. 166 and 167. The Applicant vide its email dated  09.03.2019 had communicated to the Respondent No.2 inadequacies in  claim form and the proofs submitted. 

29. The Respondent has not provided the necessary proof to substantiate its  claim and hence the Liquidator is unable to verify the claim in full.  30. The Liquidator vide email dated 26.03.2019 addressed to the Respondent  No.2 stated that since the documents were not sufficient, claim to the  extent of Rs.11,05,95,499/- is admitted and the balance amount of  Rs.9,97,60,044/- has not been verified as the working calculation of rent  and penalty for both license number 166 and 167 was not provided to the  Liquidator with necessary documents. 

31. Further, the Respondent No.2 vide notice dated 14.10.2020 requested  the Applicant to admit the additional claim of Rs.9,97,60,044/-. The  Applicant on 13.01.2021 inter alia apprised the Respondent No.2 that  dues admitted prior to the Liquidation commencement date will be addressed in terms of Section 53 of the Code and the amount that become  due during the Liquidation period will be treated as CIRP costs and paid  in priority. 

32. The Respondent No.2 vide its letter dated 20.01.2021 (hereinafter  referred to as Impugned Notice) along with the Order passed by  Government of Karnataka cancelled the lease sanctioned with respect to  leased Premises, to the extent of 49.31acres with immediate effect for  non-payment of lease rent and the leased premises for not being utilized. 

33. Moreover, the Applicant also explained the provisions of Section 33(5)  of the Code stating that the section bars any suit or legal proceeding to  be instituted by or against the Corporate Debtor on account of  commencement of liquidation process. 

34. It is submitted that the institution of proceedings against the Corporate  Debtor by the Respondent No.1 during the pendency of Liquidation  period itself is not permissible as per Section 33(5) of the Code given the  moratorium. 

35. Accordingly, the present Application is filed by the Liquidator seeking  the following reliefs: 

• i. Set aside the Impugned Order dated i.e. order of Government of  Karnataka dated 14.12.2020. 

• ii. Set aside the impugned notice dated 20.01.2021 issued by the Respondent No.2 i.e. the Port Officer Mangalore Port. 

36. The Respondent No.2 submits that out of the entire claim of  Rs.18,88,22,584/- pertains to the CIRP and Liquidation period. The  Applicant has only released an amount of Rs.51,34,122/-. The  Respondent No.2 states that these due are outstanding since 01.05.2013. 

37. The Applicant has erred in rejecting the partial claim to the extent of  Rs.9,97,60,044/- on the ground of “without adequate details as  prescribed under the Liquidation Regulations”. The Respondent vide  emails dated 14.10.2020 and 01.06.2021 has provided the working  calculation of rent and penalty for both license numbers 166 and 167.  

38. The Respondent submits that it is well within its powers to terminate the  lease and evict the Applicant on clear failure to pay the dues in terms of  Section 53 of the Code 

IA. No. 2164 of 2021 

39. This Application filed by the Port Authority, Mangalore as a counter to  IA No. 167 of 2022 seeking directions against Liquidator and admission  of claim filed by the Port Authorities in its entirety and vacation of port  land in view of the Order dated 14.12.2020. In alternative, if the  occupation of port land is permitted then the Liquidator ought to release  the CIRP Costs and Liquidation Costs in terms of Section 53 of Code. 

Findings and Directions:  

40. We have perused records and heard the submissions made by the parties. 41. Considering the facts and submissions made in IA No. 1772 of 2022, IA  No. 167 of 2022 and IA No. 2164 of 2021, we note that land on which  Mangalore Shipyard is built was leased premises and owing to non - payment of lease rentals vide Order dated 14.12.2020 the said lease was  terminated. 

42. The Successful Bidder i.e. Chowgule SBD Private Limited submits that  the reliefs enumerated in clauses viii and ix in paragraph 6 hereinabove, are central for the purpose of reviving and restarting its operations for  shipbuilding work of the Port. Further, it is submitted that the  implementation of the bid is conditional upon the grant of above stated  reliefs under clause viii and ix. 

43. The Relief sought at clause viii pertains to transfer leasehold rights of the  Corporate Debtor to the Successful Bidder in Mangalore Shipyard Land.  The Liquidator has filed an Application bearing IA No. 167 of 2022  wherein he has challenged the Termination Order of Government of  Karnataka dated 14.12.2020 and Notice dated 20.01.2021. As a counter  to the aforesaid Application, the Port Officer, Mangalore Port has filed  an Application bearing IA. No. 2164 of 2022. 

44. The relief at clause ix relates to release of assets of the Corporate Debtor in the custody/attachment of the customs department, Mangalore by  way of confiscation.  

45. Considering the inter related facts and circumstances and in the interest  of maximization of the value of the stakeholders of the Corporate  Debtor, this bench vide Order 14.11.2022 had directed the Successful  Bidder and Ld. Counsel appearing for the Mangalore Port Trust to try  and arrive at an amicable solution.  

46. In view of the aforesaid direction, the Successful Bidder i.e. Chowgule  SBD Private Limited vide affidavit dated 28.11.2022 submits that it is  ready and willing to enter into a fresh lease deed with the Government  of Karnataka as per applicable rates under the “The Karnataka  Ports(Landing and Shipping Fees)(Amendment) Rules, 2022” and the  Mangalore Port Trust has vide affidavit dated 28.11.2022 stated that it  would extend necessary support and the fresh lease shall be in terms of  Karnataka Minor Port Land Allotment Guidelines-2020 and The  Karnataka Ports(Landing and Shipping Fees)(Amendment) Rules, 2022.  

47. The above stated affidavits are taken on record and the parties have  amongst themselves carved out a solution with respect to the aforesaid  issue of transfer of lease in favour of the Successful Bidder. Accordingly,  the relief claimed in Clause (viii) in paragraph 6 hereinabove is rendered  infructuous. 

48. As far as reliefs enumerated in clause (ix) is concerned the Hon’ble  Supreme Court in the matter of Sundaresh Bhatt, Liquidator of ABG  Shipyard vs Central Board of Indirect taxes and Customs has held as under: 

• “45. From the above discussion, we hold that the respondent could  only initiate assessment or re-assessment of the duties and other levies.  They cannot transgress such boundary and proceed to initiate  recovery in violation of Sections 14 or 33(5) of the IBC. The interim  resolution professional, resolution professional or the liquidator, as  the case may be, has an obligation to ensure that assessment is legal  and he has been provided with sufficient power to question any  assessment, if he finds the same to be excessive.  

• 54. On the basis of the above discussions, following are our  conclusions:  

• i. Once moratorium is imposed in terms of Sections 14 or 33(5) of the  IBC as the case may be, the respondent authority only has a limited  jurisdiction to assess/determine the quantum of customs duty and  other levies. The respondent authority does not have the power to  initiate recovery of dues by means of sale/confiscation, as provided  under the Customs Act.  

• ii. After such assessment, the respondent authority has to submit its  claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods  prescribed under the IBC, before the adjudicating authority.  

• iii. In any case, the IRP/RP/liquidator can immediately secure goods  from the respondent authority to be dealt with appropriately, in terms  of the IBC.” 

49. In view of the law laid down in the aforesaid Judgement we hereby direct  the customs department to release the confiscated assets of the Corporate  Debtor at Mangalore Shipyard.  

50. The LOI dated 11.06.2022 was issued to the Successful Bidder i.e.  Chowgule SBD Private Limited for “Category B-Parcel 4: Set of assets  pertaining to Mangalore Shipyard on ‘as is where is basis’, ‘as is what is’, ‘as is  how is’ and ‘without any recourse basis’, with financial proposal submitted for  INR 75,00,06,000/-.” It is evident that the said sale was in terms of  Regulation 32(d) of the Insolvency and Bankruptcy Board of India  (Liquidation Process) Regulations, 2016 which deals with sale of assets  in parcels.  

51. We note that the Successful Bidder i.e. Chowgule SBD Private Limited has deposited an amount of Rs.7,50,00,000/- out of the total bid amount  of Rs. 75,00,06,000/- (Rupees Seventy-Five Crore and Six Thousand  Only). The LOI was issued by the Liquidator on 11.06.2022. In terms of  Schedule 1 Clause 12 of the Liquidation Regulations, the highest bidder shall be invited to provide balance sale consideration within 90 days from  such demand and payments made after 30 days shall attract interest at  the rate of 12%. 

52. We direct the Successful Bidder to deposit the balance sale consideration  within 30 (Thirty) days from date of this order. Failure, if any on part of  the Successful Bidder to deposit the balance sale consideration within 30  days shall result in forfeiture of the EMD and cancellation of sale of the  Corporate Debtor. Further, the Successful Bidder shall be liable to  deposit the balance sale consideration along with 12% p.a. interest  onwards 11.07.2022 (after 30 days of date of issuance of demand letter  dated 11.06.2022) in accordance with Schedule 1 Regulation 12 of the  Liquidation Regulations. 

53. The said sale consideration shall be distributed by the Liquidator in terms  of Section 53 of the Code. Further, as on the date of approval by the  Adjudicating Authority, all such claims which are not a part of statement  of claims, shall stand extinguished and no person will be entitled to  initiate or continue any proceedings in respect to a claim which is not a  part of the statement of claims.  

54. For the sake of convenience, the reliefs sought are tabulated hereinbelow:

Sr. No.	Particulars of the reliefs and  concessions	Remarks
i.	Direction to the secured creditors  to provide to the Bidder, upon  issuance of Sale Certificate by the  Liquidator/Applicant, all the  necessary documents for release of  charges including duly executed  charge release forms and to  handover the originals of all title  documents/ deeds that were  deposited with them by the  Corporate Debtor or its  shareholders in connection with  the Mangalore Shipyard Assets  deleting all encumbrances/ charges  mentioned in the assets secured to  them.	Granted. The dues of  the creditors shall be  distributed in terms of  Section 53 of the Code  and hence the  liabilities shall stand  extinguished qua the  Mangalore Shipyard.  Consequently, upon  issuance of Sale  Certificate the  documents/ deeds shall be provided to the  bidder
ii.	Direction that, from the date of the  Sale Certificate, all encumbrances, attachments, liens, charges,  security interests, liabilities, claims  and obligations in relation to the  Mangalore Shipyard Assets shall  stand released irrevocably, without  any obligation on the Bidder and  from the date of Sale Certificate,  the Mangalore Shipyard Assets  shall vest with the Bidder free from  any security interest,  encumbrance, lien, attachment,  claim, counter claim, or charge  whatsoever.	Granted. Since the  applicant should not be saddled with the  liability prior to the  issue of sale certificate.
iii.	Direction that, from the date of the  sale certificate, any and all the  legal proceedings (including any  show cause, notice, adjudication  proceedings, assessment  proceedings, regulatory orders  etc.), arbitration or other legal, judicial, regulatory or  administrative proceedings, in  relation to the Mangalore  Shipyard Assets, initiated before  any court, tribunal or authority by  or on behalf of any creditor or  governmental authorities, to  enforce any rights or claims against  the company shall be withdrawn,  abated, settled and/ or  extinguished with effect from the  date of the Sale Certificate and the  Bidder shall no longer be required  to make any payments in relation  to such litigations/proceedings.  Further direction to all the  stakeholders of the company  (including creditors and  governmental authorities), for not  pursuing such litigations/ proceedings after the issuance of  Sale Certificate and withdrawing  all existing  litigations/proceedings, wherever  pending.	Granted. Since the  applicant should not  be saddled with the  liabilities prior to the  issue of sale certificate.
iv	Direction that, from the date of the  sale certificate, all claims by any  government authority or  department (including but not  limited to the customs department,  Department of Ports and Inland  Water Transport, Government of  Karnataka pertaining to  Mangalore Shipyard assets or any  liabilities or obligations owed or  payable by the Company to any  government authority or  department (including but not  limited to taxes, liabilities, interest,  penalties, duties, etc.), whether proceedings after the issuance of  Sale Certificate and withdrawing  all existing  litigations/proceedings, wherever  pending.direct or indirect, whether  admitted or not, due or contigent,  asserted or un-asserted,  crystallized or un-crystallized,  known or unknown, secured or  unsecured, disputed or  undisputed, in relation to any  period prior to the date of Sale  Certificate, shall stand  permanently extinguished and no  such claim, liability etc. shall be  recoverable in any form or manner  whatsoever from the Bidder and  the payment of Sale consideration  by the Bidder into the liquidation  account is a full and final  settlement by the bidder towards  such claims, liabilities etc.	Granted. The claims of  the creditors shall be  distributed in terms of  Section 53 of the Code.
v.	Direction that, from the date of the  sale certificate, all the governmental and regulatory  departments providing essential  services to the Mangalore  Shipyard Assets, such as  electricity, water, port authorities,  etc. and all the critical suppliers  and vendors shall continue to give  full support to the Bidder without  arm twisting the Bidder for any  liabilities of the Company  Pertaining to the period prior to  the date of the sale certificate	The Successful Bidder  can apply for grant of essentials services to  the relevant regulatory  authorities. The  regulatory authorities  may consider the  same.
vi.	Direction to the relevant  governmental and regulatory  departments that the  environmental clearances and the  electricity connection/permissions  obtained for the Mangalore  shipyard assets shall be transferred  in the name of the bidder without any demand for the liabilities of  the Company pertaining to the  period prior to the date of the sale  certificate	The Successful Bidder  can apply for grant of  essentials services to  the relevant regulatory  authorities. The  regulatory authorities  may consider the  same.
vii.	Direction that, from the date of the  Sale Certificate, the Bidder shall be  entitled to the benefit of Section  32A of the Code and all the actions  taken against the Mangalore  Shipyard Assets for an offence  committed prior to the  commencement of its corporate  insolvency resolution process of  the Company, shall cease and the  Bidder shall not be prosecuted for  such an offence. Further, no action  shall be taken or continued against  the Mangalore Shipyard Assets in  relation to any offence committed  prior to the commencement of the corporate insolvency resolution  process of the Company.	Section 32(1)A  pertains to waivers under Resolution Plan  and not Sale of Assets  under Liquidation  Proceedings. The  present Application is  for sale of assets in  parcels.
viii	Direction to the Karnataka  Maritime Board / Department of  Ports and Inland Water Transport,  Government of Karnataka (i) that  with effect from the Transfer Date,  the lease deed(s) for the Mangalore  shipyard Land shall not be  terminated or cancelled on account  of any non-compliance or breach  of the terms of the lease deed by the  Company, pertaining to the period  prior to the Transfer Date, and (ii)  that the leasehold rights in the  Mangalore Shipyard land shall be  transferred to the Bidder with the  lease rentals in accordance with the  Guidelines / Notifications framed  by the Government of Karnataka.	Rendered Infructuous  in view of settlement  arrived at by the  Successful Bidder and  Mangalore Port.
ix.	Direction to the Customs Department, Mangalore that the  Mangalore Shipyard be de-bonded  and custody / attachment of the  Confiscated Assets on account of  liabilities of Company pertaining  to the period prior to the Transfer  Date, be released and the Bidder be  allowed peaceful possession of the  Confiscated Assets.	Granted in view of law aid down by the  Hon’ble Apex Court in  Sundaresh Bhatt,  Liquidator of ABG  Shipyard vs Central  Board of Indirect taxes  and Customs.

55. With the aforesaid observation present IA No. 1772 of 2022 In C.P (IB)  No. 292/MB/C-I/2017 stands disposed of as allowed in above terms.  

56. In view of the understanding arrived at between the Successful Bidder  and the Mangalore Port Trust vide affidavits dated 28.11.2022 IA No.  167 of 2022 and IA No. 2164 of 2021 stands disposed of. 

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