IBC- SC Directs Already Deposited Amount Of Company To Be Appropriated Towards Settlement Dues Under Sabka Vishwas Scheme
The Supreme Court while deciding an appeal relating to the Insolvency and Bankruptcy Code Moratorium has directed that the payment of Rs. 1,24,28,500/- already deposited by the appellant company be appropriated towards the settlement dues under ‘Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019’.
The Court while allowing the appeal has also directed that the appellant be issued a discharge certificate for the same.
The two-Judge Bench comprising Justice M.R. Shah and Justice B.V. Nagarathna held, “The impugned judgment and order passed by the High Court is hereby quashed and set aside. It is directed that the payment of Rs.1,24,28,500/- already deposited by the appellant be appropriated towards settlement dues under “Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019” and the appellant be issued discharge certificate. Present appeal is allowed accordingly.”
The Bench asserted that the Allahabad High Court had erred in refusing to grant any relief to the appellant as prayed.
The Court further said, “… can the Court close its eyes and say that though there may be valid reasons and/or causes for that person’s inability to make the payment, still no relief can be granted to him? There may be extra ordinary cases which are required to be considered on facts of each case.”
The Apex Court also said that the Courts are meant to do justice and cannot compel a person to do something which was impossible for him to do.
Advocate Charanya Lakshmikumaran appeared on behalf of the appellant while Advocate Vikramjit Banerji represented the respondents.
The appellant company registered with the Service Tax Department was a company engaged in providing hospitality services. The Service Tax Department conducted investigations as to the evasion of service tax by the appellant and issued show-cause notices demanding payment of service tax. The proceedings under the Insolvency and Bankruptcy Code (Amendment) Act, 2021 (IBC) were initiated against the appellant.
The NCLT, Delhi vide order admitted the application filed by the Financial Creditors of the appellant. Under the 2019 Scheme, the appellant was required to make the payment within a time period of 30 days but in view of COVID-19, the time to make the payment was extended by the Government. The appellant approached the High Court by way of the petition but the same got dismissed.
The Supreme Court after hearing the contentions of both parties noted, “… the appellant was not in a position to deposit the settlement amount at the relevant time, more particularly on or before 30.06.2020 due to legal impediment and the bar to make the payment of settlement amount in view of the mortarium under the IBC … it is found that the appellant was otherwise entitled to the benefit under the Scheme as the Form No.1 submitted by the appellant has been accepted …”
The Court further observed that the appellant cannot be punished for not doing something which was impossible for it to do and even if the appellant wanted to deposit the settlement amount within the stipulated period, it could not do so in view of the bar under the IBC as, during the moratorium, no payment could have been made.
The Court also asserted, “… the appellant cannot be rendered remediless and should not be made to suffer due to a legal impediment which was the reason for it and/or not doing the act within the prescribed time. … The High Court while exercising the powers under Article 226 of the Constitution of India cannot extend the Scheme. However, in the present case it is not a case of extension of the Scheme by the High Court; It is a case of taking remedial measures.”
The Court said that it is a case where the appellant was unable to make the payment due to the legal impediment and the bar during the period of moratorium.
Accordingly, the Apex Court allowed the appeal.
Cause Title- M/s. Shekhar Resorts Limited (Unit Hotel Orient Taj) v. Union of India & Ors.