M/S. SHEKHAR RESORTS LIMITED (UNIT OF ORIENT TAJ) versus UNION OF INDIA on 5 January 2023

M/S. SHEKHAR RESORTS LIMITED (UNIT OF ORIENT TAJ)

v.

UNION OF INDIA

(Civil Appeal No.8957 of 2022)

JANUARY 05, 2023

[M. R. SHAH AND B.V. NAGARATHNA, JJ.]

Insolvency and Bankruptcy Code, 2016 : Deposit of settlementamount under the 2019 Scheme, during moratorium – Whenimpossible in view of the bar under the IBC – Appellant-corporatedebtor, if can be made to suffer for no fault of its own and renderedrememediless – On facts, applicationby financial creditor of theappellant u/s. 7 – Corporate Insolvency Resolution Process againstthe appellant – Appellant subjected to moratorium – Thereafter,Resolution plan approved and the appellant applied for “SabkaVishwas (Legacy Dispute Resolution) Scheme 2019 – Appellantcould not pay Rs 1,24,28,500/- as tax dues on the last day due tomoratorium imposed under IBC – Appellant sought extension oftime but the same was rejected – Writ petition by the appellant –Dismissed by the High Court holding that it cannot issue directionto the authority to accept the amount due and payable under theScheme, 2019; and that the Designated Committee under the schemeis not existing – On appeal, held: Under the provisions of the IBC,no payment could have been made during the period of moratorium– Thus, the appellant was statutorily restrained/debarred frommaking any payment – It was impossible for the appellant to makeany payment during the period of moratorium – In view thereof, theappellant cannot be punished for not doing something which wasimpossible for it to do – There was a legal impediment in the way ofthe appellant to make any payment during the moratorium –Appellant was otherwise entitled to the benefit under the Scheme –Thus, the High Court erred in refusing to grant any relief to theappellant , and the order passed by the High Court quashed andset aside – Sabka Vishwas (Legacy Dispute Resolution) Scheme,2019.

Allowing the appeal, the Court

HELD: 1.1 It would not be fair on the part of the Court togive a direction to do something which is impossible and if a

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Aperson has been directed to do something which is impossible,and if he fails to do so, he cannot be held guilty, the appellantcannot be punished for not doing something which was impossiblefor it to do. There was a legal impediment in the way of theappellant to make any payment during the moratorium. Even ifthe appellant wanted to deposit settlement amount within theBstipulated period, it could not do so in view of the bar under theIBC as, during the moratorium, no payment could have beenmade. In that view of the matter, the appellant cannot be renderedremediless and should not be made to suffer due to a legalimpediment which was the reason for it and/or not doing the actCwithin the prescribed time. [Para 7.3, 8][1120-H; 1121-A-C]

1.2 As regards, the observations made by the High Courtto the effect that the High Court cannot, in exercise of powersunder Article 226 of the Constitution of India extend the periodunder the Scheme, 2019, to some extent the High Court is right.DThe High Court while exercising the powers under Article 226of the Constitution of India cannot extend the Scheme. However,in the instant case it is not a case of extension of the Scheme bythe High Court. It is a case of taking remedial measures. It isnot a case where the appellant did not make any application withinEthe stipulated time under the Scheme. This is not a case wherethe Form No.3 determining the settlement amount was not issuedduring the validity of the Scheme. It is not a case where theappellant deliberately did not deposit the settlement amount and/or there was any negligence on the part of the appellant in notdepositing the settlement amount within the stipulated time. ItFis a case where the appellant was unable to make the paymentdue to the legal impediment and the bar to make the paymentduring the period of moratorium in view of the provisions of theIBC. There may be extra ordinary cases which are required tobe considered on facts of each case. The courts are meant to doGjustice and cannot compel a person to do something which wasimpossible for him to do. [Para 8.1][1121-D-F; 1122-A]

1.3. As regards, the ground given by the High Court, thatthe Designated Committees are not in existence, is concerned,it is required to be noted that the CBCE has issued a circularH

that in a case where the High Court/courts have passed an ordersetting aside the rejection of the claim under the Scheme after30.06.2020, the applications can be processed manually. In manycases the High Courts have remanded the matter to theDesignated Committees which consist of the officers of theDepartment and the applications thereafter are processedmanually. [Para 8.2]

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1.4 As the appellant was not in a position to deposit thesettlement amount at the relevant time, more particularly on orbefore 30.06.2020 due to legal impediment and the bar to makethe payment of settlement amount in view of the mortarium underthe IBC, and as it is found that the appellant was otherwise entitledto the benefit under the Scheme as the Form No.1 submitted bythe appellant has been accepted, the Form No.3 determining thesettlement amount has been issued, the High Court has erred inrefusing to grant any relief to the appellant as prayed. [Para9][1122-D-E]

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1.5 The impugned judgment and order passed by the HighCourt is quashed and set aside. It is directed that the payment ofRs.1,24,28,500/- already deposited by the appellant beappropriated towards settlement dues under “Sabka Vishwas(Legacy Dispute Resolution) Scheme, 2019” and the appellantbe issued discharge certificate. [Para 10][1122-F]

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Sunil Vasudeva vs. Sundar Gupta (2019) 17 SCC 385 :[2019] 8 SCR 1190;Calcutta Iron MerchantsAssociation vs. Commissioner of Commercial Taxes(1997) 8 SCC 42;Gyanichand vs. State of AndhraPradesh (2016) 15 SCC 164 – relied on.

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Case Law Reference

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ACIVIL APPELLATE JURISDICTION : Civil Appeal No.8957of 2022.

From the Judgment and Order dated 24.06.2021 of the High Courtof Judicature at Allahabad in Writ Tax No.328 of 2021.

BMs. Charanya Lakshmikumaran, Ms. Apeksha Mehta, Ms.Mounica Kasturi, Pranav Mundra, Karan Sachdev, Advs. for theAppellant.

Vikramjit Banerji, ASG, M.K.Maroria, Ms. Niranjana Singh,Nachiketa Joshi, Rajan Kumar Choursia, Mohd Akhil, P.V. Yogeswaran,CSiddhartha Sinha, Shivam Singhania, Raman Yadav, Advs. for theRespondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.D

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 24.06.2021 passed by the High Court of Judicature atAllahabad in Writ Tax No.328 of 2021 by which the High Court hasdismissed the said writ petition preferred by the appellant herein seekingdirection to the respondents for consideration of the case of the petitionerEunder the scheme “Sabka Vishwas (Legacy Dispute Resolution) Scheme,2019” (hereinafter referred to as the “Scheme of 2019”), the originalwrit petitioner has preferred the present appeal.

2. The facts leading to the present appeal in nutshell are as under:

FThat the appellant – company registered with the Service TaxDepartment was a company engaged in providing hospitality services.The Service Tax Department conducted investigations as to the evasionof service tax by the appellant and issued show cause notices demandingpayment of service tax under various categories such as Accommodationin Hotels, Inn, Guest House, Restaurant Services, Mandap KeeperGservices etc.

2.1 Proceedings under the Insolvency and Bankruptcy Code,2016 (hereinafter referred to as “IBC”) were initiated against theappellant – Company. The NCLT, Delhi vide order dated H

11.09.2018 admitted the application filed by the Financial Creditors ofthe appellant under Section 7 of the IBC. Thus, on and from 11.09.2018the corporate insolvency resolution process against the appellantcommenced and the appellant was subjected to moratorium under Section14 of the IBC on and from 11.09.2018. The Committee of Creditorsconstituted as per the provisions of the IBC, in its 15[th ]meeting,unanimously approved the resolution plan submitted by NCJ InfrastructurePrivate Limited on 04.06.2019. That thereafter the Scheme of 2019 cameto be introduced on 01.09.2019 under Section 125 of the Finance Act,2019 for availing the benefit of “Sabka Vishwas (Legacy DisputeResolution) Scheme, 2019”. The appellant acting through its Resolutionprofessional submitted an application within the period prescribed underthe Scheme 2019. The applicant – company was issued Form No.1 on27.12.2019. At this stage, it is required to be noted that the last date formaking the application under the Scheme 2019 was 31.12.2019. Thus,Form No.1 was issued within the prescribed time limit and the tax dueswere computed by the appellant as per the Scheme, 2019. That thereafterForm No.3 was issued by the Designated Committee on 25.02.2020determining the amount due and payable under the Scheme by theappellant. It appears that as per the said statement for payment of taxdues, the appellant was required to pay Rs.1,24,28,500/-. Under theScheme the appellant/assessee was required to make the payment asper Form No. 3 within a time period of 30 days. However, in view of theCOVID-19 Pandemic, the time to make the payment was extended bythe Government upto 30.06.2020.

2.2 That the NCLT approved the Resolution Plan of the successfulResolution applicant - NCJ Infrastructure Private Limited vide orderdated 24.07.2020. Thus, on approval of the Resolution Plan by the NCLTthe moratorium period came to an end, with the closure of the insolvencyproceedings on 24.07.2020. Subsequent to the acceptance of theResolution Plan by the NCLT, the appellant wrote to the successfulresolution applicant and the Commissioner, CGST and Central Excise,Agra intimating them that the resolution process under the IBC hadcome to an end and that the appellant is ready and willing to make fullamount of Rs.1,24,28,500/- as ascertained by the Designated Committeein Form No.3. Vide communication dated 09.10.2020 to the AssistantCommissioner, the appellant explained that the settlement amount underthe Scheme, 2019 could not be paid by the appellant before 30.06.2020due to the legal moratorium imposed upon the company and sought A

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Apermission to pay the due amount. The Joint Commissioner, Agra videletter dated 19.10.2020 intimated the appellant that the last date forpayment under the Scheme was 30.06.2020, which could not be extended.Consequently, the request of the appellant was rejected. Since theappellant could not obtain permission for payment of the dues post thelifting of the moratorium, the appellant approached the High Court byBway of Writ Tax No.328 of 2021. By the impugned judgment and orderthe High Court has dismissed the said writ petition on the grounds that(i) the High Court shall not issue a direction contrary to the Scheme; (ii)the relief sought cannot be granted as the Designated Committee underthe Scheme is not existing.C2.3 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court, the original writ petitioner – appellanthas preferred the present appeal.

3. Ms. Charanya Lakshmikumaran, learned counsel appearing onbehalf of the appellant has vehemently submitted that in the facts andDcircumstances of the case the Hon’ble High Court has seriously erred indismissing the writ petition and not directing the authority to accept theamount due and payable under the Scheme, 2019.

3.1 It is submitted that the Hon’ble High Court has erred in holdingthat the Designated Committee does not exist. It is submitted that theEDesignated Committee under the Scheme was formed as per Rule 5 ofthe Scheme, 2019. The Designated Committee consists of either thePrincipal Commissioners, Commissioners, Additional Commissioners,Joint Commissioners or Deputy Commissioners of the Central Exciseand Service Tax depending on the tax amount involved in the matter. ItFis submitted that in the present case, the Designated Committeecomprised of the Joint Commissioner and the Commissioner who areofficers associated with the offices of Respondent nos.3 and 4. That theDesignated Officers continue to act as the Designated Committee underthe Scheme till the completion of the proceedings under the Scheme.

G3.2 It is submitted that the Designated Committee under theScheme is being constituted on a need basis to comply with the orders ofthe courts across the country. That in many cases the DesignatedCommittee rejected the applications under the Scheme, 2019 erroneouslyand the different courts set aside the decisions of the DesignatedCommittee after 30.06.2020 and directed the Designated Committee toH

consider the case of the respective applicants under the Scheme, 2019.It is submitted that to reconsider the cases pursuant to the orders passedby the courts/High Courts, the CBEC issued the instructions dated17.03.2021 allowing for manual processing of declarations under theScheme by the respective Designated Committees. It is submitted thattherefore even after 30.06.2020 the respective Designated Committeescarried out their functions under the Scheme, however by manualprocessing. It is submitted that therefore the reasoning given by theHon’ble High Court that the Designated Committees are not in existenceafter 30.06.2020 and therefore the appellant is not entitled to any relief,may not be accepted, as even after 30.06.2020 and even as per theinstructions issued by the CBEC, the respective Designated Committeescontinued to function and process the declarations manually.

3.3 It is further submitted by learned counsel appearing on behalfof the appellant that in the instant case the Hon’ble High Court has notproperly appreciated the cause for which the appellant could not depositthe amount under the Scheme 2019 on or before 30.06.2020. It issubmitted that at the relevant time and more particularly at the timewhen the Form No.3 was issued and even during the period under theScheme 2019, the appellant was subjected to the rigor of the provisionsof the IBC by virtue of the moratorium period which ended on 24.07.2020when the NCLT approved the Resolution Plan. It is submitted that in theinstant case, the appellant bonafidely could not deposit the settlementdue, on or before 30.06.2020 on account of operation of law. It is nextsubmitted that during the moratorium period, no payment could havebeen made as per the provisions of the IBC. It is contended that if anypayment would have been made during the mortarium period the samewould have been in breach of the provisions of the IBC. It is submittedthat as per the Resolution Plan accepted during the insolvencyproceedings, the Resolution Applicant was required to deposit all statutorydues (including service tax dues) within 6 months from the effectivedate into an escrow account. That as per the Resolution Plan, paymentto escrow account shall be treated as effective payment to the relevantOperational Creditors. It is further contended that in this case, effectivedate is 24.07.2020, the date on which the Resolution Plan was approvedby the NCLT. So, Service Tax dues along with other statutory dueswere deposited in an escrow account on 08.01.2021 before the expiryof the period of six months. It is accrued that this Hon’ble Court in thecase of Principal Commissioner of Income Tax vs. Monnet Ispat A

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A& Energy Ltd., (2018) 18 SCC 786 has held that once a moratoriumhas been enforced, any existing proceeding against the debtor shall standprohibited. In this regard, it is submitted that the IBC shall haveprecedence over any inconsistent statutes.

3.4 It is vehemently submitted that in any case, no person can beBleft remediless due to operation of law. That in the present case, themoratorium period under the IBC was extended from 11.09.2018 to24.07.2020 due to the COVID-19 pandemic and non-functioning of theNCLT. It is contended that even otherwise, the appellant could not havemade any payment during the mortarium period by operation of law andinability to make the payment was owning to the moratorium imposedCunder the provisions of the IBC. It is urged that therefore, the appellantmay not be left remediless when the application under the Scheme 2019was submitted and processed within time. In support of her abovesubmissions and the relief prayed, learned counsel appearing on behalfof the appellant has heavily relied upon the decisions of this Court in the Dcase of Sunil Vasudeva vs. Sundar Gupta, (2019) 17 SCC 385 (para31), United Air Travel Services vs. Union of India, (2018) 8 SCC141 (para 13) and Union of India vs. Asish Agarwak, (2022) SCCOnline SC 543 (para 23).

3.5 It is reiterated submitted that the appellant could not make theEpayment due to legal disability and no one can be expected to do theimpossible. Reliance is placed on the decisions of this Court in the caseof Gyanichand vs. State of Andhra Pradesh, (2016) 15 SCC 164(para 11) and Calcutta Iron Merchants Association vs.Commissioner of Commercial Taxes, (1997) 8 SCC 42 (para 5).

F3.6 It is submitted that the appellant cannot be prejudiced and/ormade to suffer for no fault of the appellant. Reliance is placed on thedecision of this Court in Anmol Kumar Tiwari & Ors. vs. State ofJharkhand reported in (2021) 5 SCC 424.

Making the above submissions it is prayed to allow the presentGappeal and direct the respondents to appropriate the payment ofRs.1,24,28,500/- towards settlement dues under the Scheme 2019 andthat discharge certificate be issued to the appellant accordingly.

4. While opposing the present appeal, Shri Vikramjit Banerji,learned ASG appearing on behalf of the Union of India has vehementlysubmitted that in the facts and circumstances of the case no error hasH

been committed by the Hon’ble High Court in dismissing the writ petitionand refusing to direct the respondents to accept the payment towardsthe settlement dues under the Scheme, 2019.

4.1 It is submitted that admittedly the Scheme was valid upto30.06.2020 and the last date for payment of settlement amount underthe Scheme, 2019 was 30.06.2020. That thereafter the Scheme wasclosed and even the Designated Committees were also dissolved andtherefore as rightly observed by the Hon’ble High Court, the Hon’bleHigh Court has no jurisdiction to extend the Scheme. It is submitted thatif the Scheme is extended it would create many complications.

4.2 It is further submitted that in the present case, admittedly, nopayment was made of settlement amount under the Scheme prior to30.06.2020 and therefore, the prayer of the original petitioner to extendthe time limit to make the payment of settlement amount under theScheme, 2019 was rightly rejected by the Commissioner and the samehas rightly not been interfered with by the Hon’ble High Court.

Making above submissions it is prayed to dismiss the presentappeal.

5. We have heard the learned counsel appearing for the respectiveparties at length.

6. At the outset, it is required to be noted and it is not in disputethat the appellant is entitled to the benefit of the settlement under theScheme, 2019. The Scheme, 2019 came to be introduced on 01.09.2019and the last date for making the application under the Scheme was30.12.2019 and in fact, the appellant submitted the application in FormNo.1 on 27.12.2019 i.e. before the last date specified for making anapplication. Under the Scheme, after the Form No.1 is processed theDesignated Committee was to scrutinize the same and issue the FinalForm No.3 determining the settlement amount which the applicant wasrequired to deposit within a period of one month from the date of receiptof the final determination – Form No.3. That the appellant was issuedthe Form No.3 on 25.02.2020 and was required to pay the settlementdues on or before 25.03.2020. However, in view of the COVID-19Pandemic the Government extended the time upto 30.06.2020. Therefore,the appellant was required to deposit the settlement dues on or before30.06.2020. However, even before the Scheme, 2019 came to beintroduced, the appellant was subjected to proceedings under the IBC

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Awhich commenced on 11.09.2018 when the NCLT admitted the applicationunder Section 7 of the IBC. Thus, the moratorium under the IBCcommenced on 11.09.2018. The CoC approved the Resolution Plan on04.06.2019, and the same came to be approved by the NCLT by Orderdated 24.07.2020. Therefore, the moratorium under the IBC continued upto 24.07.2020. Under the provisions of the IBC no payment couldBhave been made during the period of moratorium. Therefore, the appellantwas statutorily restrained/debarred from making any payment. Therewas statutory disability on the part of the appellant in making the paymentduring the moratorium. If the appellant had made any payment duringthe period of moratorium, the appellant would have committed breach ofCthe provisions of the IBC. Therefore, it was impossible for the appellantto make any payment during the period of moratorium. Immediately onthe moratorium coming to an end, the appellant – Resolution Professional/ the successful Resolution applicant approached the authority requestingthem to accept the settlement amount under the Scheme, 2019 as perthe Form No.3. Such request has been rejected by the Commissioner onDthe rejection has been confirmed by the High Court.

7. Therefore, the short question which is posed for considerationbefore this Court is, whether, when it was impossible for the appellantto deposit the settlement amount in view of the bar and/or the restrictionsunder the IBC, the appellant can be punished for no fault of the appellant?EIn a given case can the appellant be made to suffer for no fault of itsown, and be rendered remediless and denied the benefit/relief though itwas impossible for the appellant to carry out certain acts, namely todeposit the settlement amount during the moratorium.

7.1 As per the settled position of law, no party shall be left remedilessFand whatever the grievance the parties had raised before the court oflaw, has to be examined on its own merits [Sunil Vasudeva (supra) (para31)].

7.2 As observed and held by this Court in the case of CalcuttaIron Merchants’ Association (supra), no law would compel a person toGdo the impossible. [Calcutta Iron Merchants’ Association (supra) (para5)]

7.3 In the case of Gyanichand (supra) it was observed by thisCourt that it would not be fair on the part of the Court to give a directionto do something which is impossible and if a person has been directed toH

do something which is impossible, and if he fails to do so, he cannot beheld guilty.

8. Applying the law laid down by this Court in the aforesaiddecisions to the facts of the case on hand, the appellant cannot bepunished for not doing something which was impossible for it to do.There was a legal impediment in the way of the appellant to make anypayment during the moratorium. Even if the appellant wanted to depositsettlement amount within the stipulated period, it could not do so in viewof the bar under the IBC as, during the moratorium, no payment couldhave been made. In that view of the matter, the appellant cannot berendered remediless and should not be made to suffer due to a legalimpediment which was the reason for it and/or not doing the act withinthe prescribed time.

8.1 Now so far as the observations made by the High Court to theeffect that the High Court cannot, in exercise of powers under Article226 of the Constitution of India extend the period under the Scheme,2019, to some extent the High Court is right. The High Court whileexercising the powers under Article 226 of the Constitution of Indiacannot extend the Scheme. However, in the present case it is not a caseof extension of the Scheme by the High Court; It is a case of takingremedial measures. It is not a case where the appellant did not makeany application within the stipulated time under the Scheme. This is nota case where the Form No.3 determining the settlement amount wasnot issued during the validity of the Scheme. It is not a case where theappellant deliberately did not deposit the settlement amount and/or therewas any negligence on the part of the appellant in not depositing thesettlement amount within the stipulated time. As observed hereinaboveit is a case where the appellant was unable to make the payment due tothe legal impediment and the bar to make the payment during the periodof moratorium in view of the provisions of the IBC. In a given case itmay happen that a person who has applied under the Scheme and whowas supposed to make payment on or before 30.06.2020, becameseriously ill on 29.06.2020 and there was nobody to look after his affairsand therefore he could not deposit the amount; such inability was beyondhis control and thereafter, immediately on getting out of sickness he triedto deposit the amount and/or approached the Court - can the Court closeits eyes and say that though there may be valid reasons and/or causesfor that person’s inability to make the payment, still no relief can be A

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Agranted to him? There may be extra ordinary cases which are requiredto be considered on facts of each case. The Courts are meant to dojustice and cannot compel a person to do something which was impossiblefor him to do.

8.2 Now so far as the other ground given by the High Court, thatBthe Designated Committees are not in existence, is concerned, it isrequired to be noted that the CBCE has issued a circular that in a casewhere the High Court/courts have passed an order setting aside therejection of the claim under the Scheme after 30.06.2020, the applicationscan be processed manually. In many cases the High Courts haveremanded the matter to the Designated Committees which consist ofCthe officers of the Department and the applications thereafter areprocessed manually.

9. In view of the above, and under the circumstances and for thereasons stated above, as the appellant was not in a position to depositthe settlement amount at the relevant time, more particularly on or beforeD30.06.2020 due to legal impediment and the bar to make the payment ofsettlement amount in view of the mortarium under the IBC, and as it isfound that the appellant was otherwise entitled to the benefit under theScheme as the Form No.1 submitted by the appellant has been accepted,the Form No.3 determining the settlement amount has been issued, theEHigh Court has erred in refusing to grant any relief to the appellant asprayed.

10. In view of the above and for the reasons stated above, thepresent appeal is allowed. The impugned judgment and order passed bythe High Court is hereby quashed and set aside. It is directed that theFpayment of Rs.1,24,28,500/- already deposited by the appellant beappropriated towards settlement dues under “Sabka Vishwas (LegacyDispute Resolution) Scheme, 2019” and the appellant be issued dischargecertificate. Present appeal is allowed accordingly.

However, in the facts and circumstances of the case there shallbe no order as to costs.G

Nidhi Jain

(Assisted by : Abhishek Pratap Singh and Shashwat Jain, LCRAs)

Appeal allowed.

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