Garden Silk Mills LTD. vs. Union Of INDIA

Facts

The petitioner, Garden Silk Mills Ltd., filed a writ application challenging an order dated 18.01.2017 passed by the Commissioner of Central Excise, Surat-1. This order confirmed a demand, which the petitioner argued was time-barred and ignored a previous order dated 05.02.1998 by the Commissioner (Appeals) holding the petitioner eligible for exemption under Notification No.8/96. The petitioner had previously paid duty under protest and had refund claims rejected. The Commissioner (Appeals) had allowed an appeal and remanded the matter for adjudication on entitlement to exemption. Subsequent orders from the Deputy Commissioner and another appeal to the Commissioner (Appeals) also favoured the petitioner, with the Appellate Tribunal remanding the matter for joint adjudication. During the pendency of the writ petition, the National Company Law Tribunal (NCLT) approved a resolution plan for the petitioner company, declaring it insolvent. The petitioner filed a Civil Application seeking the petition to be treated as abated and infructuous due to this NCLT order.

Held

The Court held that the writ petition is rendered infructuous, nonest, and abated. This decision is based on the NCLT's approval of the resolution plan for the petitioner company under Section 31(1) of the Insolvency and Bankruptcy Code, 2016. The Court relied on the Supreme Court's judgment in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd., which clarified that upon approval of a resolution plan by the NCLT, claims not part of the plan stand extinguished, and related proceedings are terminated. The Court noted that the Revenue Department sought liberty to invoke Section 61 of the Insolvency and Bankruptcy Code, 2016, to file an appeal against the NCLT's order if required. The Court explicitly stated that it had not expressed any opinion on the merits of the case. The operative direction is to dispose of the writ application as abated and infructuous, with liberty reserved for the revenue department to file appropriate proceedings under Section 61 of the Code.

Key Issues

1. Whether the writ petition is rendered infructuous, nonest, and abated in light of the National Company Law Tribunal's (NCLT) approval of a resolution plan for the petitioner company, declaring it insolvent, as per Section 31(1) of the Insolvency and Bankruptcy Code, 2016? Petitioner's arguments: The petitioner contended that the NCLT's approval of the resolution plan, which declared the company insolvent, renders the ongoing writ proceedings concerning tax demands abated and infructuous. They relied on the Supreme Court's decision in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. regarding the extinguishment of claims not part of the resolution plan. Revenue's arguments: The Revenue Department, represented by Mr. Dhaval Vyas, did not contest the abatement of the writ petition but sought liberty to invoke Section 61 of the Insolvency and Bankruptcy Code, 2016, to file an appeal against the NCLT's resolution plan approval if necessary.