IBC| “No law would compel a person to do the impossible”, Supreme Court upholds validity of the moratorium period which debarred the appellant from making settlement payment.


Supreme Court: The petitioner challenged the order passed by the Allahabad High Court which had dismissed the writ petition seeking directions to the respondent for consideration of the case of the petitioner under the scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme,2019 (‘2019 scheme'), the division bench of *M.R. Shah and B.V. Nagarathna, J.J., set aside the impugned order while stating that the Allahabad High Court had erred in refusing to grant relief to the appellant, and directed the payment already deposited by the appellant be appropriated towards settlement under 2019 scheme while issuing discharge certificate.

In September 2018, Corporate Insolvency Resolution Process (‘CIRP') was initiated against the appellant wherein unanimously approved resolution plan was submitted, which was eventually accepted by National Company Law Tribunal (‘NCLT').

Subsequently, the 2019 scheme was introduced under Section 125 of the Finance Act, 2019 under which the appellant was required to pay ‘due tax' within 20 days, but due Covid-19 Pandemic, the Government had extended the time for the same. Approval of the resolution plan by NCLT made the moratorium period come to an end, with the closure of the CIRP.

The appellant had applied to avail benefit of 2019 scheme within the prescribed time limit, however, the settlement amount under the 2019 scheme could not be paid due to ‘moratorium period' imposed upon the appellant. Thereafter, the Joint Commissioner, Agra, rejected the request of the appellant stating expiry of the last date for submission.

Therefore, appellant had approached Allahabad High Court which had dismissed the writ petition on the grounds that it could not issue direction contrary to the scheme and the fact that the Designated Committe under the 2019 scheme did not exist anymore.


Whether the appellant be punished for being unable to settle the deposit amount, due to its debarment under the provision of Insolvency and Bankruptcy Code, 2016?

Court Analysis

The Court noted that the appellant had timely submitted the application to avail the benefit of the 2019 scheme before the expiry of the last date.

The Court stated that the appellant was statutorily restrained/debarred from making payment under the provisions of IBC which prevented him from making the payment during the moratorium period. The appellant had duly approached the authority requesting them to accept the settlement amount under the 2019 scheme as soon as the moratorium period had ended which had been rejected by the Commissioner and confirmed by the Allahabad High Court.

The Court stated that no party should be left remediless and whatever the grievance the parties had raised before the court of law had to be examined on its own merits. No law would compel a person to do the impossible.

“There was a legal impediment in the way of the appellant to make any payment during the moratorium. Even if the appellant wanted to deposit 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.” observed the Supreme Court

While commenting on the observation of the Allahabad High Court to the effect that it cannot extend the period under the 2019 Scheme while exercising the powers under Article 226 of the Constitution, the Court held that the present case was not a case of extension of the 2019 Scheme but was a case of taking remedial measures.

Further stated that it was neither a case where the appellant did not make any application within the stipulated time under the 2019 Scheme nor where the appellant deliberately did not deposit the settlement amount. It was duly a case where the appellant was unable to make the payment due to the legal impediment and the bar to make the payment during the period of moratorium in view of the provisions of the IBC. Moreover, even if the Designated Committees were not in existence, the application could have been processed manually

Thus, while setting aside the impugned order of the Allahabad High Court, the Court stated that it had erred in refusing to grant relief to the appellant and directed the payment already deposited by the appellant be appropriated towards settlement under the 2019 scheme while issuing discharge certificate.

[Shekhar Resorts Limited v Union of India, 2023 SCC OnLine SC 11, decided on 05-01-2023]

*Judgment by Justice M.R. Shah

Know Thy Judge | Justice M. R. Shah

Advocates who appeared in this case :

For the appellant- Advocate Charanya Lakshmikumaran

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