A coram of Justice Ashok Bhushan (Chairperson), Shreesha Merla (Technical member) and Naresh Salecha (Technical Member) has held that non-payment of TDS by the Corporate Debtor is not a default and an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be admitted over the same.
The present Appeal was preferred by a ex director of the CD against the order of the Adjudicating Authority which admitted a Section 9 application filed by the Operational Creditor (OC).
The facts leading up to the Section 9 application were as such. The OC had preferred a Section 9 application, however the parties agreed to enter into a settlement. The Adjudicating Authority passed an order to the effect, that the application could be revived in the event of settlements talks failing. Subsequently, the CD and OC entered into certain settlements. The settlement explicitly conveyed that the amounts were inclusive of the TDS amount.
Subsequent to settlement amounts being paid by the CD, the OC prayed before the Adjudicating Authority revival of the Section 9 Application and the Adjudicating Authority passed an order asking the CD to indicate the details of the payment.
Consequently, via a supplementary affidavit the appellants conveyed the Adjudicating Authority that certain TDS amounts remained outstanding. Post this, the Adjudicating Authority admitted the Section 9 application and it is this order that the appeal has been preferred.
Observations and Decision:
The Tribunal observed that there was no event or scope of settlement talks between parties failing and thus the Adjudicating Authority could not have intervened and made an order approving the revival.
The only outstanding amount payable were the two TDS amounts. It was held that non-payment of the TDS amount by the CD was no occasion for admitting Section 9 application by the Adjudicating Authority. The appropriate authority for taking action against non-payment of TDS is provided under Income Tax Act, 1961 and is in the domain of income tax authorities. Therefore, the approval of Section 9 application was termed to be unsustainable and set aside.
Further, the tribunal clarified that the provisions of the IBC could not be used for giving effect to the recovery of TDS amounts. Appeal was allowed with a cost of Rupees One Lakh on the OC for misusing the process under IBC.
[Amitabh Roy v Master Development Management (India) Pvt. Ltd., 2022 SCC OnLine NCLAT 240, decided on 18-5-2022]
Advocates appearing before NCLAT:
For appellants: Mr Anand Sukumar, Mr Mainak Bose and Mr Bhupesh Kumar Pathak
for Respondent: Mr Ankur Rai