The Supreme Court has quashed two demand notices issued by the Chhattisgarh government against JSW Steel Limited (formerly JSW Ispat Special Products Limited), in a case related to insolvency.
The order was passed by the Bench of Justice BR Gavai and Justice AG Masih on a contempt petition filed by JSW Ispat Special Products Limited (now JSW Steel Limited).
The top court of the country quashed the demand notices issued by the State of Chhattisgarh on May 17, 2022 and December 9, 2022 to the tune of Rs 2,66,42094 under the Chhattisgarh Value Added Tax Act, 2005; Rs 1,08,25,666 under the Central Sales Tax Act,1956; and Rs 61,51,689/- under the Entry Tax Act, 1957.
As per the case, in 2017, insolvency proceedings were initiated against M/s Monnet Ispat & Energy Limited. The resolution plan was approved on July 24, 2018, declaring the petitioner as the successful resolution applicant.
The State of Chhattisgarh failed to file a claim when invited by the Insolvency Resolution Professional vide a public announcement dated July 27, 2017.
The petitioner primarily argued the presence of three essential ingredients of contempt.
The Bench acknowledged the presence of a valid and subsisting order – the judgment passed in Ghanshyam Mishra & Sons vs Edelweiss Asset Reconstruction Company & Ors, (2021) 9 SCC 657.
It observed that the findings were binding and operational on the officers of the Commercial Tax Department of the Government of Chhattisgarh.
It observed that despite knowledge of the Ghanashyam Mishra judgment by way of letters sent by the petitioner to the contemnors, the contemnors still issued demand notices to the petitioner for a period prior to approval of the resolution plan.
The Contemnors included Assistant Commissioner, Commercial Tax Department, Raipur – II, Additional Revenue Collector, Raipur and Assistant Commissioner Division – II, Commercial Tax Department, Raipur.
The High Court said there was willful disobedience of the verdict as the Contemnors had the knowledge of the judgment while issuing the Demand Notices.
Once a resolution plan was approved and the resolution applicant started on a clean slate, it could not be flung with surprise claims, noted the Bench.
It held that the act of the Contemnors was contemptuous in nature, however, no stern action would be taken against them in light of the unconditional apology tendered by the Contemnors to the petitioner, as directed by the Bench.
The Bench reiterated that once a resolution plan was approved, all claims in the resolution plan were deemed frozen and shall be binding on all stakeholders, including the government authorities.
All claims and dues, which were not part of Resolution Plan, shall stand extinguished and no one shall be entitled to initiate or continue any proceedings in relation thereto, it added.
In view of the above, the Apex Court held the demand notices issued by the Contemnors to be illegal and quashed & set aside the same.
It further disposed of the contempt plea after accepting the unconditional apology offered by the Contemnors.
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