Validity Of Telangana VAT Attachment Pending In HC Cannot Be Decided In CIRP: NCLT Hyderabad

The observations were made by a bench of Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri while deciding an application filed by the resolution professional of Kobo Biotech Ltd seeking removal of attachment over the corporate debtor's property.

“The question whether such attachment, founded upon a statutory first charge and sovereign recovery powers, stands eclipsed or overridden by subsequent initiation of CIRP, necessarily involves examination of the validity and effect of action taken under the TVAT Act, an issue squarely within the domain of the Hon'ble High Court where the matter is pending.”, the bench observed.

Kobo Biotech had been admitted into CIRP on August 13, 2024. The resolution professional contended that the attachment created by the Sales Tax Department under the TVAT Act was hindering the CIRP and should be lifted in view of the moratorium under Section 14 of the Insolvency and Bankruptcy Code.

The attachment in question had been imposed on February 21, 2015 for recovery of tax dues amounting to Rs. 74.75 crore under the APGST, AP VAT and TVAT regimes. The validity of this attachment was already under challenge before the Telangana high court in a writ petition filed in 2018, where a status quo order dated August 24, 2018 was in operation.

The tribunal observed that the question whether such attachment, founded on statutory first charge and sovereign recovery powers under the TVAT Act, stands overridden by CIRP would require examination of the legality of the attachment itself.

Holding that such issues fall within the domain of the High Court where the matter is pending, the tribunal declined to exercise its jurisdiction under the IBC.

The tribunal held the application to be not maintainable and granted liberty to the resolution professional to seek appropriate relief before the Telangana high court.

For Applicant: Advocate Mano Ranjani

For Respondents: Advocate Anvesh Reddy