Statutory Charge Cannot Be Waived By Marking 'N.A.' Against Security Interest In CIRP Claim Form: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has held that where a statute creates a charge, it cannot be treated as waived merely because a statutory authority marked “N.A.” against security interest in the prescribed insolvency claim form, unless the statute itself permits such waiver.

Partly allowing an appeal by the Assistant Commissioner of State Tax, Vapi, in the CIRP of Vinergy International Pvt Ltd, the tribunal held that Gujarat VAT dues must be treated as the claim of a secured operational creditor, though the same benefit would not extend to the CST component.

A bench of Judicial Member Justice N. Seshasayee and Technical Members Arun Baroka and Indevar Pandey held, “Where a statute creates a charge, then it is not left to the choice of the statutory authorities to waive it, unless the statute itself grants them the authority to waive.”

The bench added, “Therefore, it cannot be said that when the appellant had made its claim in Form B and notifying to the resolution professional that it does not have a security interest over the asset of the CD, it may not amount to waiver, even though every statutory authority presumed to have knowledge about the law that it administers. ”

The ruling came in an appeal against the December 9, 2024 order of the Mumbai bench of the National Company Law Tribunal, which had approved the resolution plan for Vinergy International Pvt. Ltd.

The resolution professional had treated the State Tax Department as an operational creditor based on its claim form, in which it marked “N.A.” against the column requiring disclosure of security interest.

Vinergy was admitted into the corporate insolvency resolution process on February 9, 2023. Before commencement of CIRP, the tax department had issued a notice under Section 44 of the Gujarat Value Added Tax Act creating a lien over the corporate debtor's bank account for outstanding dues.

Following the commencement of CIRP, the State Tax Department lodged a claim in Form B for ₹15.65 crore towards VAT, CST and interest, which the interim resolution professional admitted in full.

But in the column requiring details of any security interest, the department marked “N.A.” It later changed tack. On January 5, 2024, it wrote to the resolution professional asserting that, in light of the Supreme Court's rulings in State Tax Officer v Rainbow Papers and the review judgment, it ought to be treated as a secured operational creditor.

The resolution professional and the successful resolution applicant opposed the claim, pointing out that the department had itself indicated in Form B that no security interest applied. Having taken that position, they argued, it could not later seek a different classification.

They also said the department never objected when the resolution plan came up before the NCLT for approval, and was therefore barred from raising the issue in appeal.

They further contended that even if the statutory charge argument succeeded, it could apply only to VAT dues and not CST dues, since the Central Sales Tax Act does not create a comparable statutory charge.

The respondents also argued that the approved resolution plan reflected the commercial wisdom of the committee of creditors and should not be disturbed in appellate review.

The NCLAT held that the ₹15.65 crore claim was a composite claim comprising VAT, CST and interest, and accepted that Section 48 of the Gujarat VAT Act creates a statutory charge only for the VAT component.

“Therefore, Sec.48 of the Gujarat VAT Act creates a statutory charge only for VAT claim, and hence the same benefit cannot be extended to CST component of the claim,” the tribunal held.

On the question of waiver, the tribunal relied on the Supreme Court's ruling in Motilal Padampat Sugar Mills.

“Waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be 'an intentional act with knowledge',” the tribunal noted.

However, it held that the resolution professional could not rely solely on the department's omission in Form B, particularly because he was independently aware of the lien created over the corporate debtor's bank account.

The tribunal noted that the RP had himself initiated separate proceedings seeking removal of that lien, and the department had in reply asserted its claim under Section 48 of the Gujarat VAT Act.

Referring to the Supreme Court's ruling in Greater NOIDA v Prabhjit Singh Soni, the tribunal held that a resolution professional has a duty to collate and verify claims from available records.

“Now, in the context of the present case, if the RP knew that a lien is created on the bank account of the CD at the instance of the appellant, is it not then obligatory for him to ascertain the basis of the said lien,” the bench said.

It added, “Even if he had missed it then, when the appellant in his reply to I.A.4517 of 2023 has claimed right based on Sec.48 of the Gujarat VAT Act, is it not then required of the RP to ascertain if the appellant was entitled to be treated as a secured creditor.”

Rejecting the RP's defence, the bench observed, “The contention of the RP in the present appeal based on the position taken by the appellant in Form B may be valid only if the only source of information to the RP is the very form and no other.”

In a pointed conclusion, it held, “To repeat, when the RP had every opportunity to ascertain if the appellant has a right under Sec.48 of the Gujarat VAT Act, and here the game substantially ends.”

Accordingly, the tribunal held that ₹3.41 crore representing VAT dues must be treated as the claim of a secured operational creditor.

However, it declined to disturb the approved resolution plan, holding that the dispute concerned distribution under Section 53 of the Insolvency and Bankruptcy Code.

“There is no need to reject the resolution plan as approved by the Adjudicating Authority. It is an issue involving the distribution required to be made under Sec.53 of the Act. This exercise the CoC can now undertake,” the tribunal held.