STATE BANK OF INDIA vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX & ORS

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CWP/4170/2018HC Punjab & HaryanaPHHC01104473201825 February 2019Bench: MR. JUSTICE R.C. KATHURIA (RETD.),MR. JUSTICE HARINDER SINGH SIDHU2 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court held that in view of the moratorium declared by the National Company Law Tribunal (NCLT) under Section 14(1) of the Insolvency and Bankruptcy Code, 2016, the writ petition had become infructuous. The court noted that the parties were in agreement on this point. Consequently, the petition was disposed of as such. The court did not delve into the merits of the dispute regarding the precedence of recovery between the Income Tax Department and the State Bank of India, as the moratorium effectively stayed all such recovery proceedings. The operative direction was to dispose of the petition as infructuous.

What were the facts?

The petitioner, State Bank of India, filed a writ petition under Articles 226/227 of the Constitution of India challenging a notice dated February 16, 2017, issued under Section 226(3) of the Income Tax Act, 1961, by the respondent. The primary dispute concerned the precedence of recovery of outstanding liabilities from M/s R.P. Basmati Rice Ltd. between the petitioner and the respondent-bank/department. It was brought to the court's attention that the National Company Law Tribunal (NCLT), Chandigarh Bench, had admitted an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium under Section 14(1) of the Code.

What were the issues?

1. Whether the notice dated 16.02.2017 issued under Section 226(3) of the Income Tax Act, 1961, is valid in light of the moratorium declared under Section 14(1) of the Insolvency and Bankruptcy Code, 2016? (Question of law) Assessee's Contention: The petitioner (State Bank of India) argued that the moratorium declared by the NCLT under the Insolvency and Bankruptcy Code, 2016, would take precedence, rendering the notice issued under the Income Tax Act infructuous. Revenue's Contention: The respondent (Principal Commissioner of Income Tax and ors.) agreed with the petitioner that the moratorium declared by the NCLT made the present petition infructuous.

Which sections of the Income-tax Act were involved?

Section 226(3),Section 14(1),Section 9

AI-generated summary — verify with the full judgment below

225 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.4170 of 2018 Decided on : 25.02.2019 State Bank of India ...... Petitioner Versus Principal Commissioner of Income Tax and ors. ...... Respondents CORAM : HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL Present : Mr. Sanjay Bansal, Sr. Advocate with Mr. Amit Parsad, Advocate for the petitioner. Mr. Yogesh Putney, Sr. Standing Counsel for respondent. **** Ajay Kumar Mittal, J. The instant writ petition has been filed under Articles 226/227 of the Constitution of India for issuance of writ in the nature of Certiorari/ Mandamus for quashing the notice dated 16.02.2017 (Annexure P-5) issued under Section 226(3) of the Income Tax Act, 1961 by respondent No.2. 2. The primary dispute in the writ petition was regarding whether the petitioner or the respondent-bank/department would have precedence to recover the outstanding liabilities from M/s R.P.Basmati Rice Ltd. 3. It was stated by learned counsel for the parties that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') filed by the respondents has been admitted by the National Company Law Tribunal, Chandigarh Bench, Chandigarh (in short 'NCLT') and Moratorium under Section 14(1) of the Code has been declared. The relevant portion of the order is reproduced as below: SONIA BURA 2019.03.05 15:28 I attest to the accuracy and integrity of this document chandigarh

CWP No.4170 of 2018 -2- “In view of the above, we declare the Moratorium in terms of sub section (1) of Section 14 of the Code as under: (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any Court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.” 4. Learned counsel for the parties are ad idem that in view of the Moratorium issued by NCLT, the present petition has become infructuous and may be disposed of as such. 5. Ordered accordingly. (AJAY KUMAR MITTAL) JUDGE

25.02.2019

(MANJARI NEHRU KAUL) sonia JUDGE

Whether speaking/reasoned: Yes/No Whether reportable : Yes/No SONIA BURA 2019.03.05 15:28 I attest to the accuracy and integrity of this document chandigarh

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