DCIT 15(3)(1), MUMBAI vs. RELIANCE COMMUNMICATION LTD, NAVI MUMBAI

During the course of hearing, at the outset, we noticed that in case of the assessee, the matter is pending before the Insolvency Professional in terms of The Insolvency and Bankruptcy Code, 2016 (“the Code”) and moratorium period has been declared as per section 14 of the Code. We further noticed that a Petition was filed by the Ericson India Pvt. Ltd. against the assessee i.e., Reliance Communications Ltd. („Corporate Debtor‟), before the Hon‟ble National Company Law Tribunal („Hon‟ble NCLT‟), Mumbai Bench, in terms of section 9 of the Code r/w rules and regulations framed therein. The said Petition was admitted by the Hon‟ble NCLT, and Corporate Insolvency Resolution Process („CIRP‟) of the Corporate Debtor was ordered to be commenced vide order dated 15/05/2018, passed by the Hon‟ble NCLT. The Hon‟ble NCLT appointed Interim Resolution Professional for the Corporate Debtor vide its order dated 18/05/2018. Subsequently, the Committee of Creditors of Reliance Communications Ltd. A.Y. 2009–10, 2010–11, 2011–12, 2012-13, 2013-14 and 2014-15 Corporate Debtor, pursuant to their meeting and in accordance with the provisions of the Code, appointed Resolution Professional for the Corporate Debtor, who was substituted for the Interim Resolution Professional by the Hon‟ble NCLT, vide its order dated 21/06/2019. Vide aforesaid order dated 15/05/2018, the Hon‟ble NCLT declared moratorium period under section 14 of the Code w.e.f. 15/05/2018.

We have considered the submissions and perused the material available on record. It is pertinent to note that as per the provisions of section 14 of the Code, institution of a Suit or continuation of pending Suit or proceedings against the Corporate Debtor including execution of any judgment, decree, or order in any Court of law, Tribunal, Arbitration Panel or other authorities, shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of Reliance Communications Ltd. A.Y. 2009–10, 2010–11, 2011–12, 2012-13, 2013-14 and 2014-15 such order till the completion of CIRP; or if, during the CIRP period, Hon‟ble NCLT approves the resolution plan under section 31(1) or passes an order for liquidation of corporate debtor under section 33 of the Code, moratorium shall cease to have effect on date of such order. It has not been disputed by either of the parties that moratorium period is still continuing in the present case. We find that the Hon‟ble Supreme Court in case of Alchemist Asset Reconstruction Co. Ltd. v/s Hotel Gaudavan Pvt. Ltd., [2017] 88 taxmann.com 202 (SC) held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) has come into effect and it is non est in law and could not have been allowed to continue.

The learned A.R. has placed reliance on the decision of the Hon‟ble Calcutta High Court in SREI Equipment Finance Limited (supra). We find that the issue before the Hon‟ble Court, in aforesaid decision, was as under:– “5. On going through the impugned order we find that the issue as to whether the proceedings had to be kept in abeyance by the assessing officer in the light of the insolvency proceedings which were pending and the effect of Section 14 of the Code have not been dealt with though that was the core issue which was canvassed in the writ petition...”

While deciding the aforesaid issue, Hon‟ble Calcutta High Court observed as under:-

From the careful perusal of the aforesaid decision, we find that the issue before the Hon‟ble Calcutta High Court was regarding the assessment order passed during the continuation of moratorium period. Thus, in the aforesaid decision, Hon‟ble Calcutta High Court dealt with the assessment proceedings and not appeals as in the present case, therefore, aforesaid decision is factually distinguishable. We are of the view that in case of assessment proceedings, the only option available with the Assessing Officer is to keep the proceedings in abeyance during the continuation of moratorium period as per section 14 of the Code and there is no option to quash the same in totality. Since, if the assessment proceeding is dropped then same cannot be revived upon completion of the moratorium period and only remedy available with the Assessing Officer will be under the provisions of section 154/147/263 of the Act, provided the jurisdictional conditions as laid down in the said sections are satisfied. Insofar as filing/continuation of appeal under the provisions of the Act, during the continuation of moratorium period is concerned, we

In the instant case, the National Company Law Tribunal (NCLT) [which by virtue of Section 5(1) of the Code is the AA] has by its order dated 18th July 2017 admitted the petition under Section 7 of the Code filed by the State Bank of India against the Respondent Assessee and prohibited, inter alia, "the institution of suits or continuation of pending suits or proceedings against the Respondent. This would include the present appeal by the Income Tax Department ('Department) against the order of the Income Tax Appellate Tribunal (ITAT) in respect of the tax liability of the Respondent–Assessee.

The aforesaid decision of the Hon‟ble Delhi High Court was affirmed by the Hon‟ble Supreme Court in PCIT v/s Monnet Ispat & Energy Ltd., [2018] 18 SCC 789. The Hon‟ble Supreme Court also upheld the overriding nature and supremacy of the provisions of the Code over any Reliance Communications Ltd. A.Y. 2009–10, 2010–11, 2011–12, 2012-13, 2013-14 and 2014-15 other enactment in case of conflicting provisions by virtue of non obstante clause contained in section 238 of the Code. Thus, we are of the considered view that the present cross appeals are a continuation of pending Suit against the Corporate Debtor, which is prohibited under section 14 of the Code. It is further pertinent to note that under section 178(6) of the Act, as amended w.e.f. 01/11/2016, the Code shall have overriding effect.

We further find that appeal by the assessee have been filed by the Director of the assessee company, which after initiation of CIRP has become functus officio. We further find that the Resolution Professional has not been impleaded as a party in the appeals before us by filing revised Form No. 36. Similarly, in the appeal filed by the Revenue also revised Form No. 36 including the Resolution Professional has not been filed. Once the insolvency proceedings commenced under the Code, all the litigations are to be pursued by Resolution Professional appointed by the Committee of Creditors and not by the company. In view of the above we are of the considered view that the present appeals, in the present form, are not maintainable.

Thus, respectfully following the aforesaid decision in Monnet Ispat & Energy Ltd. (supra), which approach has also been adopted by various coordinate bench of the Tribunal, we dismiss the present cross appeals with a liberty that upon completion of the moratorium period, if it is so Reliance Communications Ltd. A.Y. 2009–10, 2010–11, 2011–12, 2012-13, 2013-14 and 2014-15 decided, both the parties may seek recall of this order by impleading Managing Director / Director, representing the new management of the assessee company, or the Official Liquidator, as the case may be.