# M/S NS Papers Limited & Anr v. Union of India & Ors

- **Citation:** (2024) 12 ILRA 290
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-12-11
- **Case number:** Writ Tax No. 408 of 2021
- **Bench:** Shekhar B. Saraf, Vipin Chandra Dixit
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-ns-papers-limited-anr-v-union-of-india-ors-51208
- **Pages:** 7

## Headnote

Civil Law - The Income Tax Act, 1961Sections 144 & 144B - Assessment Orderimpugned - approved resolution plan-impugned
order without any basis in law-the resolution
plan alone shall remain payable-new liabilityinherently and palpably be illegal- impugned
order -quashed and set aside.

Writ Petition is allowed. (E-9)

List of Cases cited:

## Text

290 INDIAN LAW REPORTS ALLAHABAD SERIES

"4. Tenancy agreement.-

(1) ...

(2) ...

(3) Where, in relation to a
tenancy created before the commencement
of this Act,-

(a) if an agreement in writing was
entered into between the landlord and the
tenant, they shall jointly present a copy thereof
to the Rent Authority within three months of the
commencement of this Act.

(b) if no agreement in writing was
entered into, the landlord and the tenant shall
enter into an agreement in writing with regard
to that tenancy and present the same to the Rent
Authority
within
three
months
of
the
commencement of this Act:

Provided that where the landlord or
the tenant fail to present jointly a copy of the
tenancy agreement or fail to reach an
agreement within specified period, such
landlord and tenant shall separately file the
particulars about such tenancy with the Rent
Authority within one month from the date of
expiry of period mentioned in clause (b) above,
in the form specified in First Schedule. If the
landlord has submitted his particulars within
the specified period but tenant fails to submit
such particulars, the landlord may file an
application for eviction on this ground alone:

Provided further that during such
eviction proceedings, the Rent Authority shall,
notwithstanding anything contained in this Act,
decide interim rent payable by the tenant
during such adjudication."

16. There is no averment in the entire writ
petition that after commencement of the
Tenancy Act, 2021 any agreement was entered
into between the petitioners and their landlord
or that upon failure of the landlord to enter into
any agreement any of the petitioners gave any
application
to
the
rent
authority
for
regularization of their tenancy. The petitioners
have not disclosed the monthly rents payable by
them and there is no pleading that the rents are
being paid regularly to the landlords. Thus there
is nothing on record to establish that the tenancy
of the petitioners is protected under the
provisions of the Transfer of Property Act or
the Uttar Pradesh Regulation of Urban
Premises Tenancy Act, 2021.

17. When the petitioners are unable to
establish with the help of some cogent
material that their tenancy rights which
were created under an oral agreement, are
still continuing and are protected by any
provision of law which would have effect
in
spite
of
the
non-obstante
clause
contained in Section 35 of the SARFAESI
Act referred to above, the petitioners
cannot
invoke
the
extra-ordinary
discretionary jurisdiction of this Court
under Article 226 of the Constitution of
India
as
establishment
of
a
legally
enforceable right and infringement thereof
is a sine quo non for invoking the writ
jurisdiction of this Court.

18. In view of the foregoing discussion,
this Court is of the considered view that there is
no merit in the writ petition. The writ petition is
accordingly dismissed.
----------
(2024) 12 ILRA 290
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.12.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.
THE HON'BLE VIPIN CHANDRA DIXIT, J.

Writ Tax No. 408 of 2021

M/S NS Papers Limited & Anr.
 ...Petitioners
Versus
Union of India & Ors. ...Respondents
12 All. M/S NS Papers Limited & Anr. Vs. Union of India & Ors.
291
Counsel for the Petitioners:
Ms. Arti Agarwal, Ms. Mahima Jaiswal, Mr.
Rishabh Jain

Counsel for the Respondents:
Mr. Gaurav Mahajan

Civil Law - The Income Tax Act, 1961Sections 144 & 144B - Assessment Orderimpugned - approved resolution plan-impugned
order without any basis in law-the resolution
plan alone shall remain payable-new liabilityinherently and palpably be illegal- impugned
order -quashed and set aside.

Writ Petition is allowed. (E-9)

List of Cases cited:

1. Committee of Creditors of Essar Vs Satish
Kumar Gupta reported in (2020) 8 SCC 531

2. Ghanshyam Mishra & Sons (P.) Ltd. Vs
Edelweiss
Asset
Reconstruction
Co.
Ltd.
reported in 2021 (4) TMI 613

3. Ultra Tech Nathdwara Cement Ltd. Vs U.O.I.,
2020 SCC OnLine Raj 1097

4. Essar Steel (India) Ltd. (CoC) Vs Satish
Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC
(Civ) 443

5. Akshay Jhunjhunwala Vs U.O.I., 2018 SCC
OnLine Cal 142

6. Uttam Galva Metallics Ltd. & Mr. Subodh
Karmakar Vs Assistant Commissioner of
Income Tax, U.O.I. reported in 2024 (9) TMI
371

(Delivered by Hon'ble Shekhar B. Sarraf, J.)

1. Heard Ms. Arti Agarwal with Ms.
Mahima Jaiswal and Mr. Rishabh Jain,
learned counsel appearing on behalf of the
petitioners and Mr. Gaurav Mahajan,
learned counsel appearing on behalf of the
respondents.

2. This is a writ petition under Article
226 of the Constitution of India wherein the
writ
petitioner
has
challenged
the
Assessment Order dated April 28, 2021
passed under Section 144 read with Section
144B of the Income Tax Act, 1961
(hereinafter after referred to as 'the Act')
for the assessment year 2018-19.

3. Ms. Arti Agarwal, learned counsel
appearing on behalf of the petitioner has
submitted that the petitioner no.1 was the
erstwhile company that went through
insolvency proceedings. She submits that
the resolution plan was approved on
February 24, 2021 wherein the Income Tax
Department had also put forward its claim
before
the
resolution
professional.
Subsequent to the resolution plan being
approved, the assessment order has been
passed for the particular assessment year.

4. Learned counsel appearing on
behalf of the petitioner further reiterates
that by letter dated March 8, 2021 this
information had been communicated to the
Income Tax Department. She, accordingly,
submits that the entire proceedings that has
been initiated and the impugned order that
has been passed are without any basis in
law and are specifically contrary to Section
31 of the Insolvency and Bankruptcy Code,
2016 (hereinafter referred to as 'the Code').

5. Learned counsel appearing on
behalf of the petitioner relies upon the
judgements of the Supreme Court in the
case of Committee of Creditors of Essar
vs. Satish Kumar Gupta reported in
(2020) 8 SCC 531 and in the case of
Ghanshyam Mishra and Sons (P.) Ltd. v.
Edelweiss Asset Reconstruction Co. Ltd.
reported in 2021 (4) TMI 613 to buttress
her argument that once a resolution
application has come into picture, the
292 INDIAN LAW REPORTS ALLAHABAD SERIES
successful applicant cannot suddenly be
faced with undecided claims. The relevant
paragraph in Satish Kumar Gupta (Supra)
is delineated below :-

"67. For the same reason, the
impugned NCLAT judgment in holding that
claims that may exist apart from those
decided on merits by the resolution
professional and by the Adjudicating
Authority/Appellate Tribunal can now be
decided by an appropriate forum in terms
of Section 60(6) of the Code, also militates
against the rationale of Section 31 of the
Code. A successful resolution applicant
cannot suddenly be faced with "undecided"
claims after the resolution plan submitted
by him has been accepted as this would
amount to a hydra head popping up which
would throw into uncertainty amounts
payable
by
a
prospective
resolution
applicant who successfully take over the
business of the corporate debtor. All claims
must be submitted to and decided by the
resolution
professional
so
that
a
prospective resolution applicant knows
exactly what has to be paid in order that it
may then take over and run the business of
the corporate debtor. This the successful
resolution applicant does on a fresh slate,
as has been pointed out by us hereinabove.
For these reasons, the NCLAT judgment
must also be set aside on this count.
(Emphasis by me)

6. She further submits that since as per
the
Resolution
plan,
all
pending
proceedings are extinguished, now the
Resolution Applicant cannot be burdened
with this assessment order which is not part
of the Resolution Plan. The provisions of
IBC ensures that the successful resolution
applicant starts running the business of the
corporate debtor as a fresh innings after the
approval of resolution plan. However, in
the present case respondent No.2 passed an
impugned order after approval of the
resolution plan and made addition. The
Resolution Applicant cannot be saddled
with any unforseen liability and impugned
order is bad as it amounted to fastening
liability on the Resolution applicant beyond
what has been agreed in the Resolution
Plan.

7.
Furthermore,
B.R.
Gavai,
J.
authoring the Supreme Court three Bench
judgement in Ghanshyam Mishra (Supra)
has recently highlighted the principles at
paragraph nos.86 to 95 that are extracted
below:-

"86. As discussed hereinabove,
one of the principal objects of the I&B
Code is providing for revival of the
corporate debtor and to make it a going
concern. The I&B Code is a complete Code
in itself. Upon admission of petition under
Section 7 there are various important
duties and functions entrusted to RP and
CoC. RP is required to issue a publication
inviting claims from all the stakeholders.
He is required to collate the said
information and submit necessary details in
the
information
memorandum.
The
resolution applicants submit their plans on
the basis of the details provided in the
information memorandum. The resolution
plans undergo deep scrutiny by RP as well
as CoC. In the negotiations that may be
held between CoC and the resolution
applicant, various modifications may be
made so as to ensure that while paying part
of the dues of financial creditors as well as
operational
creditors
and
other
stakeholders, the corporate debtor is
revived and is made an on-going concern.
After
CoC
approves
the
plan,
the
adjudicating authority is required to arrive
at a subjective satisfaction that the plan
12 All. M/S NS Papers Limited & Anr. Vs. Union of India & Ors.
293
conforms to the requirements as are
provided in sub-section (2) of Section 30 of
the I&B Code. Only thereafter, the
adjudicating
authority
can
grant
its
approval to the plan. It is at this stage that
the plan becomes binding on the corporate
debtor, its employees, members, creditors,
guarantors and other stakeholders involved
in the resolution plan. The legislative intent
behind this is to freeze all the claims so that
the resolution applicant starts on a clean
slate and is not flung with any surprise
claims. If that is permitted, the very
calculations on the basis of which the
resolution applicant submits its plans
would go haywire and the plan would be
unworkable.

87. We have no hesitation to say
that the words "other stakeholders" would
squarely cover the Central Government,
any State Government or any local
authorities. The legislature noticing that on
account of obvious omission certain tax
authorities were not abiding by the
mandate of the I&B Code and continuing
with the proceedings, has brought out the
2019 Amendment so as to cure the said
mischief. We therefore hold that the 2019
Amendment is declaratory and clarificatory
in nature and therefore retrospective in
operation.

88. There is another reason
which persuades us to take the said view.
Clause (10) of Section 3 of the I&B Code
defines "creditor" thus:

"creditor" means any person to
whom a debt is owed and includes a
financial creditor, an operational creditor,
a secured creditor, an unsecured creditor
and a decree-holder;"

89. Subsections (20) and (21) of
Section 5 of the I&B Code define
"operational creditor" and "operational
debt" respectively as such:

"operational creditor" means a
person to whom an operational debt is
owed and includes any person to whom
such debt has been legally assigned or
transferred;

"operational debt" means a
claim in respect of the provision of goods
or services including employment or a debt
in respect of the payment of dues arising
under any law for the time being in force
and payable to the Central Government,
any State Government or any local
authority;"

90. "Creditor" therefore has
been defined to mean "any person to whom
a debt is owed and includes a financial
creditor, an operational creditor, a secured
creditor, an unsecured creditor and a
decree-holder".

"Operational creditor" has been
defined to mean a person to whom an
operational debt is owed and includes any
person to whom such debt has been legally
assigned or transferred.

"Operational debt" has been
defined to mean a claim in respect of the
provision of goods or services including
employment or a debt in respect of the
payment of dues arising under any law for
the time being in force and payable to the
Central
Government,
any
State
Government or any local authority.

91. It is a cardinal principle of
law that a statute has to be read as a
whole. Harmonious construction of clause
(10) of Section 3 of the I&B Code read with
clauses (20) and (21) of Section 5 thereof
would reveal that even a claim in respect of
dues arising under any law for the time
being in force and payable to the Central
Government, any State Government or any
local authority would come within the
ambit of "operational debt". The Central
Government, any State Government or any
local authority to whom an operational
294 INDIAN LAW REPORTS ALLAHABAD SERIES
debt is owed would come within the ambit
of "operational creditor" as defined under
clause (20) of Section 5 of the I&B Code.
Consequently, a person to whom a debt is
owed would be covered by the definition of
"creditor" as defined under clause (10) of
Section 3 of the I&B Code. As such, even
without the 2019 Amendment, the Central
Government, any State Government or any
local authority to whom a debt is owed,
including the statutory dues, would be
covered by the term "creditor" and in any
case, by the term "other stakeholders" as
provided in sub-section (1) of Section 31 of
the I&B Code.

92. The Division Bench of the
Rajasthan High Court in Ultra Tech
Nathdwara Cement Ltd. v. Union of
India[Ultra Tech Nathdwara Cement Ltd.
v. Union of India, 2020 SCC OnLine Raj
1097] , by judgment and order dated 7-42020 has taken a view that the demand
notices issued by the Central Goods and
Service Tax Department, for a period prior
to the date on which NCLT has granted its
approval to the resolution plan, are not
permissible in law. While doing so, the
Rajasthan High Court has relied on the
judgment of this Court in Essar Steel
(India) Ltd. (CoC) [Essar Steel (India) Ltd.
(CoC) v. Satish Kumar Gupta, (2020) 8
SCC 531 : (2021) 2 SCC (Civ) 443] .

93. The Calcutta High Court in
Akshay Jhunjhunwala v. Union of India
[Akshay Jhunjhunwala v. Union of India,
2018 SCC OnLine Cal 142] has also taken
a view that the claim of operational
creditor will also include a claim of a
statutory authority on account of money
receivable pursuant to an imposition by a
statute. We are in agreement with the views
taken by these courts.

94. Therefore, in our considered
view, the aforesaid provisions leave no
manner of doubt to hold that the 2019
Amendment is declaratory and clarificatory
in nature. We also hold that even if the
2019 Amendment was not effected, still in
light of the view taken by us, the Central
Government, any State Government or any
local authority would be bound by the
resolution plan, once it is approved by the
adjudicating authority (i.e. NCLT).

CONCLUSION

95. In the result, we answer the
questions framed by us as under:

(i) That once a resolution plan is
duly
approved
by
the
adjudicating
authority under sub-section (1) of Section
31, the claims as provided in the
resolution plan shall stand frozen and will
be binding on the corporate debtor and its
employees, members, creditors, including
the
Central
Government,
any
State
Government or any local authority,
guarantors and other stakeholders. On the
date of approval of resolution plan by the
adjudicating authority, all such claims,
which are not a part of resolution plan,
shall stand extinguished and no person
will be entitled to initiate or continue any
proceedings in respect to a claim, which is
not part of the resolution plan.

(ii) The 2019 Amendment to
Section 31 of the I&B Code is clarificatory
and declaratory in nature and therefore
will be effective from the date on which
the I&B Code has come into effect.

(iii) Consequently all the dues
including the statutory dues owed to the
Central
Government,
any
State
Government or any local authority, if not
part of the resolution plan, shall stand
extinguished and no proceedings in
respect of such dues for the period prior to
the date on which the adjudicating
authority
grants
its
approval
under
Section 31 could be continued."

(Emphasis by me)
12 All. M/S NS Papers Limited & Anr. Vs. Union of India & Ors.
295

8. Furthermore, division bench of the
Bombay High Court in the case of Uttam
Galva Metallics Ltd. and Mr. Subodh
Karmakar vs. Assistant Commissioner of
Income Tax, Union of India reported in
2024 (9) TMI 371 has dealt with all the
Supreme Court judgments on the point
extensively including the judgments cited
above and has come to the following
conclusion :-

9. Mr. Mahajan, learned counsel
appearing on behalf of the respondent
authorities has supported the assessment
order on the ground that no proper
information was given by the petitioner to
the Income Tax Authorities with regard to
resolution plan. Ergo, the assessment that
was carried out by means of faceless
assessment was correctly done as the
department did not have notice of the IBC
proceedings against the petitioner.

10. Learned counsel appearing on
behalf of the respondent authorities further
submits that all the dues including the
statutory
dues
owed
to
the
Central
Government, any State Government or any
local authority, if not part of resolution plan
shall stand extinguished and no proceedings
in respect of such dues for the period prior to
the date on which the Adjudicating Authority
granted its approval under Section 31 could
be continued. He, however, submitted that the
question as to whether or not regular
assessment under the provisions of the Act
can be initiated, continued with and
concluded where CIRP under the Code has
been initiated and moratorium under Section
14 of the Code has been imposed by the
NCLT, has not expressly been raised nor
answered, and therefore remains res-integra.
The third question and its answer in the
above judgment only relate to initiation of
proceedings for recovery of dues and do not
relate to the initiation of any fresh assessment
proceedings. Moreover, if the final order of
the Supreme Court were also perused, it
would be clear that it does not cover the point
of initiation, continuation and culmination of
assessment proceedings, and only declares
that the "respondents are not entitled to
recover any claims or claim any debts owed
to them from the Corporate Debtor accruing
prior to the transfer date".

11.
He
further
submits
that
if
proceedings under the Act could be initiated,
continued with and culminated during the
course of CIRP and institution of Moratorium
u/s 14 of the Code, the following may also
kindly be considered, for these have a bearing
on the fact that income tax proceedings
should not get shadowed or extinguished
merely by the institution of CRIP and passage
of a moratorium order, unless the proceedings
were clearly inconsistent with or repugnant to
any provisions of the Code, which is not the
case here.

12. Upon considering the facts and
circumstances of the case, we are of the
view that the arguments raised by the
learned counsel appearing on behalf of the
respondents is without any merit on two
counts. Firstly, it is clear by the letter dated
March 8, 2021 that the petitioner had
informed the Income Tax Authorities with
regard to approval of resolution plan.
Secondly, the department itself had filed a
claim before the Resolution Professional,
and accordingly, the argument that the
department was not aware of the IBC
proceedings holds no water.

13. Even assuming that the department
was not informed about the proceedings,
the law is very clear as expounded in the
296 INDIAN LAW REPORTS ALLAHABAD SERIES
judgments cited above. The resolution
applicant cannot be saddled with new
claims once a resolution plan has been
approved.

14. The argument that an assessment
that has been kept pending for a prior
period and is quantified subsequent to the
approval of the Resolution Plan is an
argument in sophistry. If this argument is
accepted then all authorities would be in a
position to keep assessment/re-assessment
pending till completion of the Resolution
Plan, and thereafter, culminate the same
and saddle the successful Resolution
Applicant with an unknown burden. Such
an action cannot be countenanced as the
same would be an anathema to the
fundamental principles of the moratorium
provided under the Code. The law cannot
be read in a manner wherein the basic
structure of the Code is breached by
hindering the flow of the same by creation
of roadblocks and dams - the underlying
principle of the Code is to give a fresh start
to the Resolution Applicant. Any new
liability being fastened after the approval of
the Resolution Plan would inherently and
palpably be illegal and go beyond the
Lakshman Rekha of the Code.

15. In light of the above, the impugned
assessment order dated April 28, 2021 is
quashed and set aside. In the event any
penalty proceedings have been initiated by
the department, the writ petitioner shall be
at liberty to challenge the same in
accordance with law.

16. Ergo, the writ petition is allowed.
----------
(2024) 12 ILRA 296
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.12.2024

BEFORE

THE HON'BLE ROHIT RANJAN AGARWAL, J.

Matters Under Article 227 No. 4053 of 2017

State of U.P. & Anr. ...Petitioners
Versus
M/S Jindal Concrete Udyog ...Respondent

Counsel for the Petitioners:
C.S.C.

Counsel for the Respondents:
Rama Goel Bansal, S.C.

Civil Law-The Micro, Small and Medium
Enterprises
Development
Act,
2006Sections 18 & 19 - The Arbitration and
Conciliation Act, 1996-Section 34(1) (3) -
By the orders impugned, the doors for effective
adjudication on merits has been closed down by
the Courts below. The time for making predeposit of 75% of the awarded amount was
granted once and the Court below should have
taken a lenient view as the matter was not
being adjudicated nor any interim order was
operating and time should have been extended
so as to enable the St. to have made the predeposit before the application under Section 34
was entertained and heard--- The matter needs
to be heard on merit and St. be directed to
comply the mandatory provisions of Section 19
making a pre-deposit of 75% to the awarded
amount by extending the time--- Matter is
remitted to the District Judge to hear the
application filed by the petitioner under Section
34 of Act of 1996 subject to deposit of
Rs.20,00,000/- within a period of one month
from today.

Petition partly allowed. (E-15)

List of Cases cited:

1. Snehadeep Structures Pvt. Ltd.Vs Mah. Small
Scale Industries Development Corp. Ltd. (2010)
3 SCC 34

2. Goodyear India Ltd. Vs Norton Intech
Rubbers Pvt. Ltd.& anr.(2012) 6 SCC 345