Writ Petition No. 20681 of 2021 · The High Court
Case Details
- 1 - NC: 2025:KHC:13412 WP No. 20681 of 2021 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 20681 OF 2021 (T-RES) BETWEEN: 1. TEBMA SHIPYARD LIMITED, A COMPANY INCORPORATED UNDER THE PROVISION OF THE ERSTWHILE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT S. NO 377, PAZHAMATHUR VILLAGE, PUKATHURAI POST, MADURANTAKAM TALUK, KANCHEEPURAM, TAMIL NADU - 603 116. 2. COCHIN SHIPYARD LIMITED, A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE ERSTWHILE COMPANIES ACT 1956 HAVING ITS REGISTERED OFFICE AT ADMINSITRATIVE BUILDING, COCHIN SHIPYARD PREMISES, PERUMANOOR COCHIN ERNAKULAM, KERALA – 682 015. REPRESENTED BY (V.J. JOSE) (DIRECTOR FINANCE) (BY SRI. RAVI RAGHAVAN, SRI AZHAAN KAMAAL, SRI. SAGAR AGRAWAL, ADVOCATES) …PETITIONERS AND: DEVELOPMENT COMMISSIONER COCHIN SPL ECONOMIC ZONE (CSEZ), SUB OFFICE FOR 100% EOUS IN KARNATAKA NO 120-C,EPIC, WHITEFILED BANGLAORE – 560 066. (BY SRI. A. CHANDRACHUD, ADVOCATE) …RESPONDENT Digitally signed by NANDINI D Location: High Court of Karnataka - 2 - NC: 2025:KHC:13412 WP No. 20681 of 2021 THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE SHOW-CAUSE NOTICE BEARING NO.1/14/2008:EOU:CSEZ/2815/1552 DATED 24.08.2021 ISSUED BY THE RESPONDENT UNDER SECTION 14 R/W SECTION 11 OF THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 AND RULE 17 OF THE FOREIGN TRADE (REGULATION) RULES, 1993 AND ALL PROCEEDINGS PURSUANT THERETO (AT ANNEXURE-A). THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, the petitioners seek the following reliefs: “a. Issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ or order or direction quashing the show-cause notice 1552 bearing No. 1/14/2008:EOU:CSEZ/2815/1552 dated 24.08.2021 issued by the Respondent under Sec. 14 read with Sec. 11 of the Foreign Trade (Development and Regulation) Act, 1992 and Rule 17 of the Foreign Trade (Regulation) Rules, 1993 and all proceedings pursuant thereto (at ANNEXURE - A); b. Pass such other order as this Hon'ble Court may deem fit and proper in the circumstances of the case and in the interests of justice.” 2. Heard learned counsel for the petitioners and learned counsel for the respondent and perused the material on record. - 3 - NC: 2025:KHC:13412 WP No. 20681 of 2021 3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioners invited my attention to the material on record in order to point out that the Letter of Permission (LOP) obtained by petitioner No.1 from the respondent to operate an 100% Export Oriented Unit (EOU) at Malpe, Karnataka, dated 26.03.2008 was extended from time to time. It is pointed out that in the year 2018, in insolvency proceedings before the NCLT, Chennai, petitioner No.1 underwent corporate insolvency resolution process, in which petitioner No.2 emerged as a successful bidder and resolution was approved by the NCLT on 04.03.2020. Under these circumstances, the petitioners addressed letters to respondent No.1 dated 23.03.2021, 11.03.2021 and 07.05.2021, seeking formal approval for exit from the Export Oriented Unit, pursuant to which respondent issued the impugned show-cause notice proposing levy of penalties for defaults prior to 24.08.2021 (Annexure-A) proposing to levy penalties for the alleged defaults for the periods prior to approval of the Resolution plan dated 04.03.2020, which is not permissible in law in the light of the judgment of the various Courts including the Supreme Court as held in the case of Ghanashyam Mishra & Sons Pvt. Ltd Vs. - 4 - NC: 2025:KHC:13412 WP No. 20681 of 2021 Edelweiss Asset Reconstruction Company Ltd – (2021) 9 SCC 657, which has been followed by various Courts in the following decisions: i. Sree Metaliks Limited Vs. Additional Director General and Others – (2023) SCC OnLine Del 941 ii. Dighi Port Limited Vs. Revenue Minister, Mantralaya and others - W.P.No.9288/2015 dated 04.08.2023 (Bombay) iii. RPS Infrastructure Limited Vs. Mukul Kumar and Another – (2023) 10 SCC 718 iv. M/s. Patanjali Foods Limited Vs. Commissioner of Central Excise and Service Tax – CEA No.6/2024 Dated 30.09.2024 (Karnataka) v. M/s. Embio Limited Vs. Director General of Foreign Trade and others – Civil Appeal NO.6394/2024 dated 13.05.2024 (SC) 4. It is submitted that even assuming that the petitioner had committed default in complying with the export obligation imposed upon him under the Letter of Permission (LOP), even then the petitioner would not be liable to penalty as held by the Apex Court in the case of M/s. Embio Limited (supra). It is therefore - 5 - NC: 2025:KHC:13412 WP No. 20681 of 2021 submitted that the impugned show-cause notice is illegal and arbitrary and the same deserves to be quashed.
Legal Reasoning
52. The position of law, as articulated above, continues to hold the field.” 69. In contradiction, in Rainbow Papers, a claim was lodged in the prescribed form, albeit after the last date of submission indicated in the public announcement by the IRP, but before the NCLT had rendered its decision in the matter. 71. This is a case, where despite knowledge, the statutory authorities chose not to submit their proof of claim. - 7 - NC: 2025:KHC:13412 WP No. 20681 of 2021 Mr. Sharma's argument, that since it was known to SML that amounts were due, proof of claim [under the unamended Regulation i.e., Regulation 12] was not required to be filed, is difficult to accept, because if this argument were to be sustained, then whatever the assessee [in this case SML] were to state before the RP would have to be taken as the gospel truth. In a given case, the assessee could state, that nothing was due to the concerned creditor. In our view, once a Public Announcement was made, it was incumbent upon all creditors, which included the statutory creditors, to submit the proof of claim. 75. Given this situation, we are of the view, that if the law, as enunciated by the Supreme Court in Ghanashyam Mishra is applied, then the dues, if any owed to the respondents would have to be declared as having extinguished, and if such is the position, the adjudication of the impugned show- cause notice would be an exercise in futility. 78. Thus, for the foregoing reasons, we are of the view, that the impugned show-cause notice seeks to do, what is, in fact, an exercise in futility, given the law laid down by the Supreme Court in Ghanashyam Mishra. The Supreme Court has enunciated, in no uncertain terms, the clean slate principle1; it cannot be set at naught by entertaining claims that concern the period obtaining before the approval of the Resolution Plan. 7. Similarly, the Bombay High Court in the case of Dighi Port Limited (supra), has held as under: - 8 - NC: 2025:KHC:13412 WP No. 20681 of 2021 “26. These subsequent events have literally eclipsed the original cause of action that brought the Petitioner to Court. We are no longer required to examine whether the Review Application was or was not correctly decided, whether or not the demands were justified and whether or not the Tehsildar was correct in making those demands. The limited question is whether, absent a claim being lodged and pursued in the resolution process, i.e., in the CIRP and being included in the approved resolution plan, the State Government can still maintain its demand for royalty or penalty. Putting it conversely, if the State Government did not lodge that claim with the RP pursuant to the notice he issued specifically for that purpose and within the time provided in that notice, and if that claim was not incorporated in the COC decision of September 2019 and the NCLT final approval thereafter, i.e., if it did not form part of the approved resolution plan, whether it can still be said to be an outstanding demand or stands extinguished. Can the State Government stand outside the insolvency resolution process and yet maintain its demand and now seek to apply against the resolution application? 27. We believe the matter is squarely covered by the decision of the Supreme Court in Ghanashyam Mishra and Sons Pvt Ltd v Edelweiss Asset Reconstruction Co Ltd and Ors. In particular, we have reference to paragraphs 65 to 69, 102 and 108, quoted below for easy reference: 65. Bare reading of Section 31 of the I&B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the - 9 - NC: 2025:KHC:13412 WP No. 20681 of 2021 requirements as referred to in sub-section (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern. 66. The resolution plan submitted by the successful resolution applicant is required to contain various provisions viz. provision for payment of insolvency resolution process costs, provision for payment of debts of operational creditors, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the corporate debtor under Section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub- section (1) of Section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, which also shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1 to clause (b) of sub- section (2) of Section 30 of the I&B Code clarifies for the removal of doubts that a distribution in accordance with the provisions of the said clause shall be fair and equitable to such creditors. The resolution plan is also required to provide for the management of the affairs of the corporate debtor after approval of the resolution plan and also the implementation and supervision of the resolution plan. Clause (e) of sub-section (2) of Section 30 of the I&B Code also casts a duty on RP to examine that the - 10 - NC: 2025:KHC:13412 WP No. 20681 of 2021 resolution plan does not contravene any of the provisions of the law for the time being in force. 67. Perusal of Section 29 of the I&B Code read with Regulation 36 of the Regulations would reveal that it requires RP to prepare an information memorandum containing various details of the corporate debtor so that the resolution applicant submitting a plan is aware of the assets and liabilities of the corporate debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by the Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the corporate debtor towards them are required to be contained in the information memorandum. 68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is that after the approval of the resolution plan, no surprise claims should be flung on the successful - 11 - NC: 2025:KHC:13412 WP No. 20681 of 2021 resolution applicant. The dominant purpose is that he should start with fresh slate on the basis of the resolution plan approved. 69. This aspect has been aptly explained by 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]: (SCC p. 616, para 107) “107. For the same reason, the impugned NCLAT judgment in Standard Chartered Bank v. Satish Kumar Gupta [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] 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 would 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 - 12 - NC: 2025:KHC:13412 WP No. 20681 of 2021 reasons, Nclat judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] must also be set aside on this count.” Conclusion:
Arguments
5. Per contra, learned counsel for the respondent submits that there is no merit in the petition and that the same is liable to be dismissed. 6. As rightly contended by the learned counsel for the petitioners, it is an undisputed fact borne out from the material on record that the proposed levy of penalties for the alleged defaults against the petitioners were for the periods prior to approval of the resolution plan, which was approved by the NCLT on 04.03.2020. Under identical circumstances in Sree Metaliks Limited (supra), it is held as under: 50. The Supreme Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., (2021) 9 SCC 657 was inter alia called upon to rule on the following: (i) Whether the the claims Resolution Plan as approved under Section 31 of the thus bind all Code would stand stakeholders? frozen, and reflected in (ii) Whether statutory dues, owed to the central government, state government or local authority, which did not form part of the approved Resolution Plan would stand extinguished, and thereby disable the continuation of any proceedings qua claims which concerned the period arising prior to the approval of - 6 - NC: 2025:KHC:13412 WP No. 20681 of 2021 the Resolution Plan by the adjudicating authority under Section 31 of the Code? 51. Vis-a-vis these issues, the following conclusions were reached by the Supreme Court. “102.1. 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 [the] resolution plan by the adjudicating authority, all such claims, which are not a part of [the] 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. 102.2. 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. 102.3. 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.”
Decision
102. In the result, we answer the questions framed by us as under: 102.1. 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. 102.2. 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. 102.3. 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. 108. While allowing the application filed by RP, granting approval to the resolution plan of Gmspl (i.e. CA No. - 13 - NC: 2025:KHC:13412 WP No. 20681 of 2021 402/KB/2018) and rejecting the application of EARC challenging the grant of approval to the resolution plan of Gmspl by CoC (i.e. CA No. 398/KB/2018), NCLT found that RP had followed the entire procedure as required under the I&B Code and the Regulations. It also found that CoC after applying its mind found that the resolution plan submitted by Gmspl was in conformity with the requirements under Section 30(2) of the I&B Code. 28. As the emphasized portions show, the decision in Ghanshyam Mishra’s case clearly states that any dues to the Government, if not included in the resolution plan, stand extinguished. In particular, Ghanashyam Mishra makes reference to the earlier decision of the Supreme Court in Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta and Ors. 30. We must have reference to the decision of the Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd v Raman Ispat Pvt Ltd and Ors. The reason is that this decision not only reaffirms Ghanashyam Mishra but also clarifies that the decision of the Supreme Court in State Tax Officer (1) v Rainbow Papers Ltd does not actually alter the position in law as set out in the Ghanashyam Mishra decision. In particular, in paragraph 50, the Supreme Court in the Paschimanchal Vidyut case held that the Rainbow Papers judgment did not take note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than those payable to the Central or State Government. It therefore concluded that no reliance could be placed on the decision in Rainbow Papers in support of the - 14 - NC: 2025:KHC:13412 WP No. 20681 of 2021 suggestion that the dictum or ratio of Ghanashyam Mishra stood diluted by Rainbow Papers. 35. The answer from Mr Nankani is that it is not the lodgement of a demand that is determinative. That is not the law as enunciated or interpreted in Ghanashyam Mishra. There is a defined process to be followed. It is for this reason that the RP gives and is mandated to give a notice. It is not possible to expect that somebody in the NCLT will harvest data gathered from diverse sources. All claims must be funnelled through the RP and this must happen on a schedule before an appointed date. The manner and form in which it is to be done is also prescribed. The State Government has done none of this. Once the initial steps are over, then the demand is reflected in the information memorandum that would be drawn up and it is at this point that every prospective resolution applicant would have an unambiguous idea of what was involved and what needed to be proposed. The State Government cannot assume that it is the only person with a demand against the corporate debtor. There are others including secured creditors who possibly, following the Ghanashayam Mishra ratio as interpreted in the Paschimanchal Vidyut case, stand on a higher footing. It does not make a difference whether this is a demand for tax or for some payment, for example for electricity dues; that demand must be made in the stipulated time following the prescribed procedure in the prescribed manner and must be pursued to its logical conclusion, that is to say by the claimant indicating whether or not the claimant is willing to make a concession or is demanding full payment. It is only - 15 - NC: 2025:KHC:13412 WP No. 20681 of 2021 when this is asserted that the COC can take an informed decision and make a recommendation of which of the resolution applications it lends its support to. It is thereafter that the RP will need to make a report to the COC. This, the Supreme Court has also held, is not an idle formality but requires an application of mind and the resultant NCLT order itself must take into account all these various factors including compliances. In this entire scheme, Mr Nankani submits, there is absolutely no wriggle room for an outlier claim, i.e., for some entity, be it the government or anyone else, to say that some communication or letter had been addressed and therefore there is a claim that must be deemed to have been made. There is no such concept in the IBC, which, it is well settled, is a complete code in itself. 37. Thus, Rule will have to be made absolute in terms of prayer clause (b)(i) viz., that the claim/demand for royalty/penalty under the impugned notices stands extinguished in view of the approval of the Resolution Plan under the IBC in regard to the Petitioner.” Paragraphs 20 to 24 “ 20. If we analyse the aforesaid plea, it is quite obvious that Respondent 1 did what could be done to procure the corporate debtor's records by even moving an application under Section 19 IBC. That it was not fruitful is a consequence of the corporate debtor not making available the material. It is thus not even known whether there was a reflection in the records on this aspect or not. - 16 - NC: 2025:KHC:13412 WP No. 20681 of 2021 21. The second question is whether the delay in the filing of claim by the appellant ought to have been condoned by Respondent 1. The IBC is a time bound process. There are, of course, certain circumstances in which the time can be increased. The question is whether the present case would fall within those parameters. The delay on the part of the appellant is of 287 days. The appellant is a commercial entity. That they were litigating against the corporate debtor is an undoubted fact. We believe that the appellant ought to have been vigilant enough in the aforesaid circumstances to find out whether the corporate debtor was undergoing CIRP. The appellant has been deficient on this aspect. The result, of course, is that the appellant to an extent has been left high and dry. 22. Section 15 IBC and Regulation 6 of the IBBI Regulations mandate a public announcement of the CIRP through newspapers. This would constitute deemed knowledge on the appellant. In any case, their plea of not being aware of newspaper pronouncements is not one which should be available to a commercial party. 23. The mere fact that the adjudicating authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon. As described above, in Essar Steel [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , the - 17 - NC: 2025:KHC:13412 WP No. 20681 of 2021 Court cautioned against allowing claims after the resolution plan has been accepted by the COC. 24. We have thus come to the conclusion that Nclat's impugned judgment [Mukul Kumar v. RPS Infrastructure Ltd., 2021 SCC OnLine NCLAT 648] cannot be faulted to reopen the chapter at the behest of the appellant. We find it difficult to unleash the hydra-headed monster of undecided claims on the resolution applicant.” 8. Similarly, in the case of M/s. Patanjali Foods Limited (supra), the Division Bench of this Court has held as under: “ 11. The relevant fact situation as noticed above is undisputed, insofar as issuance of the show cause notice dated 26.3.2012 as also the Order-in-Original. The proceedings initiated against Ruchi Soya under the IBC are also a matter of record. Hence, from the aforementioned, it is clear that during the pendency of the appeal before the CESTAT, the proceedings under IBC against Ruchi Soya had commenced and also culminated with the acceptance of the modified resolution plan, consequent to which Patanjali has continued the business of Ruchi Soya, which is also forthcoming from the certificate dated 24.6.2022. It is further undisputed that the revenue has not made any claim before the IRP during CIRP process under the IBC. 12. The Hon’ble Supreme Court in the case of Ghanshyam Misha10 was considering the following questions: - 18 - NC: 2025:KHC:13412 WP No. 20681 of 2021 (i) As to whether any creditor including “2 the Central Government, State Government or any local authority is bound by the resolution plan once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the I&B Code”)? (ii) As to whether the amendment to Section 31 by Section is Act clarificatory/declaratory or substantive in nature? 2019 26 of of 7 (iii) As to whether after approval of resolution plan by the adjudicating authority a creditor including the Central Government, State Government or any initiate any is entitled local authority proceedings for recovery of any of the dues from the corporate debtor, which are not a part of the resolution plan approved by the adjudicating authority?” to 2.1. The Hon’ble Supreme Court answered the said questions as follows: “102. In the result, we answer the questions framed by us as under: the corporate debtor and including is duly 102.1. That once a resolution plan 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 its binding on employees, members, creditors, the Central Government, any State Government or local authority, guarantors and other any 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. 102.2. 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. - 19 - NC: 2025:KHC:13412 WP No. 20681 of 2021 102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not resolution plan, shall stand part of 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.” the 13. The Hon’ble Supreme Court in the case of Ruchi Soya Industries Ltd.,11 was considering the following questions: “6. The short point that is involved is as to whether the claim of the present respondent which was admittedly not resolution lodged before professional after public notices were issued under Sections 13 and 15 IBC could be considered at this stage.” the 13.1 After noticing its earlier judgment in the case of Ghanshaym Mishra it has held as follows: “11. Admittedly, the claim in respect of the demand which is the subject-matter of the present proceedings was not lodged by Respondent 2 after public announcements were issued under Sections 13 and 15 IBC. As such, on the date on which the resolution plan was approved by the learned NCLT, all claims stood frozen, and no claim, which is not a part of the resolution plan, would survive. 12. In that view of the matter, the appeals deserve to be allowed only on this ground. It is held that the claim of the respondent, which is not part of the resolution plan, does not survive. The amount time of the appellant at deposited by the - 20 - NC: 2025:KHC:13412 WP No. 20681 of 2021 admission of the appeals along with interest accrued thereon is directed to be refunded to the appellant.” 14. It is clear from the aforementioned that the revenue not having made any claim before the IRP during the CIRP process and the demand not having been part of the resolution plan, has stood extinguished and cannot be continued. 15. It is relevant to note that a Division Bench of the Gujarath High Court in the case of The Commissioner of Customs, while considering an appeal filed by the revenue in the case of Patanjali after noticing Section 32A of the IBC as well as the amended Section 31 of the IBC as also the judgment of the Hon’ble Supreme Court in the case of Ghanshyam Mishra has held as follows: the resolution process of “14. Thus taking into consideration the fact of the the completion of respondent by the NCLT and undisputed fact that the appellant has not lodged any claim in the capacity of the Operational Creditor before the Resolution Professional, this appeal is required to be disposed of as having become infructuous and abated with regard to any liability of any nature whatsoever having extinguished in view of the implementation of the Resolution Plan and change in management the and C/TAXAP/18/2019 ORDER DATED: 25/08/2022 assessee in view of the provisions of section 31 and section 32A of the IBC as fortified by the above orders passed by the Apex Court.” control of 16. Having regard to the position of law as noticed above, the demand of the revenue against the assessee cannot be continued. - 21 - NC: 2025:KHC:13412 WP No. 20681 of 2021 17. Having regard to the contention of the learned Counsel for the revenue that the assessee will not be entitled to claim refund of the sum of ` 2,97,29,891/-, which has been appropriated pursuant to the Order-in-Original, it is relevant to note that pursuant to the Order-in-Original where the demand of ` 8,06,44,997/- was confirmed and a sum of `2,97,29,891/- was appropriated, the revenue raised the demand of `5,09,15,106/- which was prior to the initiation of the CIRP proceedings under the IBC. In the appeal filed by the assessee before the CESTAT, it is forthcoming from column 9 of the memorandum of appeal that the demand of duty that was challenged by the assessee was a sum of ` 5,09,15,106/- The said demand was the subject matter of appeal before the CESTAT. It is further relevant to note that the revenue has not made any claim for the said sum of `5,09,15,106/- before the IRP, since it had already recovered a sum of ` 2,97,29,891/-, which it had appropriated as noticed in the order in original. The non making of the claim by the revenue before the IRP has, now by virtue of the judgment of the Hon’ble Supreme Court in the case of Ghanshaym Mishra and Ruchi Soya Industries Ltd., held to have been extinguished. Hence, there is justification in the submission made by the learned counsel for the revenue that the assessee will not be entitled to seek for refund of the sum of ` 2,97,29,891/- appropriated by the revenue by the Order-in-Original. Accordingly, it is made clear that the assessee will not be entitled to seek for refund of the sum of ` 2,97,29,891/- by virtue of the order passed in the present appeal.” - 22 - NC: 2025:KHC:13412 WP No. 20681 of 2021 9. As stated supra, the proposed penalties sought to be levied against the petitioner for a period prior to 2020, when the resolution plan was approved by the NCLT. Under these circumstances, I am of the considered opinion that the impugned notice is illegal, arbitrary and the same deserves to be quashed. 10. In the case of M/s. Embio Limited (supra), the Apex Court came to the conclusion that there was no allegation made by the respondents that the petitioners therein were attempting to make out any export or import in contravention of the Rules or orders made therein or the Foreign Trade Policy and consequently, quash the proceedings by holding as under: “Section 11 of the FT Act reads thus: 11. Contravention of provisions of this Act, rules, orders and foreign trade policy.— (1) No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made thereunder and the foreign trade policy for the time being in force. (2) Where any person makes or abets or attempts to make any export or import in contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy, he shall be liable to a penalty of not less than ten thousand rupees and not more than five times the value of the goods or in respect of which any services or technology - 23 - NC: 2025:KHC:13412 WP No. 20681 of 2021 contravention is made or attempted to be made, whichever is more. Sub-section (2) applies when any import or export is made in contravention of any provision of the FT Act, Rules, and orders made thereunder or the foreign trade policy. 13. In the present case, there is no allegation made by the respondents against the appellant’s predecessor of making or attempting to make any export or import in contravention of the FT Act, any rules or orders made thereunder, or the foreign trade police. Under the license granted to the appellant’s predecessor, there was an obligation to export finished goods by earning foreign exchange equivalent to USD 2,59, 948 within a period of five years. The allegation is of the failure to abide by the obligation to export the finished goods within a period of five years. So, there is no allegation of attempting to make an export or import, which is covered by Section 11(2). There is no allegation against the appellant or its predecessor of making an export or import in contravention of the export and import police. Section 11(2) is penal provision. It must be strictly constructed. Thus, the demand for penalty cannot be sustained. Hence, we set aside the impugned Judgements and orders of the learned Single Judge and Division Bench. We also set aside the Order-in-Original dated 16th July 2004 (Annexure-P-3) by which the impugned penalty was imposed.” 11. In view of the aforesaid facts and circumstances, I pass the following: - 24 - NC: 2025:KHC:13412 WP No. 20681 of 2021 ORDER i. The petition is allowed. ii. The impugned notice dated 24.08.2021 issued by the respondent, is hereby quashed. Sd/- (S.R.KRISHNA KUMAR) JUDGE BMC List No.: 1 Sl No.: 14