Case Note & Summary
The dispute arose from the appellant company's inability to pay a settlement amount of Rs.1,24,28,500/- under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 by the extended deadline of 30.06.2020 due to a moratorium imposed under the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant, a hospitality service provider, had been under corporate insolvency resolution process from 11.09.2018, with the moratorium ending on 24.07.2020 upon approval of a resolution plan by the NCLT. The appellant had submitted its application under the Scheme within the prescribed time, received Form No.3 determining the dues on 25.02.2020, but could not pay during the moratorium period. After the moratorium lifted, the appellant sought permission to pay, but the authorities rejected the request, citing the expired deadline. The High Court dismissed the appellant's writ petition, reasoning that it could not issue directions contrary to the Scheme and that the Designated Committee under the Scheme no longer existed. The Supreme Court considered the core legal issue of whether the appellant, prevented by legal disability from paying due to the IBC moratorium, was entitled to relief. The appellant argued that the Designated Committee continued to function manually post-deadline per CBEC instructions, and that IBC's moratorium provisions took precedence, making payment during that period impossible and a breach of law. The Court analyzed these submissions, referencing precedents on moratorium effects and legal disability. It held that the appellant's failure to pay was due to operation of law, not fault, and that the Designated Committee could process the case manually. The Court allowed the appeal, directing the respondents to accept the payment made into an escrow account on 08.01.2021 and issue a discharge certificate under the Scheme.
Headnote
A) Insolvency Law - Moratorium Under IBC - Legal Disability to Pay Dues - Insolvency and Bankruptcy Code, 2016, Section 14 - The appellant, under corporate insolvency resolution process from 11.09.2018 to 24.07.2020, was subject to moratorium under Section 14 IBC, prohibiting payments during that period. Held that the appellant's inability to pay the Sabka Vishwas Scheme amount by 30.06.2020 was due to legal disability imposed by operation of law, and no person can be expected to do the impossible or be left remediless. (Paras 3.3-3.5) B) Tax Law - Sabka Vishwas Scheme - Designated Committee's Existence Post-Deadline - Finance Act, 2019, Section 125 and Scheme Rules - The High Court dismissed the writ petition partly on grounds that the Designated Committee under the Scheme no longer existed after 30.06.2020. The Supreme Court noted that CBEC instructions dated 17.03.2021 allowed manual processing of declarations by Designated Committees post-deadline, and committees continued to function for court-ordered reconsiderations. Held that the Designated Committee could still process the appellant's case manually. (Paras 3.1-3.2) C) Conflict of Laws - Precedence of IBC Over Inconsistent Statutes - Insolvency and Bankruptcy Code, 2016 - The appellant argued that IBC has precedence over any inconsistent statutes, citing Principal Commissioner of Income Tax vs. Monnet Ispat & Energy Ltd. (2018) 18 SCC 786, which held that moratorium prohibits existing proceedings against the debtor. This principle supported the appellant's claim that payment during moratorium would breach IBC provisions. (Para 3.3) D) Procedural Law - Writ Jurisdiction - Relief for Legal Disability - The Supreme Court exercised its jurisdiction to grant relief where the appellant faced legal disability due to moratorium under IBC. The Court directed the respondents to accept the payment of Rs.1,24,28,500/- made into an escrow account on 08.01.2021, within six months of the resolution plan approval on 24.07.2020, and issue a discharge certificate under the Sabka Vishwas Scheme. (Paras 3.6, 5)
Issue of Consideration
Whether the appellant, who could not pay the settlement amount under the Sabka Vishwas Scheme by the extended deadline of 30.06.2020 due to a moratorium under the Insolvency and Bankruptcy Code, 2016, is entitled to relief and direction for acceptance of payment post-moratorium.
Final Decision
Supreme Court allowed the appeal, directed respondents to accept payment of Rs.1,24,28,500/- made into escrow account on 08.01.2021 towards settlement dues under Sabka Vishwas Scheme and issue discharge certificate to appellant
Law Points
- The Sabka Vishwas (Legacy Dispute Resolution) Scheme
- 2019 under Section 125 of the Finance Act
- 2019
- Insolvency and Bankruptcy Code
- 2016 (IBC) moratorium provisions under Section 14
- precedence of IBC over inconsistent statutes
- legal disability due to operation of law
- no person to be left remediless
- Designated Committee's continued existence for manual processing post-scheme deadline
