Facts of the Case

The petitioner, Commissioner of Income Tax, Central-III, Delhi, filed a writ petition against the Income Tax Settlement Commission & Anr.

  • The respondent company (Respondent No. 2) was undergoing Corporate Insolvency Resolution Process (CIRP) before the NCLT.
  • The petitioner’s claim submitted before the Resolution Professional (RP) was rejected.
  • It was also brought to the Court’s notice that the petitioner did not respond to the public announcement issued by the Interim Resolution Professional (IRP).
  • The petitioner intended to pursue an appropriate remedy against the rejection of its claim.

 

Issues Involved

  1. Whether the writ petition can proceed during the subsistence of moratorium under Section 14 of the IBC.
  2. Whether any effective relief can be granted while CIRP proceedings are pending before the NCLT.

 

Petitioner’s Arguments

  • The petitioner (Revenue) contended that its claim filed before the Resolution Professional had been rejected.
  • It submitted that it is in the process of pursuing appropriate legal remedies against such rejection.

 

Respondent’s Arguments

  • It was submitted that the petitioner did not respond to the public announcement made by the IRP.
  • The respondent emphasized that the company is already undergoing CIRP before the NCLT, and hence the statutory framework under IBC governs the matter.

 

Court’s Findings / Order

  • The Court observed that moratorium under Section 14 of the IBC is currently in operation.
  • Due to the moratorium, continuation of proceedings in the writ petition would serve no meaningful purpose.
  • Accordingly, the writ petition was closed.
  • However, liberty was granted to the petitioner to revive the petition, subject to the outcome of proceedings before the NCLT and in accordance with law.

 

Important Clarifications by the Court

  • The Court reaffirmed that Section 14 moratorium has overriding effect, restricting continuation of parallel proceedings.
  • It clarified that remedies must be pursued within the framework of IBC proceedings before NCLT during CIRP.
  • Liberty to revive ensures that rights of the petitioner are not extinguished, but only deferred.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/60812122023CW7082014_153052.pdf

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