Customs Appellate Tribunal Abates Appeal After Approval of Resolution Plan by NCLT

Case Name:

Custom Appeal No. 2657 of 2012 - Patanjali Foods Limited (formerly known as Ruchi Soya Industries Ltd.) vs. Commissioner of Customs, Mangalore

Key Takeaways:

1. The Customs, Excise & Service Tax Appellate Tribunal issued a final order on Custom Appeal No. 2657 of 2012.
2. The appeal was filed by Patanjali Foods Limited against an Order-in-Original passed by the Commissioner of Customs, Mangalore.
3. During the pendency of the appeal, the National Company Law Tribunal (NCLT) approved a Resolution Plan under the Insolvency and Bankruptcy Code, 2016.
4. The Tribunal held that the appeal abates as per Rule 22 of CESTAT (Procedure) Rules, 1982, once the Resolution Plan is approved by the NCLT.
5. The Tribunal cited various case laws supporting the abatement of the appeal after the approval of the Resolution Plan by the NCLT.

Case Synopsis:

The order is related to Custom Appeal No. 2657 of 2012, which arose from an Order-in-Original No.1/2012-Commr. passed by the Commissioner of Customs, Mangalore.

The appellant in this case is Patanjali Foods Limited (formerly known as Ruchi Soya Industries Ltd.), and the respondent is the Commissioner of Customs, Mangalore. The order was issued by Hon’ble Dr. D.M. Misra, Member (Judicial), and Hon’ble Mrs. R. Bhagya Devi, Member (Technical).

The appeal was filed by the appellant against the Order-in-Original passed by the Commissioner of Customs, Mangalore. The appellant raised various grounds for their grievance against the Commissioner’s order and filed the appeal under Section 129A of the Customs Act, 1962.

During the pendency of the appeal, it was brought to the record that Standard Chartered Bank filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) as the Financial Creditor for the initiation of Corporate Insolvency Resolution Process (CIRP) against the appellant. The necessary orders were passed by the Hon’ble National Company Law Tribunal (NCLT), Hyderabad on 8th December 2017 and 15th December 2017. Subsequently, the NCLT approved the Resolution Plan under Section 31(1) of the IBC, 2016 and passed an order dated 24.07.2019.

Consequent to the approval of the Resolution Plan, the appellants filed a miscellaneous application before the Tribunal on 29.05.2023. In the application, the appellants narrated the facts of the proceedings before the NCLT and enclosed the orders passed from time to time. They also referred to a judgment in the case of Ghansyam Mishra Vs. Edelweiss Reconstruction Company Ltd. - 2021 SCC Online SC 313, stating that the appeal became infructuous and any liability stands extinguished.

The learned Authorized Representative for the Revenue argued that once the Resolution Plan is approved by the NCLT, the appeals stand abated as per Rule 22 of CESTAT (Procedure) Rules, 1982, and the Tribunal becomes functus officio. The learned Authorized Representative relied on several case laws to support this argument.

The issue involved in the present appeals is whether the appellants are entitled to continue with the appeal and claim relief after the Order of NCLT approving the resolution plan has been passed.

The Tribunal referred to Rule 22 of CESTAT (Procedure) Rules, 1982, which states that if a party to the appeal or application dies or is adjudicated as an insolvent, the appeal or application shall abate unless an application is made for the continuance of such proceedings by the successor-in-interest, executor, administrator, receiver, liquidator, or other legal representative of the appellant or respondent. The application must be made within 60 days of the occurrence of the event, unless there is sufficient cause for delay.

The Mumbai Bench of the Tribunal, in the case of M/s. Alok Industries Ltd, analyzed Rule 22 and held that the rule becomes applicable as soon as the successor interest with sufficient rights is appointed by the NCLT to make an application for the continuation of the proceedings. In the present case, no such application was filed by the successor interest, and therefore, the appeal abated.

Similar views were expressed by other Benches of the Tribunal in the cases cited by the learned Authorized Representative for the Revenue.

The Tribunal agreed with the consistent view expressed by the Tribunal in previous cases that the appeal abates once the Insolvency Resolution Professional (IRP) is appointed and/or the Resolution Plan is approved. Therefore, the appeal in this case abates as per Rule 22 of CESTAT (Procedure) Rules, 1982.

This appeal is filed by appellant against Order-in-Original No.1/2012-Commr. dated 31.7.2012 passed by the Commissioner of Customs, Mangalore.

2. Appellant is aggrieved by the Order of the learned Commissioner, on various grounds, filed appeal under Section 129A of the Customs Act, 1962.

3. During the pendency of this appeal, it is brought on record that, Standard Chartered Bank filed a petition under Section 7 of Insolvency and Bankruptcy Code, 2016 (in short, “IBC, 2016”) as the Financial Creditor for initiation of Corporate Insolvency Resolution Process (in short, “CIRP”) against the appellant as Corporate Debtor and necessary Orders were passed by the Hon’ble National Company Law Tribunal (in short, “NCLT”), Hyderabad on 08th December 2017 & 15th December 2017. Later the NCLT approved the Resolution Plan under Section 31(1) of the IBC, 2016 and passed the Order dated 24.07.2019.

4. Consequent to the approval of Resolution Plan vide order dated 24.07.2019 and subsequent order dated 04.09.2019, the appellants have filed a miscellaneous application before this Tribunal on 29.05.2023. In the miscellaneous application, the appellants have narrated the facts of the proceedings before the Hon’ble NCLT and enclosed orders passed from time to time.

Further, referring to the judgment in the case of Ghansyam Mishra Vs. Edelweiss Reconstruction Company Ltd. - 2021 SCC Online SC 313 in relation to the appellant became infructuous,hence stands abated and any/all liability, if any, of any nature whatsoever, stands extinguished and prayed accordingly in the said application.

5. Learned Authorised Representative for the Revenue submits that once the Resolution Plan is approved by the Hon’ble NCLT, the appeals stand abated as per Rule 22 of CESTAT (Procedure) Rules, 1982 and the Tribunal becomes functus officio. In support, he has relied on the following case-laws:-

1) M/s MC Nally Sayaji Engineering Limited vs. CCGST, Bolpur – 2023 (4) TMI 1076 – CESTAT KOLKATA

2) CCE & ST, Surat-II vs. Arcelormittal Nippon Steel India Ltd – 2023 (2) TMI 231 – CESTAT AHMEDABAD

3) M/s Jet Airways India Ltd vs. CST, Mumbai-V – 2023 (5) TMI 767 – CESTAT MUMBAI

4) M/s Bhushan Power & Steel Ltd vs. CCE, Kolkata-IV – 2023 (5) TMI 184 – CESTAT KOLKATA

5) M/s Alok Industries Ltd vs. CCE, Belapur & Mumbai – 2022 (10) TMI 801 – CESTAT MUMBAI

6) M/s Murli Industries Ltd vs. CCE, Nagpur – 2022 (11) TMI 289 – CESTAT MUMBAI

6. The issue involved in present appeals is: whether the appellants are entitled to continue with the Appeal and claim relief after Order of NCLT approving the resolution plan has been passed.

7. Undisputedly, during the pendency of this appeal necessary orders have been passed 8th December, 2017 by the Hon’ble NCLT approving the Resolution Plan under Section 31(1) of the IBC, 2016.

8. The relevant provision under the CESTAT (Procedure) Rules, 1982 prescribed at Rule 22 reads as under:

“RULE 22. Continuance of proceedings after death or adjudication as an insolvent of a party to the appeal or application. —

Where in any proceedings the appellant or applicant or a respondent dies or is adjudicated as an insolvent or in the case of a company, is being wound up, the appeal or application shall abate, unless an application is made for continuance of such proceedings by or against the successor-in-interest, the executor, administrator, receiver, liquidator or other legal representative of the appellant or applicant or respondent, as the case may be :

Provided that every such application shall be made within a period of sixty days of the occurrence of the event : Provided further that the Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period so specified, allow it to be presented within such further period as it may deem fit.”

9. The Mumbai Bench of this Tribunal in the case of M/s. Alok Industries Ltd’s case (supra) analysed in detail Rule 22 of CESTAT (Procedure) Rules, 1982 and observed that aforesaid Rule 22 should be applicable the moment the successor interest with sufficient rights is appointed by NCLT to make an application for continuation of the proceeding. It is observed as:

Learned advocate has labored to explain why this rule should not be made applicable in his case. However, in view of the fact as stated in the para 4.2 and 4.3 above we are of the view that moment the successor interest with sufficient rights to be represented is appointed by the NCLT this rule will become applicable and it is for the successor interest to make an application for continuance of the proceedings. In the present case no such application has been filed by the successor interest for the continuance of the proceedings and hence the appeal stands abated by the operation of this rule.

4.6 There is no dispute to the binding nature of the resolution plan as approved by the NCLT. It has been settled by the Hon’ble Apex Court in the cases referred to by the learned counsel for the applicant.

4.8 However, from the date of approval of the resolution plan by the NCLT, the appeal filed by the applicant has abated and CESTAT has become functus officio in the matters relating to this appeal. Further it is also settled that the impugned orders in the appeals have got merged in the order of the NCLT approving the Resolution Plan.

The decision of the Hon’ble Bombay High Court referred to by the learned Authorized representative clearly lays down the test as in which condition the said doctrine shall apply in following manner.

4.9 We are satisfied that the test laid down by the Hon’ble High Court is applicable in the present case for us to hold so. It is quite interesting to note that applicant to the extent of demand made finds the order of NCLT binding and wants pronouncement in respect of the refund by this tribunal. Can we sit in judgement over the order of NCLT approving the resolution plan? Further issue of refund is any case not the issue raised in appeal it is for the applicant to approach the relevant authorities in the matter.

5.1 The appeals filed abate as per the Rule 22 of the CESTAT Procedure Rules, 1982, with effect from the date of the approval of the resolution plan by the NCLT.

5.2 Since the appeals have abated the miscellaneous application filed by the applicant/appellant does not survive.”

10. Similar view has been expressed by other Benches of this Tribunal in the cases cited by the ld. A.R. for the Revenue i.e.(i)

M/s. MC Nally Sayaji Engineering Limited vs. CCGST, Bolpur – 2023 (4) TMI 1076 – CESTAT KOLKATA; (ii) CCE & ST, Surat-II vs. Arcelormittal Nippon Steel India Ltd – 2023 (2) TMI 231 – CESTAT AHMEDABAD; (iii) M/s Jet Airways India Ltd vs. CST, Mumbai-V – 2023 (5) TMI 767 – CESTAT MUMBAI; (iv)M/s Bhushan Power & Steel Ltd vs. CCE, Kolkata-IV – 2023 (5) TMI 184 – CESTAT KOLKATA; (v)M/s Murli Industries Ltd vs. CCE, Nagpur – 2022 (11) TMI 289 – CESTAT MUMBAI.

11. In the appellant’s own case, the Hon’ble Gujarat High Court in R/Tax Appeal No. 32 of 2019 taking note of the judgments on the subject including that of Hon’ble Supreme Court in Ghansyam Mishra’s case held that in such circumstances, the appeal abates.

12. Needless to mention, as observed by the Hon’ble Supreme Court and High Courts in a catena of cases that the Tribunal is a creature of the statute; it cannot travel beyond the express powers vested under the Statute or Rules framed under the statute while deciding a statutory Appeal filed before it against the Orders of the prescribed statutory authorities mentioned under the statute. The corollary, any order passed by the Tribunal beyond the vested powers under the statute would be non-est in law.

13. In the circumstances, we are in complete agreement with the view consistently expressed by this Tribunal in a series of cases referred as above that the appeal abates once the IRP is appointed and/or Resolution plan approved. Consequently, this appeal abates as per Rule 22 of CESTAT (Procedure) Rules, 1982 and this is the relief/Order could be passed as prescribed under the said Rule.

(Operative portion of the Order was pronounced in Open Court.)

(D.M. MISRA)

MEMBER (JUDICIAL)

(R. BHAGYA DEVI)

MEMBER (TECHNICAL)