No proceedings under GST shall continue during the moratorium period as declared under Insolvency and Bankruptcy Code.

Case Details:

Issue- In the above case, the petitioner sought to quash notices issued by respondent authority and intimating the respondent that no proceedings against the petitioner can be continued in view of the moratorium declared by the National Company Law Tribunal (for short NCLT) Bengaluru Bench, Bengaluru against the petitioner on 26-10-2018 thereby initiating corporate insolvency resolution process against the petitioner, all suits, proceedings, etc. initiated against the petitioner cannot be continued till the moratorium is lifted in accordance with the Insolvency and Bankruptcy Code, 2016 (for short the ‘IBC’), the respondent is illegally and arbitrarily attempting to continue the proceedings against the petitioner which are without jurisdiction or authority of law and contrary to Section 14 of the IBC.

Held- It was held that plain reading of section 14 of the IBC will clearly indicate that there is a complete/total embargo/bar to initiate and continue proceedings against the petitioner before any other authority including the respondent – authority also during the pendency of proceedings before the NCLT and appeal(s) to be filed against the same, if any, when the moratorium/CIRP is in force and has not been lifted; it is relevant state that neither the words ‘proceedings’ nor ‘authority’ have been defined under the IBC and consequently giving the said words their plain grammatical meaning, the only inference that arises from a reading of section 14 would be that the said provision is an all pervasive and omnibus provision which includes and encompasses proceedings initiated by the respondent – department against the petitioner also. Under identical circumstances, in Monnet Ispat & Energy Ltd.’s case (supra), in proceedings initiated by the Income-tax Department, a Division Bench of the Delhi High Court held as under: In the instant case, the National Company Law Tribunal (NCLT) [which by virtue of section 5(1) of the Code is the Adjudicating Authority] has by its order dated 18th July 2017 admitted the petition under section 7 of the Code filed by the SBI against the Respondent Assessee and prohibited, inter alia, “the institution of suits or continuation of pending suits or proceedings” against the Respondent. This would include the present appeal by the IT Department (‘Department’) against the order of the Income-tax Appellate Tribunal in respect of the tax liability of the Respondent-Assessee. The aforesaid undisputed facts and circumstances and the decisions of the Apex Court, Delhi High Court and Madras High Court, albeit under the Income-tax Act and the Negotiable Instruments Act are clearly applicable to the instant proceedings and under the GST Act also; under these circumstances, as held by the Madras High Court, I am of the considered opinion that in view of the specific embargo/bar contained in section 14 of the IBC, the instant proceedings initiated by the respondent pursuant to the impugned notices deserve to be stayed/suspended/kept in abeyance till conclusion of the proceedings before the NCLT and appeal(s) to be filed, if any, and only after lifting of the moratorium and completion of the corporation insolvency resolution process.  Insofar as the contention urged by the respondent – state with regard to proceedings to be initiated later by the respondent against the petitioner as being barred by limitation is concerned, the said contention cannot be accepted in view of the non obstante clause contained in section 60(6) of the IBC which excludes the entire period during which the moratorium is in force; so also section 75(1) of the GST Act also excludes the entire period from 29-9-2021 onwards when this court passed an order of stay up to the date of completion of the CIRP and lifting of the moratorium and as such, even this contention urged by the respondent cannot be accepted.