New Delhi, Insolvency appellate tribunal NCLAT on Monday rejected Paradeep Phosphates‘ petition for Entry Tax exemption in Odisha under a BIFR-sanctioned rehabilitation scheme.
A two-member bench has upheld the order passed by the Cuttack bench of the National Company Law Tribunal (NCLT) in this regard after observing that its claim was barred under limitations.
Paradeep Phosphates Ltd (PPL) did not make out any case before the NCLT for issuing any direction for granting exemption from payment of Entry Tax till 2014 as per the sanctioned scheme on September 2, 2008, it said.
“We are of the view that the adjudicating authority, after considering all relevant aspects of the matter, has rightly rejected (plea)…filed by the appellant,” said the bench, comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra.
PPL, a public limited company engaged in the business of manufacturing and sale of fertiliser and other related products, was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) on July 20, 2005, and was put under Draft Rehabilitation Scheme (DRS).
It had approached BIFR seeking exemption from VAT/Sale Tax and Entry Tax from the Odisha government under the provisions of Sick Industrial Company, Special Provisions Act, 1985.
However, the Odisha government opposed the claim for tax exemption, contending that it had no policy to grant relief to sick industrial companies.
The dispute subsequently reached the Odisha High Court and later the Supreme Court. In February 2014, the apex court directed Paradeep Phosphates to deposit 50 per cent of the tax demand, along with interest.
Meanwhile, the legal framework governing sick industrial companies underwent a major change. On December 1, 2016, the Insolvency and Bankruptcy Code (IBC) came into force, leading to the repeal of the Sick Industrial Companies (Special Provisions) Act (SICA), under which PPL had earlier sought relief through the BIFR-sanctioned rehabilitation scheme.
Subsequently, PPL approached the Kolkata bench of the NCLT in May 2017, seeking a declaration that the rehabilitation scheme approved by the erstwhile BIFR be treated as an approved resolution plan under Section 31 of the Insolvency and Bankruptcy Code (IBC).
The Odisha government opposed the plea and filed objections to the application. The matter was later transferred to the Cuttack bench of the NCLT for adjudication, which dismissed it.
This was challenged before the National Company Law Appellate Tribunal (NCLAT), which also rejected it.
The NCLAT observed that the Odisha government had communicated before BIFR in 2008 that it had “no policy” to grant relief to sick industrial companies, amounting to denial of consent for tax concessions.
The appellate tribunal rejected PPL’s argument of “deemed consent” under Section 19(2) of the SICA, saying the state had clearly conveyed its objection within the prescribed period.
It further noted that the seven-year rehabilitation scheme period ended in 2014 and that PPL had not challenged the 2011 BIFR order within the limitation period.
