Summary
A hotel company in insolvency applied through its resolution professional under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. It received Form No. 3 fixing Rs. 1,24,28,500 as settlement dues, payable by 30.06.2020. The IBC moratorium, however, lasted until the NCLT approved the resolution plan on 24.07.2020, and the department then refused to accept payment as time-barred. The Allahabad High Court declined relief. The Supreme Court allowed the appeal. Payment was legally impossible during the moratorium, the law does not compel the impossible, and no party should be left remediless. Granting relief was a remedial measure, not an extension of the Scheme. The CBIC had in any case allowed declarations to be processed manually after 30.06.2020.
Issues
- Whether an applicant under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 that could not pay the determined settlement dues by 30.06.2020 because of the IBC moratorium can be granted relief after the moratorium ended.
Provisions considered
- Section 125 (Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019), Finance Act, 2019The appellant had filed Form No. 1 in time and received Form No. 3 determining the settlement amount, so it was otherwise entitled to the benefit of the Scheme. (¶¶ 2.1, 6, 9)
- Sections 7 and 14, Insolvency and Bankruptcy Code, 2016The moratorium from 11.09.2018 to 24.07.2020 barred the corporate debtor from making the payment, which would otherwise have breached the Code. (¶¶ 2.1, 6, 8)
- Article 226, Constitution of IndiaWhile a High Court cannot extend a statutory scheme, it can take remedial measures where non-compliance resulted from a legal impediment. (¶ 8.1)
Held
- The appellant was statutorily barred from paying during the IBC moratorium and promptly offered payment once it ended; following Calcutta Iron Merchants' Association, Gyanichand and Sunil Vasudeva, it cannot be punished for failing to do the impossible or left remediless. (¶¶ 6, 7, 7.1, 7.2, 7.3, 8)
- This is not an extension of the Scheme by the court but a remedial measure, as the application and determination were within time and non-payment was due to a legal impediment, not negligence; the High Court's view that the Designated Committees had ceased to exist was also incorrect, given the CBIC circular permitting manual processing. (¶¶ 8.1, 8.2, 9)
Result
Civil Appeal No. 8957 of 2022 allowed; the Allahabad High Court judgment dated 24.06.2021 in Writ Tax No. 328 of 2021 set aside, and the Rs. 1,24,28,500 already deposited directed to be appropriated towards settlement dues under the Scheme with a discharge certificate to issue; no costs.