Insolvency and Bankruptcy Code, 2016 : Deposit of settlement amount under the 2019 Scheme, during moratorium – When impossible in view of the bar under the IBC – Appellant-corporate debtor, if can be made to suffer for no fault of its own and rendered rememediless – On facts, applicationby financial creditor of the appellant u/s. 7 – Corporate Insolvency Resolution Process against the appellant – Appellant subjected to moratorium – Thereafter, Resolution plan approved and the appellant applied for “Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 – Appellant could not pay Rs 1,24,28,500/- as tax dues on the last day due to moratorium imposed under IBC – Appellant sought extension of time but the same was rejected – Writ petition by the appellant – Dismissed by the High Court holding that it cannot issue direction to the authority to accept the amount due and payable under the Scheme, 2019; and that the Designated Committee under the scheme is not existing – On appeal, held: Under the provisions of the IBC, no payment could have been made during the period of moratorium – Thus, the appellant was statutorily restrained/debarred from making any payment – It was impossible for the appellant to make any payment during the period of moratorium – In view thereof, the appellant cannot be punished for not doing something which was impossible for it to do – There was a legal impediment in the way of the appellant to make any payment during the moratorium – Appellant was otherwise entitled to the benefit under the Scheme – Thus, the High Court erred in refusing to grant any relief to the appellant , and the order passed by the High Court quashed and set aside – Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
Allowing the appeal, the Court
HELD: 1.1 It would not be fair on the part of the Court to give a direction to do something which is impossible and if a person has been directed to do something which is impossible, and if he fails to do so, he cannot be held guilty, the appellant cannot be punished for not doing something which was impossible for it to do. There was a legal impediment in the way of the appellant to make any payment during the moratorium. Even if the appellant wanted to deposit settlement amount within the stipulated period, it could not do so in view of the bar under the IBC as, during the moratorium, no payment could have been made. In that view of the matter, the appellant cannot be rendered remediless and should not be made to suffer due to a legal impediment which was the reason for it and/or not doing the act within the prescribed time. [Para 7.3, 8][1120-H; 1121-A-C]
1.2 As regards, the observations made by the High Court to the effect that the High Court cannot, in exercise of powers under Article 226 of the Constitution of India extend the period under the Scheme, 2019, to some extent the High Court is right. The High Court while exercising the powers under Article 226 of the Constitution of India cannot extend the Scheme. However, in the instant case it is not a case of extension of the Scheme by the High Court. It is a case of taking remedial measures. It is not a case where the appellant did not make any application within the stipulated time under the Scheme. This is not a case where the Form No.3 determining the settlement amount was not issued during the validity of the Scheme. It is not a case where the appellant deliberately did not deposit the settlement amount and/or there was any negligence on the part of the appellant in not depositing the settlement amount within the stipulated time. It is a case where the appellant was unable to make the payment due to the legal impediment and the bar to make the payment during the period of moratorium in view of the provisions of the IBC. There may be extra ordinary cases which are required to be considered on facts of each case. The courts are meant to do justice and cannot compel a person to do something which was impossible for him to do. [Para 8.1][1121-D-F; 1122-A]
1.3. As regards, the ground given by the High Court, that the Designated Committees are not in existence, is concerned, it is required to be noted that the CBCE has issued a circular that in a case where the High Court/courts have passed an order setting aside the rejection of the claim under the Scheme after 30.06.2020, the applications can be processed manually. In many cases the High Courts have remanded the matter to the Designated Committees which consist of the officers of the Department and the applications thereafter are processed manually. [Para 8.2]
1.4 As the appellant was not in a position to deposit the settlement amount at the relevant time, more particularly on or before 30.06.2020 due to legal impediment and the bar to make the payment of settlement amount in view of the mortarium under the IBC, and as it is found that the appellant was otherwise entitled to the benefit under the Scheme as the Form No.1 submitted by the appellant has been accepted, the Form No.3 determining the settlement amount has been issued, the High Court has erred in refusing to grant any relief to the appellant as prayed. [Para 9][1122-D-E]
1.5 The impugned judgment and order passed by the High Court is quashed and set aside. It is directed that the payment of Rs.1,24,28,500/- already deposited by the appellant be appropriated towards settlement dues under “Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019” and the appellant be issued discharge certificate. [Para 10][1122-F] Sunil Vasudeva vs. Sundar Gupta (2019) 17 SCC 385 : [2019] 8 SCR 1190; Calcutta Iron Merchants
Association vs. Commissioner of Commercial Taxes (1997) 8 SCC 42; Gyanichand vs. State of Andhra Pradesh (2016) 15 SCC 164 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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