GST Authorities Not Necessary Parties in IBC Proceedings U/S 9: NCLT Allahabad

GST Authorities Not Necessary Parties in IBC Proceedings U/S 9: NCLT Allahabad

Introduction

The National Company Law Tribunal (NCLT), Allahabad Bench, has held that impleadment of the GST Authorities in proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) is not permissible merely on the ground that the invoices on which the petition is based have been disputed by the Corporate Debtor.

Factual Background

The application was filed seeking impleadment of the GST Authorities as Respondents No. 2 to 5. The impleadment was sought on the basis that the invoices annexed with the original application were alleged to be bogus and involved no actual delivery of goods.

Procedural Background

The Tribunal heard the impleadment application and evaluated the contentions of both parties. The Respondent submitted that the ongoing GST investigation pertains to a different entity and bears no connection with the present dispute.

Contentions of the Parties

Applicant's Contentions: The Applicant contended that the GST Authorities ought to be impleaded since the invoices annexed with the application were allegedly bogus and involved fictitious transactions.

Respondent's Contentions: The Respondent submitted that the GST inquiry is unrelated to the disputed invoices in the present matter. It was further argued that GST returns evidencing payments had already been submitted, and that a criminal complaint was initiated by the director of the Corporate Debtor only after the issuance of the demand notice.

Tribunal’s Analysis

The Tribunal held that the GST Authorities are independent statutory bodies conducting investigations in accordance with law and are neither necessary nor proper parties in IBC proceedings under Section 9.

Reasoning & Findings

The Bench comprising Shri Praveen Gupta (Hon'ble Member Judicial) and Shri Ashish Verma (Hon'ble Member Technical) observed that the scope of IBC proceedings is distinct from investigations conducted by tax authorities under GST laws. Hence, mere allegations of bogus invoices cannot be a valid ground to implead GST Authorities in proceedings under Section 9 of the IBC.

Implications

The ruling emphasizes the distinction between recovery/investigation mechanisms under tax laws and adjudication under insolvency law. It reiterates that IBC proceedings cannot be used to draw in unrelated government agencies merely due to parallel or unrelated disputes.

Outcome

The Tribunal dismissed the application seeking impleadment of the GST Authorities, holding that their participation is not necessary for adjudication of the Section 9 petition.

Representation

In this case, the Applicant was represented by Ms. Prachi Johri, Advocate, while the Respondents were represented by Mr. Srijan Mehrotra and Mr. Anuj Kumar, Advocates.