51

IN THE SUPREME COURT OF INDIA

INHERENT JURISDICTION
[ORDER XLVIII]
CURATIVE PETITION NO. ______/2023
ARISING OUT OF
REVIEW PETITION NO. 1622/2023
IN
CIVIL APPEAL NO. 1661/2020
(ARISING OUT OF THE JUDGMENT AND ORDER DATED 31.10.2023
DISMISSING REVIEW PETITION (CIVIL) NO. 1622/2023 JUDGEMENT
AND ORDER OF THIS HON’BLE COURT DATED 06.09.2022 IN CIVIL
APPEAL NO. 1661/2020)

BETWEEN: POSITION OF PARTIES

IN THE REVIEW IN THE
PETITION CURATIVE
PETITION
RARE ASSET PETITIONER PETITIONER
RECONSTRUCTION LIMITED
THROUGH ITS AUTHORISED
OFFICER HAVING OFFICE AT
104-106 GALA ARGOS, BS.
HARIKRUPA TOWER,
ELLISBRIDGE, AHMEDABAD-
380007 (SINCE ASSIGNED BY
CONSORTIUM OF LENDERS
LED BY INDIAN OVERSEAS
BANK)

AND

STATE TAX OFFICER (1) RESPONDENT RESPONDENT

UNIT NO. 33 KADI NO. 1 NO.1
DISTRICT MEHSANA [CONTESTING] [CONTESTING]
GUJARAT

RAINBOW PAPERS RESPONDENT RESPONDENT

LIMITED NO.2 NO.2
801 AVADESH HOUSE
 52
OPPOSITE SHRI GOVIND [CONTESTING] [CONTESTING]
GURUDWARA THALTEJ
CROSS ROAD SARKHEJ
GANDHINAGAR
HIGHWAY
AHMEDABAD 380054

IN
REVIEW PETITION (CIVIL) NO. 1622/2023

BETWEEN: POSITION OF PARTIES

IN THE CIVIL IN THE
APPEAL REVIEW
PETITION
INDIAN OVERSEAS BANK NOT A PARTY PETITIONER
THROUGH ITS BRANCH
MANAGERHAVING OFFICE
AT ASHRAM ROAD BRANCH
(0353) GROUND FLOOR,
SHARAD SHOPPING CENTRE,
NEAR CHINUBHAI TOWERS
OPPOSITE HANDLOOM
HOUSE ASHRAM ROAD
AHMEDABAD-380009

AND

STATE TAX OFFICER (1) APPELLANT RESPONDENT

UNIT NO. 33 KADI NO.1
DISTRICT MEHSANA [CONTESTING]
GUJARAT

RAINBOW PAPERS RESPONDENT RESPONDENT

LIMITED NO.1 NO.2
801 AVADESH HOUSE [CONTESTING] [CONTESTING]
OPPOSITE SHRI GOVIND
GURUDWARA THALTEJ
CROSS ROAD SARKHEJ
GANDHINAGAR
 53
HIGHWAY
AHMEDABAD 380054
IN
CIVIL APPEAL NO. 1661/2020

BETWEEN: POSITION OF PARTIES

Before Before This
the NCLAT Court

STATE TAX OFFICER (1) APPELLANT PETITIONER

UNIT NO. 33 KADI
DISTRICT MEHSANA
GUJARAT

AND

RAINBOW PAPERS RESPONDENT RESPONDENT

LIMITED
801 AVADESH HOUSE
OPPOSITE SHRI GOVIND
GURUDWARA THALTEJ
CROSS ROAD SARKHEJ
GANDHINAGAR
HIGHWAY
AHMEDABAD 380054
THROUGH ITS
MANAGING DIRECTOR

CURATIVE PETITIONER UNDER ARTICLE 142 OF THE

CONSTITUTION OF INDIA READ WITH ORDER XLVIII OF THE
SUPREME COURT RULES 2013

To,

THE HON’BLE CHIEF JUSTICE OF INDIA

AND HIS COMPANION JUDGES OF THE
HON’BLE SUPREME COURT OF INDIA.

THE HUMBLE CURATIVE PETITION

OF THE PETITIONER ABOVE NAMED:
 54
MOST RESPECTFULLY SHEWETH:

[1.] That the Rare Asset Reconstruction Limited (Curative Petitioner)

invokes the curative jurisdiction of this Hon’ble Court being

aggrieved by the judgment and order dated 31.10.2023 dismissing

Review Petition No. 1622/2023 in Civil Appeal No. 1661 of 2020.

[2.] That the aforesaid Review Petition (Civil) No. 1623 of 2023 in Civil

Appeal No. 1661 of 2020 has been filed by the Indian Overseas

Bank (Review Petitioner) which was one of the members of the

committee of creditors constituted subsequent to the commencement

of the Corporate Insolvency Resolution Process of the M/s Rainbow

Papers Limited (Corporate Debtor). Whereas, on the other hand

Rare Asset Reconstruction Limited (Curative Petitioner herein) is an

Asset Reconstruction Company under the SARFAESI Act, 2002,

granted Certificate of Incorporation by RBI., The Review Petitioner

i.e Indian Overseas Bank managing its non-performing assets

(NPAs) by assigning its debt to the Rare Asset Reconstruction

Limited (Petitioner herein). This move underscores the bank's

commitment to proactively address its distressed assets and

strengthen its financial position. and member of the Committee of

Creditors (consequent to assignment of debt by the consortium of

lenders led by Indian Overseas Bank) constituted subsequent to

commencement of Corporate Insolvency Resolution Process (CIRP)

 55
of the M/s Rainbow Papers Ltd. (hereinafter referred to erstwhile

Corporate Debtor). After the assignment of its debt, Tthe Curative

Petitioner is now a secured financial creditor of the erstwhile

Corporate Debtor. It is submitted that the grounds set out in this

curative petition fall within the parameters prescribed in the seminal

judgment of this Hon’ble Court in Rupa Ashok Hurra v. Ashok

Hurra, (2002) 4 SCC 388.

1.[3.] That the Curative Petitioner is not reiterating the facts, detailed in the

pleadings and the documents filed in Review Petition No.

1622/2023 and Civil Appeal Nos. 1661/2020 for the sake of brevity

as the said petition forms the part of the records of this Hon’ble

Court. The Curative Petitioner crave liberty from this Hon’ble Court

to refer to and rely on the records of this Hon’ble Court in the said

petition and the same may be treated as forming part of the present

curative petition.

2.[4.] That with great respect, it is submitted that the present case would

warrant the indulgence of this Hon’ble Court in this Curative

proceedings as there are errors apparent on the face of the judgment

and order dated 31.10.2023 on the following amongst other

grounds:

2.1.[4.1.] Because the judgment and order dated 31.10.2023 dismissing the

Review Petition No. 1622/2023 was passed without dealing

 56
with the submissions made by the Indian Overseas Bank

(Review Petitioner) on merits. The Review Petition was

dismissed on the ground that a co-ordinate Bench in C.A. No.

7976 of 2019 (Paschim Anchal Vidyut Vitran Nigam

Limited vs. Raman Ispat Private Limited and Others),

delivered on 17.07.2023 could not have commented upon the

judgment rendered by another co-ordinate Bench of equal

strength and that subsequent decision or a judgment of a co-

ordinate Bench or larger Bench by itself cannot be regarded as

a ground for review. However, the Review Petition was filed

much prior to the aforesaid judgment was delivered on

17.07.2023 and therefore raised substantial grounds on merits

which were not dealt by the Hon’ble Bench.

2.2.[4.2.] Because the Indian Overseas Bank (Review Petitioner) -lead

financial creditor and member of the Committee of Creditors

(“CoC”) were not heard before the order dated 06.09.2022

was passed by this Hon’ble Court and even while dismissing

the Review Petition, the submissions of the Indian Overseas

Bank (Review Petitioner) were not considered on merits. The

Civil Appeal no. 1661 of 2020 was filed without arraying the

successful Resolution Applicant, any member of CoC or even

the Resolution Professional as parties. Only M/s Rainbow

 57
Papers Ltd was made a party on whom the service remained

incomplete as the Corporate Debtor had ceased to exist upon

amalgamation with the Successful Resolution Applicant.

Thus, it was not brought to the notice of this Hon’ble Court

that pursuant to the amalgamation of the erstwhile Corporate

Debtor with the Resolution Applicant w.e.f. 31.03.2018, the

erstwhile Corporate Debtor M/s Rainbow Papers Ltd. ceased

to exist and the possession of assets of M/s Rainbow Papers

Limited has been handed over to M/s Kushal Limited– the

Successful Resolution Applicant. In these circumstances, the

order passed by this Hon’ble Court gravely prejudices not just

the Review Petitioner but all the other stakeholders, who were

not even parties to the civil appeal. Further, before a fresh

Resolution Plan can be considered by CoC, the Resolution

Professional who now stands discharged from his role will

have to take steps for demerger for the erstwhile Corporate

Debtor and the lenders will have to return Rs. 30,50,00,000/-

(Rupees Thirty Crores and Fifty Lakhs only) of upfront

amount to Resolution Applicant along with CIRP expenses

of Rs 3,66,00,000/- (Rupees Three Crores and Sixty Six

Lakhs only).
 58
2.3.[4.3.] Because the claim of Rs. 47,35,72,314/- was not crystallized

on the date Form B was said to have been submitted-there

was no debt due to State Tax Officer. The State Tax Officer

had framed a question for consideration before this Hon’ble

Court that whether by virtue of the provisions of the Gujarat

Value Added Tax Act (“GVAT Act”) more particularly

Section 48, the State Tax Department can be classified as a

secured creditor under Section 3(30) of the Insolvency and

Bankruptcy Code (“the Code”) and therefore can be treated as

one falling under Section 53 (1)(b)(ii) at the time of

distribution of assets. The case of the State Tax Officer

emanates from the argument that Section 48 creates a

statutory charge in favor of the tax authorities which falls

within the definition of Security Interest within the Section

3(30) of the Insolvency and Bankruptcy Code. However, in

the present case the claim of Rs. 47,35,72,314/- was not

crystallized on the date Form B was said to have been

submitted. Thus, it was not brought before this Hon’ble

Court that irrespective of the Section 48 of GVAT Act,

there was no debt due to the State Tax Officer and it was

at best only a contingent claim. The argument that Section

48 creates security interest in favor of the State Tax Authority

 59
can only be applied to situations where the debt has become

due and not in cases where the liability itself had not

crystallized. In Form B, it is admitted that the matter is

pending before the Commercial Tax Tribunal and that the

documents attached are Demand Notice under GVAT Act and

Central Sales Tax Act for the Year 2012-13 to 2015-16. On

02.05.2018, the GVAT Tribunal had remanded the case to

First Appellate Authority for fresh hearing. Section 48 of the

GVAT Act states that Government shall have first charge on

the property of the dealer in the event any amount is payable

by a dealer or any other person, on account of tax, interest or

penalty which the assessee is liable to pay to the government.

Further the application filed before the Adjudicating

Authority also admits that the GVAT Tribunal had passed an

order on 02.05.2018 remanding the appeal to First Appellate

Authority for fresh consideration. Under Section 3(11) of the

Code “debt” means a liability or obligation in respect of a

claim which is due from any person and includes a financial

debt and operational debt. Further as per Section 3(30) of the

Code “secured creditor” means a creditor in favour of whom

security interest is created which is defined under Section

3(31) as right, title or interest or a claim to property, created

 60
in favour of, or provided for a secured creditor by a

transaction which secures payment or performance of an

obligation and includes mortgage, charge, hypothecation,

assignment and encumbrance or any other agreement or

arrangement securing payment or performance of any

obligation of any person. The occasion to assert first charge

under the GVAT Act had not arisen and in the facts of the

present case and as per the statutory definition, the State Tax

Officer was not a creditor much less a secured creditor. The

State Tax Officer at best was only a claimant. Section 48 is

worded as follows:

“48. Tax to be first charge on property.—

Notwithstanding anything to the contrary
contained in any law for the time being in force,
any amount payable by a dealer or any other
person on account of tax, interest or penalty for
which he is liable to pay to the Government shall
be a first charge on the property of such dealer,
or as the case maybe, such person.”

2.4.[4.4.] Because Section 53 of the Code provides for the hierarchy or

priority of claims of various classes of creditors which under

Section 53 (1)(e) classifies the dues payable to the

Government as a separate and distinct category. Section 53

specifies separate and distinct treatment of amounts payable

to secured creditors on the one hand and dues payable to the

 61
government on the other. Thus, dues payable to the

government whether under a statute or by way of a transaction

is a separate category specifically enumerated under Section

53(1)(e). Secondly, Section 3(31) of the Code defines security

interest as a right, title, interest or claim to a property created

in favor of secured creditor by a transaction and not operation

of law. Section 48 of the GVAT Act extracted herein above at

best only creates a charge in favor of dues payable by an

assessee and therefore, does not fall within the definition of

transaction as provided under Section 3(33) of the Code.

Thus, the case of the State Tax Officer that it qualifies as a

secured creditor by virtue of the provisions of the GVAT Act,

more particularly Section 48 falls flat on both the counts.

Therefore, the State Tax Officer cannot claim a place at par

with the secured creditors under Section 53 of the Code.

2.5.[4.5.] Because the order dated 27.02.2019 passed by the Adjudicating

Authority at paragraph 31.1 and 31.2 records that the

outstanding amount due to secured creditor was Rs. 1,468.25

Crores and to the operational creditors was Rs.

139,40,00,000/- (Rupees One Hundred and Thirty Nine

Crores and Forty Lakhs only) whereas the liquidation value of

the Corporate Debtor was only Rs. 424,00,00,000/- (Rupees

 62
Four Hundred and Twenty Four Crores only). The Resolution

Applicant had offered Rs. 632,67,00,000/- (Rupees Sixty

Hundred Thirty Two Crores and Sixty Seven Lakhs only).

Thus, the operational creditor i.e. State Tax Officer would

not have been entitled to any amount out of the liquidation

estate in view of the waterfall mechanism of the Code

under Section 53. In IT v. Monnet Ispat & Energy Ltd.,

(2018) 18 SCC 786 it was held that as per Section 238 of the

Code, it is obvious that the Code will override anything

inconsistent contained in any other enactment, including the

Income Tax Act making it clear that income tax dues, being in

the nature of Crown debts, do not take precedence even over

secured creditors, who are private persons. Further, in Essar

Steel India Ltd. Committee of Creditors v. Satish Kumar

Gupta, (2020) 8 SCC 531 it was held that the Section 53(1) is

to be looked at as it is clear that it is the commercial wisdom

of the CoC that is free to determine what amounts be paid to

different classes and sub-classes of creditors in accordance

with the provisions of the Code and the Regulations made

thereunder and therefore a Resolution Plan approved by CoC

is not to be to interfered with.

 63
2.6.[4.6.] Because while deciding the constitutional validity of various

provisions of the Code in Swiss Ribbons Private Ltd. and

Others v. Union of India and Others (2019) 4 SCC 17, this

Hon’ble Court held that the reason for providing the waterfall

mechanism under Section 53 of the Code, is to achieve the

object for which the Code was enacted. Since repayment of

financial debts infuses capital into the economy in as much as

the Banks and Financial Institutions are able to further lend

such money to other entrepreneurs for their business unlike

the government. The rationale creates an intelligible

differentia between the financial debts and the operational

debts.

2.7.[4.7.] Because no plea with regard to Section 48 of the GVAT Act

or being a secured creditor was raised by the State Tax

Officer in this application before The Appellate Tribunal.

The issue framed by the State Tax Officer before this Hon’ble

Court was also an afterthought having been raised for the first

time before the Appellate Tribunal in Company Appeal (AT)

(Insolvency) No. 404/2019 filed by the State Tax Officer. The

State Tax Officer (Appellant in Civil Appeal No. 1661 of

2020) filed an IA No. 01 of 2019 in C.P. No.

88/9/NCLT/AHM/2017 before the Adjudicating Authority

 64
praying only for rejection of Resolution Plan without

specifically pleading that it was a secured creditor by virtue of

Section 48 of the GVAT Act. In Beacon Trusteeship Limited

v. Earthcon Infracon (P) Ltd., 2020 SCC OnLine SC 1233

this Hon’ble Court had held that a plea not raised before the

Adjudicating Authority cannot be raised for the first time in

the appeal before the Appellate Tribunal or before this

Hon’ble Court in appeal. However, the case canvassed before

this Hon’ble Court by the State Tax Officer was not even

pleaded in the first instance before the Adjudicating

Authority.

2.8.[4.8.] Because CIRP is a time bound process. It is evident that the

plea was raised for the first time after the Adjudicating

Authority rejected the application of the State Tax Officer

holding that CIRP is a time bound process and the State Tax

Officer had approached the Resolution Professional only on

22.10.2018 by which date the Resolution Plan stood approved

by CoC. Public Announcement dated 26.09.2017 was

published in prescribed Form-A in leading newspapers

namely Economic Times and Dainik Bhaskar calling the

creditors to submit their claims and it was stated therein that

the last date for submission of claims was 05.10.2017. The

 65
State Tax Officer is said to have submitted a claim on

28.02.2018. Although Form B on record is dated 24.01.2018

the covering letter and the affidavit is dated 28.02.2018. The

above view was affirmed by the Appellate Authority holding

that the Resolution Professional had no jurisdiction to

entertain the claim after the Resolution Plan stood approved

by the CoC. It is most respectfully submitted that the view

taken by the Adjudicating Authority and the Appellate

Tribunal was in line with the decision of this Hon’ble Court in

Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC),

(2022) 2 SCC 401 wherein it was held that CIRP is a time

bound process. The period prescribed under Regulation 12 of

the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations 2016

is therefore mandatory and not directory. Therefore, even the

government is obligated to file claim before the Resolution

Professional within the time limit prescribed in the public

announcement to enable the Resolution Professional to collate

all claims. Permitting belated claims such as one raised by the

State Tax Officer has the potential of opening floodgates of

litigation, if allowed. It will diminish the chances of a

successful resolution of any Corporate Debtor as it would

 66
permit persons claiming to be creditors to jump onto the

bandwagon even after the Resolution Plan has been accepted

by the CoC.

2.9.[4.9.] Because the resolution plan provided for payment of

contingent and statutory liabilities of the Corporate

debtor. It was also not brought before this Hon’ble Court that

the disputed contingent demands of the Department were

available in the records of the Corporate Debtor and were also

made available to prospective Resolution Applicants. The

successful Resolution Applicant accordingly had provided for

the same in the successful Resolution Plan. The Resolution

Professional even though had not received the claim from the

Sales Tax Officer, the Resolution Plan as approved by the

CoC and submitted to the Adjudicating Authority shows the

following liabilities under “Proposal for Contingent Liabilities

of Corporate Debtor” dues were considered. It thus emerges

that the Information Memorandum recorded and reflected the

disputed contingent claim of the department which was made

known to all prospective Resolution Applicant and the

successful Resolution Applicant had provided for the same in

the successful Resolution Plan. The State Tax Officer was not

justified in canvassing before this Hon’ble Court that if the

 67
Resolution Professional ignores the statutory demands

payable to any Government or a legal authority, altogether,

the Adjudicating Authority is bound to reject the Resolution

Plan. Further the argument that a resolution plan which does

not meet the requirements of Sub- Section (2) of Section 30 of

the IBC, would be invalid and not binding on the Central

Government, any State Government, any statutory or other

authority, any financial creditor, or other creditor to whom a

debt in respect of dues arising under any law for the time

being in force is contrary to the law laid down in

Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset

Reconstruction Co. Ltd., (2021) 9 SCC 657 wherein it was

held that claims frozen under Resolution Plan are binding on

all including the Government.

2.10.[4.10.] Because the communication from the Resolution Professional to

the Appellant in civil appeal clearly shows that no claim was

ever received by the Interim Resolution Professional or

Resolution Professional. The State Tax Officer (Appellant in

Civil Appeal No. 1661 of 2020) is said to have lodged claim

before the Insolvency Resolution Professional in requisite

Form-B to the tune of Rs.47.36 Crores. However, the email

dated 06.11.2018 filed with the Civil Appeal shows that

 68
neither the Interim Resolution Professional nor the Resolution

Professional had received any claim on 28.02.2018. The State

Tax officer undeniably approached the Resolution

Professional as well as the National Company Law Tribunal

at a much belated stage. In paragraph 39 of the judgement this

Hon’ble Court had held that the period prescribed under

Regulation 12 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons)

Regulations 2016 is not mandatory and only directory.

However Corporate Insolvency Resolution Process is a

time bound process, the Resolution Professional was not

empowered to entertain the claim. The courts below rightly

rejected the application on the grounds of delay and latches.

2.11.[4.11.] Because pursuant to the amalgamation of the erstwhile Corporate

Debtor with the Resolution Applicant w.e.f. 31.03.2018, the

erstwhile Corporate Debtor M/s Rainbow Papers Limited

ceased to exist. The possession of assets of M/s Rainbow

Papers Limited has been handed over to M/s Kushal Limited.

In these circumstances, the order passed by this Hon’ble

Court gravely prejudices not just the Review Petitioner i.e.

Indian Overseas Bank but all the other stakeholders.

 69
2.12.[4.12.] Because it was not brought to the notice of this Hon’ble Court

that the M/s Rainbow Papers Limited have ceased to exist

since 31.03.2018. Pursuant to the Resolution Plan, the

erstwhile Corporate Debtor was merged with the Resolution

Applicant. In these circumstances, before a fresh Resolution

Plan can be considered by Committee of Creditors, the

Resolution Professional who now stands discharged from his

role Because upon setting aside of the Resolution Plan, the

lenders will have to return Rs. 30,50,00,000/- (Rupees Thirty

Crores and Fifty Lakhs only) Crores of upfront amount to

Resolution Applicant along with Corporate Insolvency

Resolution Process (CIRP) expenses of Rs 3,66,00,000/-

(Rupees Three Crores Sixty Six Lakhs only). This Hon’ble

Court in Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd.

(CoC), (2022) 2 SCC 401 had therefore held that view that

resolution plan once approved may not be permitted to be

modified/withdrawn. The view taken was that judicial

restraint must not only be exercised while adjudicating upon

the constitutionality of the statute relating to economic policy

but also in matters of interpretation of economic statutes,

where the interpretative manoeuvres of the Court have an

effect of transgressing into the law-making power of the

 70
legislature and disturbing the delicate balance of separation of

powers between the legislature and the judiciary and if

resolution applicants are permitted to seek modifications after

subsequent negotiations or a withdrawal after a submission of

a resolution plan to the adjudicating authority as a matter of

law, it would dictate the commercial wisdom and bargaining

strategies of all prospective resolution applicants who are

seeking to participate in the process and the successful

resolution applicants who may wish to negotiate a better deal,

owing to myriad factors that are peculiar to their own case.

The broader legitimacy of this course of action can be decided

by the legislature alone, since any other course of action

would result in a flurry of litigation which would cause the

delay that 2016 Code seeks to disallow.

2.13.[4.13.] Because statutory authorities like tax authorities cannot be

treated as ‘secured creditors’ and ‘statutory dues’ cannot rank

higher in priority to secured creditors under the provisions of

code. Section 53 of the 2016 Code makes it abundantly clear

that it was the intention of the legislature to deal with

government dues separately from the dues of secured

creditors. There is a special provision inserted, i.e., Section 53

(1) (e) (i), specifically for ‘amount due to the Central

 71
Government and the State Government’. The same is lower in

priority to the amounts due to secured creditors which is at

Section 53(1)(b)(ii). There is intelligible differentia in the

classification since the intention of the Code is to give

preference to secured creditors i.e., banks and financial

institutions over government dues. If the legislature intended

to change the classification of ‘government dues’ to a

‘secured creditor’ on the basis of the ‘statutory charge’, there

would have been a specific language to that effect. The

legislature in its wisdom has specifically treated government

dues within the order of priority of all the dues. The

Government dues have specifically been treated differently to

all other dues owed to other stakeholders, including secured

creditors (who are second in the order of priority).

2.14.[4.14.] Because the Legislative intent in according priority to dues of

secured creditors, like banks and financial institutions, over

the dues is well captured and discussed in various reports

(prepared by commissions and committees established by the

Government of India) both prior to enactment of the Code and

even post the enactment. The Financial Sector Legislative

Reforms Commission (FLRC) was formed by the

Government of India under the chairmanship of Hon’ble Mr.

 72
Justice B.N. Srikrishna (Retd.) to discuss, review and recast

the legal and institutional structures of the financial sector in

India, in tune with the contemporary requirements of the

sector. One of the issues discussed in the report was with

respect to the priority of crown debts in the insolvency and

bankruptcy proceedings. The Report observed that “In India

our laws give preference to crown debt in the form of taxes

and statutory dues over the claims of secured creditors during

insolvency and bankruptcy proceedings. Though reforms in

certain tax laws now provide priority of secured creditors. Tax

dues under Customs Act, 1962, Central Excise Act, 1944, and

service tax under the Finance Act, 1994 are subject to the

claims of secured lenders under the Recovery of Debts due to

Banks and Financial Institutions Act, 1993 (RDDBFI) and the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (SARFAESI). It

was further observed that the government, which has

substantial powers to recover arrears to it prior to bankruptcy,

should not stand ahead of secured creditors. Statutory

priorities of a firm should be well disclosed so that creditors

can act well in time, before they get crowded out by other

claims.” The recommendation made by the Financial Sector

 73
Legislative Reforms Commission (FLRC) in its report was

accepted by the Bankruptcy Law Reform Committee (BLRC)

in its interim report dated February 2015. Similarly in the

report of the Bankruptcy Law Reforms Committee (BLRC)

also recommended to keep the right of the Central and State

Government in the distribution water fall in liquidation at a

priority below the unsecured financial creditors in addition to

all kinds of secured creditors for promoting the availability of

credit and developing a market for unsecured financing

(including the development of bond markets) as in the long

run, this would increase the availability of finance, reduce the

cost of capital, promote entrepreneurship and lead to faster

economic growth. It was observed that the government also

will be the beneficiary of this process as economic growth

will increase the revenues. Further, efficiency enhancement

and consequent greater value capture through the proposed

insolvency regime will bring in additional gains to both the

economy and the exchequer. Thereafter the Report of the

Insolvency Law Committee dated March 26, 2018 was issued

to make recommendations to the Government on the issues

arising from the implementation of the 2016 Code and the

recommendations by the public. One of the issues discussed

 74
was with respect to the low priority given to amount due to

central and state government in distribution during liquidation

under Section 53 of the 2016 Code. While addressing the

same, the Report states that the present priority given to debts

owed to Central and State Governments in Section 53 is in

line with the recommendation provided in the Bankruptcy

Law Reform Committee (BLRC) Report and has been stated

to be in line with the global best practices. Further, the United

Nations Commission on International Trade Law

(UNCITRAL) Legislative Guide on Insolvency Law also

provides that many jurisdictions give low priority to state

dues. The intention behind this is to give benefit of payment

to other creditors who have taken risks while giving loans or

providing debts. Thus, it is abundantly clear that it has always

been the legislative intent to treat government dues (whether a

statutory charge exists or not) lower in priority to the dues of

secured creditor.

2.15.[4.15.] Because Charge under the State Tax Statutes (the Gujarat Value

Added Tax Act, 2003) does not create any ‘security interest’ it

is submitted that it is trite law that the purported charge

created on the assets of a corporate debtor, pursuant to a

statutory provision, does not create any ‘interest’ on the assets

 75
of the said corporate debtor and is merely to prevent private

alienations of the assets. Further, the purported ‘charge’ under

provisions akin to Section 48 of the Gujarat Value Added Tax

Act, 2003 is an ‘incidence’ of non-payment of ‘government

dues’. It does not create an independent right in favour of the

statutory authorities to change the nature of claim to a

‘secured debt’. Section 3(30) and 3(31) of the 2016 Code

defines ‘secured creditor’ and ‘security interest’ respectively

which evidences that a secured creditor is the one in whose

favour a security interest is created. A security interest means

a right; title or interest or a claim to property, created in

favour of a person pursuant to a transaction or agreement or

arrangement securing the payment or performance of an

obligation. The term transaction has been defined in Section

3(33) is evidently a contractual arrangement, in writing,

between a party and a corporate debtor. Therefore, it is

submitted that on a conjoint reading of Section 3(30), 3(31)

and 3(33) a secured creditor is a person who has a said right,

title, interest or claim on an asset created pursuant to a

transaction, i.e., a contractual arrangement with the corporate

debtor. Admittedly, the purported ‘charge’ under the Gujarat

Value Added Tax Act, 2003 on the assets of the Corporate

 76
Debtor is not pursuant to any ‘transaction’ (or agreement or

arrangement) within the meaning of the Code.

3.[5.] That the Curative Petitioner states that no other Curative Petition in this

Hon’ble Court against the judgment and order dated 31.10.2023

passed by this Hon’ble Court in Review Petition No. 1622/2023 is

filed.

4.[6.] That the grounds raised hereinabove had been taken in the Review

Petition No. 1622/2023 and no additional ground had been pleaded

by the Curative Petitioners.

PRAYER

It, is therefore, most respectfully prayed that this Hon’ble Court may

graciously be pleased to:

i.) Allow the present Curative Petition and set aside the judgment

and order 31.10.2023 in Review Petition No. 1622 of 2023 and

order dated 06.09.2022 in Civil Appeal No. 1661 of 2020; and

ii.) Pass such other order or orders as this Hon’ble Court deems fit

and proper under the facts and circumstances of the case.

AND FOR THIS ACT OF KINDNESS, THE APPLICANT/

PETITIONER AS IN DUTY BOUND SHALL EVER PRAY

DRAWN AND FILED BY

 77
(MAYURI RAGHUVANSHI)
ADVOCATE FOR THE PETITIONER
FILED ON: 30/11/2023
NEW DELHI

BEFORE THE SUPREME COURT OF INDIA

INHERENT JURISDICTION
[ORDER XLVIII]
CURATIVE PETITION NO. ______/2023
ARISING OUT OF
REVIEW PETITION No. 1622/2023
IN
CIVIL APPEAL No. 1661/2020

BETWEEN:

RARE ASSET PETITIONER

RECONSTRUCTION LIMITED
VERSUS
STATE TAX OFFICER (I) AND RESPONDENTS
ANOTHER

CERTIFICATE IN VIEW OF SUB-CLAUSE 3 OF RULE 2 ORDER

XLVIII OF THE SUPREME COURT RULES, 2013

Certified that the present Curative Petition is the first Curative Petition in
the impugned order and that the Petitioner has not filed any other Curative
 78
Petition against the impugned order herein. No additional facts, documents
or grounds have been taken or relied upon apart from those which were
part of the Review Petition. This certificate is given on the basis of the
instructions given by the Curative Petitioner whose affidavit is filed in
support of the Curative Petition.

DRAWN AND FILED BY

(MAYURI RAGHUVANSHI)
ADVOCATE FOR THE PETITIONER
FILED ON: 30/11/2023
NEW DELHI