26 June 2019

Customs cannot sale goods in possession after moratorium under IBC

26th June

NCLAT has held that on passing of order of Moratorium by NCLT, it is not open to Customs authorities to issue an e-auction notice of assets belonging to corporate debtor since same cannot be sold during period of moratorium.

Tribunal in Commr. v. Ram Swarup Industries upheld NCLT order restricting Customs from selling assets of corporate debtor. It observed that no step was taken by Customs for sale of goods in terms of s.48 of Customs Act on non-clearance of goods within 30 days and ownership of goods in custody was still with Corporate Debtor.

Tribunal observed that ownership of the rights of the machineries was with the Corporate Debtor and not of a third party, and hence explanation below Section 18(1)(g) of IBC is not applicable.

Customs department’s plea that that the imported goods were not ‘assets’ of the ‘Corporate Debtor’, when customs duty leviable is yet to be discharged and the said goods are yet to be cleared for home consumption, was hence rejected by the NCLAT.

The department was also of the view that that the ‘Corporate Debtor’s’ ownership rights in the imported goods were relinquished by operation of law contained in Section 48 of the Customs Act, 1962.

Counsel for the Resolution Professional had submitted that Section 238 of the I&B Code specifically provides that the I&B Code will override all other laws in case of any inconsistency, and accordingly Section 14 of the IBC which provides for suspension / bar on all proceedings relating to Corporate Debtor post initiation of Corporate Insolvency Resolution Process, will be applicable to the present case.

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