Customs act v. IBC

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Shubham Budhiraja[1]

 

ABG Shipyard import goods for export. Sometimes they keep such goods at customs warehouse. ABG imported various goods since year 2011. No demand was raised by the custom department for interest on warehouse facilities and pending custom duties. In the 2017, CIRP was issued against ABG. The IRP in further of his duties asked the custom department for warehoused goods but no cooperation received for non-payment of the dues. NCLT under section 60(5) passed directions and directed the custom officer to cooperate. The NCLAT, in appeal, held that customs is a complete code in itself and no goods can be cleared unless duties are paid and thus custom department can auction them. Hon’ble Supreme Court set aside the NCLAT order and observed that the liquidation order was passed in the year 2019 but the custom department initiated the recovery under section 72 of customs act post liquidation order. It further held that IBC overrules Customs act. Customs act also recognize this aspect. Customs act can only determine the pending dues but they cannot recover it except in a manner as given in section 53 of the IBC.[2]

 

(I)                 It has been noticed from past experience that judicial delays is one of the major reasons for the failure of the insolvency process. Thus, much emphasis was laid in the BLRC Report on expediting the liquidation process by curtailing the delay to ensure that the assets of the Corporate Debtor do not get frittered away or depreciated due to the time lag. Once the stage of CIRP is over and the process of liquidation is set into motion, it is critical that least time is lost in liquidating the assets of the Corporate Debtor. The reasons are not far to see.

 

(II)               A quick, smooth and seamless process of liquidation goes a long way in stemming deterioration of the value of the assets of the Corporate Debtor in liquidation and increases the chances of maximizing the returns to the stakeholders.

 

(III)             An Anchor Bidder has no vested right beyond the ROFR, being the origination of the proposal. It must be borne in mind that the Swiss Challenge Process is just another method of private participation that has been recognized by this Court for its transparency but IBC has left it to the discretion of the Liquidator to explore the best possible method for selling the assets of the Corporate Debtor in liquidation, which includes Private Sale through direct negotiations with the object of maximizing the value of the assets offered for sale.

 

 


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com

[2] CIVIL APPEAL No. 7667 of 2021, Judgment dated 26/08/2022

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