Brief Facts of the case:
Corporate Debtor imported machinery from outside India, custom duty as assessed the custom officer was not paid in full by the corporate debtor due to dispute regarding amount of duty. Department carry out certain e-auction for disposal of uncleared imported cargo but not find any bidder. Corporate debtor filed an application u/s 10 for corporate Insolvency Resolution Process (CIRP) which was admitted by the NCLT and moratorium was imposed. Post that customs department again carried out the e-auction which was challenged by the RP of corporate debtor and filed an application with NCLT praying for issuing directions to the Appellant not to proceed with e-auction of machineries. While NCLT accepted the application, custom department challenged the order in NCLAT.
Question before Adjudicating Authority:
Whether custom department can carry out e-auction of goods of corporate debtor during the CIRP period which are lying with them due to non-payment of custom duty? And whether Resolution professional can take control of this asset?
As per Customs Act:
Section 48 of the ‘Customs Act, 1962’ allows Customs authorities to dispose unclaimed, uncleared, non-duty paid imported goods after providing the importer with thirty-day notice.
As per Insolvency & Bankruptcy Code (IBC), 2016:
Moratorium’ under Section 14 of IBC suspending/barring all proceeding relating to corporate debtor once CIRP is initiated.
As per Sec 18 (1) (f), Interim resolution professional shall take into custody any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor
Section 238 of the IBC specifically provides that the IBC will override all other laws in case of any inconsistency.
The goods are in the custody of the Custom Authority, but the ownership remains with the ‘Corporate Debtor’.
Resolution Professional’ has right to take control and custody of any asset, though the Customs Authority is in possession of the same for the present.
During the period of ‘Moratorium’, the assets of the ‘Corporate Debtor’ cannot be alienated, transferred or sold to a third party. Hence custom authority cannot e-auction the goods, RP can take control of the asset, application filed by custom authority is dismissed accordingly.
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