Legal principle

Once the Adjudicating Authority (NCLT) approves the Liquidator's decision to sell the movable/immovable assets of the corporate debtor in liquidation by adopting a particular mode of sale, there is no provision in the IBC that empowers the Appellate Authority (NCLAT) to suo motu conduct a judicial review of that commercial decision.

Court decision

The extract breaks off before the Court's determination of the main appeal (C.A. No. 7667 of 2021) on release of warehoused goods, customs dues, Sections 48/72/142A and IBC priority, so the final holding on the core customs-vs-IBC question is not disclosed in the extract. The extract does disclose the decision in the connected appeals: the NCLAT judgment dated 10.12.2021, to the extent it modified the NCLT's order dated 16.08.2021 and restrained/derailed the Private Sale Process, was quashed and set aside; Civil Appeal No. 7722 of 2021 (R.K. Industries) was dismissed, and Civil Appeal No. 7731 of 2021 (Welspun) was allowed, with directions that the private negotiations commenced on 24.08.2021 be taken to their logical end by the liquidator within four weeks.

Facts

ABG Shipyard, a shipbuilding corporate debtor, regularly imported materials for constructing ships and stored them in Customs Bonded Warehouses in Gujarat and Container Freight Stations in Maharashtra, filing bills of entry for warehousing and obtaining EPCG licences for the warehoused goods. CIRP commenced on 01.08.2017 with a moratorium under Section 13(1)(a) IBC, and liquidation followed on 25.04.2019, with the appellant (Sundaresh Bhatt) appointed liquidator. From 29.03.2019 the Customs authorities issued demand notices for non-fulfilment of EPCG export obligations, and on 11.07.2019 issued a notice under Section 72(1) of the Customs Act for dues of Rs. 763,12,72,645 on 2531 bills of entry, while also filing Form C claims before the liquidator. The NCLT on 25.02.2020 directed release of the warehoused goods to the liquidator without payment of customs duty (customs being left free to lodge claims under the IBC), but the NCLAT on 22.11.2021 reversed, holding the goods were not the corporate debtor's assets, that title was deemed lost under Sections 48 and 72 of the Customs Act, and that the goods be released or disposed of as per the Customs Act by the Proper Officer. The appellant sold the Surat warehoused goods for Rs. 169.11 crores, and the ongoing Dahej sale was challenged before the Supreme Court in connected appeals C.A. Nos. 7722 and 7731 of 2021 (R.K. Industries and Welspun).

Key provisions

• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 33(5), Customs Act, 1962 — Unloading and loading of goods at approved places only
• Section 53, Customs Act, 1962 — Transit of certain goods without payment of duty
• Section 142A, Customs Act, 1962 — Liability under Act to be first charge 
• Section 71, Customs Act, 1962 — Goods not to be taken out of warehouse except as provided by this Act
• Section 48, Customs Act, 1962 — Procedure in case of goods not cleared, warehoused, or transhipped within thirty days after unloading
• Section 61, Customs Act, 1962 — Period for which goods may remain warehoused
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 59, Customs Act, 1962 — Warehousing bond
• Section 46, Customs Act, 1962 — Entry of goods on importation
• Section 25, Customs Act, 1962 — Power to grant exemption from duty