In the current case, the CIRP was launched by order dated 07.08.2017 by the adjudicating authority pursuant to Section 7 of the I&B Code, and Mr. Savan Godiawala, the appellant, was appointed as Interim Resolution Professional and later confirmed as Resolution Professional of the Corporate Debtor. Subsequently, by order dated 27.08.2018, the adjudicating authority appointed the appellant as the Official Liquidator of the Corporate Debtor.
It was also acknowledged that on March 31, 2016, the Income Tax Department filed a complaint under Sections 276-B and 278-B of the IT Act against Respondent No. 1, the Company's Managing Director, and Respondent No. 2, a Corporate Debtor, alleging that the Tax deducted at source under various TDS sections during the financial year 2012–2013 has not been deposited to the Government.
In the instant case titled Mr. Savan Godiawala v. Mr. G. Venkatesh Babu, Managing Director, Lanco Infratech Ltd. & Ors, the issue raised for clarification before the NCLAT was:
Who has violated the agreement by failing to deposit the TDS on time, making it certain that the alleged offence took place in the fiscal year 2012–2013?
With regard to this issue, respondent No. 1 has submitted an application to the compounding authority because, according to the prosecution, he violated Sections 276-B and 278-B of the Income Tax Act in the current case. Since the liquidator has not committed the claimed offence, he is not obligated to make an application prior to the compounding authority finding that he has done so. However, it is true that once he has assumed control of the Company, the Liquidator must defend the Respondent No. 2 Company.
The findings of Ld. Adjudicating Authority that Respondent No. 1 is appearing in the criminal case brought against the company because he was the then-Managing Director failed to persuade NCLAT. Actually, the Company and Respondent No. 1 in his individual capacity are both the targets of the case. Therefore, even after the liquidation processes have begun, Respondent No. 1 must stand trial in his own right, and if the crime is ultimately found to have occurred, he will be punished.
With the foregoing in mind, the NCLAT determined that the Ld. The Adjudicating Authority had erroneously interpreted the terms of Section 35(1)(k) of the I&B Code and ordered the liquidator to reimburse Respondent No. 1 for the compounding fees. The contested order was thus overturned because it was not supported by the law and the evidence.
The NCLAT categorically stated that,
"Therefore, the person responsible and in charge of the day to day affairs to the Company at relevant time has committed the default. Therefore, he only can be punished. As per the allegation, the Respondent No. 1 G Venketesh Babu was a person responsible and in charge of day to day affairs of the Company being Managing Director. Thus, as per the allegation, he has committed the offence therefore, if the alleged offence is proved then the Company as well as Respondent No. 1 G Venketesh Babu both will be convicted and the Company being a juristic person cannot be punished with imprisonment only the Respondent No. 1 can be punished with imprisonment, which is minimum three months maximum seven years that is why the Respondent No. 1 filed an application for compounding the offence and he wants to escape the consequences at the cost of Company which is in liquidation."