Supreme Court Grants Relief to Company Unable to Deposit Settlement Amount during Insolvency Moratorium

In a recent judgment, the Supreme Court of India has granted relief to M/s. Shekhar Resorts Limited, a hospitality services company, after it was unable to deposit the settlement amount under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 during an insolvency moratorium. The Court emphasized that no person should be left remediless and highlighted the impossibility of the appellant making the payment due to the legal impediment caused by the moratorium under the Insolvency and Bankruptcy Code (IBC). "No person should be left remediless, and the Court cannot compel a person to do something impossible."

The appellant company had approached the High Court seeking directions to consider its case under the Scheme of 2019. However, the High Court dismissed the petition, stating that it could not issue a direction contrary to the Scheme and that the Designated Committee, responsible for processing applications under the Scheme, no longer existed.

Justice M.R. Shah, delivering the judgment, observed, "The appellant cannot be punished for not doing something which was impossible for it to do... No person should be left remediless, and the Court cannot compel a person to do something impossible." The Court acknowledged the legal disability faced by the appellant during the moratorium, which prohibited any payments, and emphasized that the inability to deposit the settlement amount should not render the appellant remediless.

Furthermore, the Supreme Court noted that even after the expiry of the Scheme, the Designated Committees continued to function manually in cases where courts set aside rejections after the Scheme period. It also mentioned circulars issued by the Central Board of Indirect Taxes and Customs (CBIC), allowing for manual processing of declarations under the Scheme in such cases.

Consequently, the Supreme Court allowed the appeal, quashed the High Court's judgment, and directed the appropriation of the payment already deposited by the appellant towards the settlement dues under the Scheme of 2019. The appellant will also be issued a discharge certificate.

This judgment highlights the Court's commitment to ensuring that individuals and entities facing legal impediments are not unfairly penalized and provides clarity on the application of the Scheme in cases involving insolvency moratoriums.

Date of Decision: January 5, 2023

M/s. Shekhar Resorts Limited vs Union of India & Ors.