The Supreme Court has passed a landmark decision in the matter of “Sundaresh Bhatt vs. Central Board of Indirect Taxes & Customs” [Civil Appeal No. 7667 of 2021] and held that the provisions of the Insolvency and Bankruptcy Code, 2016 (“Code”) will prevail over the provisions of the Customs Act, 1962 (“Customs Act”) and consequently set aside the order of the National Company Law Appellate Tribunal (“NCLAT”).

The appeal was filed by the Liquidator of ABG Shipyard Ltd. (“Corporate Debtor”), challenging the order of the NCLAT wherein inter alia it was held by the NCLAT that the Goods lying in the customs bonded warehouses are not the assets of Corporate Debtor as the Corporate Debtor failed to take positive steps to take control of its assets by failing to pay customs duties and for that reason, the Corporate Debtor is deemed to have relinquished its title to its Goods by legal implication in terms of the Customs Act.

The question that came for consideration before the Hon’ble Supreme Court was whether the provisions of the Code will prevail over the provisions of the Customs Act and to what extent and whether the Customs Authority is entitled to confiscate the goods of the Corporate Debtor and issue notice to sell the goods in terms of the Customs Act when the liquidation process has been initiated.

Link Legal (currently Dentons Link Legal) team comprising of Abhishek Sharma, Partner, Ashly Cherian, Associate Partner, and Gaurav Arora, Senior Associate appeared for the Liquidator of ABG Shipyard.

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