The Supreme Court has allowed an appeal in a case pertaining to the Insolvency and Bankruptcy Code, 2016 and reiterated that all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, shall stand extinguished.

The Appeal before the Apex Court was filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IB Code) challenging the judgment passed by the National Company Law Appellate Tribunal (NCLAT).

The Division Bench comprising Justice Abhay S Oka and Justice Ujjal Bhuyan said, “In this case, the income tax dues of the CD for the assessment years 2012-13 and 2013-14 were not part of the approved Resolution Plan. Therefore, in view of sub-section (1) of Section 31, as interpreted by this Court in the above decision, the dues of the first respondent owed by the CD for the assessment years 2012-13 and 2013-14 stand extinguished.”

AOR Charu Ambwani represented the Appellant while ASG N Venkatraman represented the Respondent.

Factual Background

The Corporate Insolvency Resolution Process (CIRP) was initiated concerning the corporate debtor M/s. Tehri Iron and Steel Casting Ltd. (CD). The appellants are the Joint Resolution Applicants who submitted a Resolution Plan. The National Company Law Tribunal (NCLT) approved the Resolution Plan submitted by the appellants.

The Resolution Plan had referred to the liability of Rs 16,85,79,469 of the first respondent (Income Tax Department) for the assessment year 2014-15 based on the demand which was rectified under section 154 of the Income Tax Act, 1961 ( IT Act). The liability was shown in the Resolution Plan under the heading “Contingent liabilities”. After the approval of the Resolution Plan, the first respondent issued demand notices under the IT Act concerning assessment years 2012- 13 and 2013-14, respectively, concerning the CD.As the first respondent issued a letter asserting the said demands, the second respondent applied to the NCLT to declare that the demands made by the first respondent pertaining to assessment years 2012-13 and 2013-14 were invalid. It was urged that the said demands were invalid as no claim in respect thereof was made before the Resolution Professional until the Resolution Plan was approved.

The NCLT dismissed the application, holding it to be frivolous. Cost of Rs. 1 lakh was made payable by the appellants and the second respondent. Being aggrieved by the said order, an appeal under Section 61 of the IB Code was preferred before the NCLAT. By the impugned judgment and order the NCLAT dismissed the said appeal.Aggrieved thereby, the appellant approached the Apex Court.

Reasoning

Upon a perusal of the facts of the case, the Bench found that the first respondent did not make any claim regarding income tax dues of the CD for the assessment years 2012-13 and 2013-14. It was also noticed that the income-tax liabilities for the assessment years 2012-13 and 2013-14 have not been shown as contingent liabilities under the Resolution Plan.

Referring to the judgment in Ghanashyam Mishra and Sons Pvt. Ltd. through the authorised signatory v. Edelweiss Asset Reconstruction Company Ltd. through the Directors & Ors. (2021), the Bench said, “In view of the declaration of law made by this Court, all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of the IB Code.”

It was further noticed that the NCLAT ignored the binding precedent and the legal effect of the approval of the Resolution Plan. “We cannot approve NCLT's approach of not considering the application on merits and dismissing the same without recording any reasons and also by imposing costs. The order of payment of costs was unwarranted”, it added. It was further held that the Resolution Plan which was approved was binding on the first respondent. Therefore, the subsequent demand raised by the first respondent for the assessment years 2012-13 and 2013-14 was held to be invalid.

“Once the Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier. If such demands are taken into consideration, the appellants will not be in a position to recommence the business of the CD on a clean slate”, it said and also added, “The additional demands made by the first respondent in respect of the assessment years 2012-13 and 2013-14 will operate as roadblocks in implementing the approved Resolution Plan, and appellants will not be able to restart the operations of the CD on a clean slate.”

Allowing the appeal and setting aside the impugned orders of the NCLT and the NCLAT, the Bench held that the demands raised by the first respondent against the CD in respect of assessment years 2012-13 and 2013-14 were invalid and couldn’t be enforced.

Cause Title: Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr. (Neutral Citation: 2025 INSC 375)

Appearance:

Appellant: AOR Charu Ambwani

Respondent: ASG N Venkatraman, AOR Raj Bahadur Yadav, Advocates Rajat Nair, H R Rao, Ishaan Sharma, Sachin Sharma, Sarthak Karol

Click here to read/download Judgment


Justice Abhay S OkaJustice Ujjal Bhuyan

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.