In a recent judgment delivered on March 20, 2025, the Hon'ble Supreme Court of India (Supreme Court / Court), in the case of Vaibhav Goel & Anr. vs. Deputy Commissioner of Income Tax & Anr.,1 held that Income Tax dues not included in an approved Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (Code) stand extinguished. The Court reiterated that a successful resolution applicant cannot be fastened with "belated" claims after the resolution plan is approved by the National Company Law Tribunal (Adjudicating Authority).
This judgment was delivered while deciding an appeal under Section 62 of the Code, filed by Joint Successful Resolution Applicants (Appellants). The appeal challenged the November 25, 2021 judgment of the National Company Law Appellate Tribunal (NCLAT), which upheld the May 21, 2019 order of the Adjudicating Authority.
In the instant case, corporate insolvency resolution process (CIRP) was initiated against M/s. Tehri Iron and Steel Casting Ltd. (Corporate Debtor), whereby, the Appellants submitted a resolution plan which was approved by the Adjudicating Authority vide its order dated May 21, 2019. The said resolution plan inter alia considered an Income Tax liability of Rs. 16,85,79,469/- (Rupees Sixteen Crore Eighty Five Lakh Seventy Nine Thousand Four Hundred and Sixty Nine), for Assessment Year 2014-15, as a "contingent liability" based on a demand notice dated December 18, 2017. However, after the approval of the resolution plan, the Income Tax Department issued further demand notices dated December 26, 2019 and December 28, 2019 for Assessment Years 2012-13 and 2013-14 respectively, despite not filing any claims for these assessment years with the resolution professional of the Corporate Debtor.
In the meantime, a monitoring committee of the Corporate Debtor was constituted, the monitoring professional informed the Income Tax Department that these demands were unsustainable in law as these were raised after the approval of the resolution plan. Despite the above, the Income Tax Department reasserted their demand vide its letter dated June 2, 2020, leading the monitoring professional to approach the Adjudicating Authority against the demands raised. The Adjudicating Authority dismissed the application as "frivolous" and imposed a cost of ₹1,00,000/- (Rupees One Lakh) on the Appellants.
Being aggrieved by the decision, the Appellants filed an appeal under Section 61 of the Code before the NCLAT, which was also dismissed on November 25, 2021. This led to the present appeal before the Supreme Court.
The Supreme Court noted that the Income Tax Department had not filed any claims regarding the Corporate Debtor's tax dues for Assessment Years 2012-13 and 2013-14 before the Resolution Professional. Thus, these dues could not be raised post-approval of the Resolution Plan. Further, while referring to Clause 2(e) and (g) of the Resolution Plan, Supreme Court observed that the Appellants proposed to pay all statutory liabilities appearing in the Corporate Debtor's balance sheet as of the CIRP commencement date would be paid in the normal course of business. It is also noted that post payment of these dues, all statutory dues stand satisfied, settled, and extinguished, with no further claims would subsist. Therefore, Income Tax liability for A.Y. 2014-15 amounting to Rs. 16,85,79,165/- (Rupees Sixteen-crores, eighty-five lakhs, seventy-nine thousand, one-hundred and sixty-five only) was included as a contingent liability, but there was no mention of dues for A.Y. 2012-13 and 2013-14 in the resolution plan.
The Court relied on the Adjudicating Authority's order dated May 21, 2019, which explicitly stated that the resolution plan is binding on the Corporate Debtor, members and employees of the Corporate Debtor, Creditors, including statutory authorities and all other stakeholders. The Supreme Court also rejected the Income Tax Department's reliance on paragraph from the resolution plan, which allowed government departments to decide on relief and concessions separately. It was noted that since A.Y. 2012-13 and 2013-14 demands were never included in the resolution plan, the argument of the Income Tax Department was irrelevant.
While considering the legal provisions enshrined under the Code, Supreme Court reaffirmed that under Section 31(1) of the Code, once a resolution plan is approved, it is binding on all stakeholders, including the Central and State Governments for statutory dues. It further placed reliance on landmark judgments including Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.2 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 and no proceedings could be continued in respect of such dues for the period prior to the date on which the Adjudicating Authority approves the resolution plan under Section 31 of the Code.
In the instant case, the income tax dues of the Corporate Debtor 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 decision of Ghanashyam Mishra (supra), the dues of the first respondent owed by the Corporate Debtor for the assessment years 2012-13 and 2013-14 shall stand extinguished.
While deciding the above case, the Hon'ble Supreme Court passed an observation that NCLAT cannot disregard a judgment passed by it only because the same was not cited before Adjudicating Authority and terming the action of the NCLAT for not considering the said judgment as "perverse".
The Supreme Court reiterated that once the resolution plan is approved by the Adjudicating Authority, no belated claim can be entertained which was not made earlier. If such demands, like Income Tax demands, are taken into consideration, the successful resolution applicant will not be in a position to recommence the business of the Corporate Debtor on a clean slate.
The judgment once again clarifies the legal position on belated claims by creditors, particularly statutory authorities. The ruling strengthens the confidence of resolution applicants by ensuring that once a resolution plan is approved, no new claims can be raised later. At the same time, this decision serves as a warning to statutory authorities to file their claims at the earliest opportunity during CIRP proceedings.
Footnotes
1 Civil Appeal No. 49 of 2022
2 Civil Appeal No.49 of 2022
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