High Court quashes demand notice and assessment order in the absence of any claim not forming part of the resolution plan.
The Division Bench of Gujarat High Court comprising Justice Bhargav D. Karia and Justice Niral R. Mehta was hearing the application filed by the Corporate Debtor and held that demand notice and assessment order in the absence of any claim not forming part of the resolution plan.
The High Court determined that once a resolution plan is approved under section 31 of the Insolvency and Bankruptcy Code (IBC), claims outlined in the plan become binding, extinguishing any claims not included. Therefore, any demands or proceedings not part of the resolution plan stand extinguished. However, demands arising after the resolution plan's approval, such as those from reassessment proceedings initiated after the effective date of the plan, are not considered extinguished.
The High Court heard arguments from Mr. Dhinal Shah for the petitioner and Mr. Karan Sanghani for respondent Nos. 2 and 3. The matter was taken up for final hearing with the consent of both advocates. The petitioner sought various reliefs, including a declaration prohibiting coercive action against the petitioner and quashing of certain notices issued by respondent No. 2.
The petitioner, a company, had undergone insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) initiated by the State Bank of India. The National Company Law Tribunal (NCLT) approved a resolution plan submitted by M/s. Agrawal Coal Corporation Private Limited, extinguishing certain liabilities of the petitioner.
The petitioner challenged notices issued by the Commissioner of Income Tax (Appeals) regarding assessment orders for several years, including 2018-19. The petitioner argued that these proceedings should have lapsed after the NCLT approved of the resolution plan.
The High Court referred to relevant sections of the IBC and the Supreme Court's decision in Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd. The Supreme Court ruled that once a resolution plan is approved, claims as provided in the plan stand frozen, extinguishing any claims not included. However, it noted that claims arising after the approval date aren't affected.
In this case, the court found that the demand raised in the assessment order for 2018-19, issued after the NCLT's approval, wasn't part of the resolution plan's claims. Therefore, the demand wasn't extinguished. However, notices issued by the CIT (Appeals) were quashed as they pertained to claims covered by the resolution plan.
In summary, while the court quashed certain notices, it upheld the demand raised in the assessment order for 2018-19, ruling that it wasn't extinguished by the resolution plan.
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