Delhi High Court held that once a resolution plan is approved, all pre-existing statutory dues not included in the plan, are extinguished and cannot be claimed by government authorities.
Delhi High Court Bench of Justice Sachin Datta observed that once a resolution plan is approved by the NCLT and NCLAT under Section 31 of the IBC, all pre-existing statutory dues, including property taxes not included in the plan, are extinguished and cannot be claimed by government authorities for the period prior to the effective date of the resolution plan.
The petitioner filed a writ under Article 226 of the Indian Constitution, seeking to quash a Common Assessment Order issued by the Municipal Corporation of Delhi (MCD) on 02.03.2024, which demanded property tax for Flat Nos. 101-112 at the International Trade Tower, Nehru Place, New Delhi. The petitioner specifically contested the tax demand for Flat Nos. 109 to 112, owned by them, arguing that any property tax liability prior to 26.03.2021 should be extinguished, as per the resolution plan approved by the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT).
The petitioner underwent a Corporate Insolvency Resolution Process (CIRP) in 2017, during which JSW Steel Ltd. submitted a resolution plan approved by the Committee of Creditors and subsequently sanctioned by the NCLT and NCLAT. The resolution plan stipulated that all outstanding government dues prior to the effective date of 26.03.2021 would be written off. The petitioner contended that demands for property tax before this date were invalidated by the Insolvency and Bankruptcy Code (IBC), which binds all stakeholders, including government authorities.
Despite representations made to the MCD, the respondent did not acknowledge these provisions in their assessment order. The petitioner cited several Supreme Court judgments, affirming that once a resolution plan is approved under Section 31 of the IBC, all pre-existing claims, including statutory dues, are extinguished if not included in the plan. The petitioner further highlighted that a similar stay on tax recovery was granted in a previous case concerning their property in the New Friends Colony.
The High Court, after considering the arguments and relevant legal precedents, found merit in the petitioner's submissions and granted an ad-interim order staying the impugned assessment order concerning Flat Nos. 109 to 112. The petitioner was directed to pay property tax only for the period after 26.03.2021. The court scheduled the next hearing for 25.07.2024, allowing the respondents time to file their replies.
Subscribers can access the case, along with case analysis, case research, ratio decidendi, headnotes, briefs, caselaw cross-references, etc. etc.
Click on the Citation
Comments