The Supreme Court reaffirmed that statutory claims stand extinguished if not submitted during the Corporate Insolvency Resolution Process (CIRP), emphasizing the binding nature of an approved resolution plan.
On 20 March 2025, the Supreme Court Bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan reviewed an appeal and reaffirmed that statutory claims, including those for customs duty, not submitted during the Corporate Insolvency Resolution Process (CIRP) stand extinguished upon approval of the Resolution Plan under Section 31 of the IBC. The Court held that government authorities cannot raise demands post-approval, as the Resolution Plan is binding on all stakeholders, including statutory creditors.
The Supreme Court adjudicated an appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the judgment of the National Company Law Appellate Tribunal (NCLAT) dated 25th November 2021. The Corporate Insolvency Resolution Process (CIRP) had been initiated against M/s. Tehri Iron and Steel Casting Ltd., and the appellants, being the Joint Resolution Applicants, had submitted a Resolution Plan on 21st January 2019. The National Company Law Tribunal (NCLT) had approved the plan on 21st May 2019. The Resolution Plan had acknowledged liability of Rs.16,85,79,469/- owed to the Income Tax Department for the assessment year 2014-15, categorized as "Contingent Liabilities." Subsequently, demand notices for assessment years 2012-13 and 2013-14 were issued, despite no claims having been filed before the Resolution Professional. The Monitoring Professional contested these demands before the NCLT, which dismissed the application on 17th September 2020 and imposed costs of Rs. 1 lakh. An appeal to the NCLAT was similarly dismissed.
The appellants contended that the NCLT dismissed the application without assigning reasons and that the Resolution Plan, once approved, extinguished all prior claims that were not included. They relied on the Supreme Court’s decision in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505 arguing that the NCLAT disregarded the binding precedent. Conversely, the Income Tax Department asserted that paragraph 44 of the NCLT's order denied relief for statutory dues, leaving the issue to be decided by the relevant government departments. The Supreme Court noted that the Resolution Plan unequivocally provided for the settlement and extinguishment of statutory liabilities as they appeared in the CIRP balance sheet. The demand for income tax dues for assessment years 2012-13 and 2013-14 was not reflected as contingent liabilities, making paragraph 44 of the NCLT’s order inapplicable.
Relying on Section 31(1) of the IBC, the Supreme Court reiterated that an approved Resolution Plan binds all stakeholders, including the government. The 2019 amendment to Section 31 clarified that statutory dues not forming part of the Resolution Plan stand extinguished. In Ghanashyam Mishra and Sons Private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534, the Supreme Court had held that any claims not included in the approved plan could not be pursued post-approval. Since the tax dues for assessment years 2012-13 and 2013-14 were not part of the Resolution Plan, they stood extinguished by operation of law. The Supreme Court criticized the NCLAT for disregarding binding precedent on incorrect grounds, holding that its reasoning was perverse. The NCLT’s dismissal of the application without considering the merits and imposition of costs was found to be unwarranted. The Supreme Court thus set aside the orders of the NCLT and NCLAT, reaffirming that statutory claims not forming part of an approved Resolution Plan are legally extinguished under Section 31 of the IBC.
Mr. Nikhil Nayyar, Sr. Advocate, Ms. Charchika Yadav, Mr. Devashish Chauhan, Advocates and Ms. Charu Ambwani, AOR represented the Appellants
Mr. N Venkatraman, A.S.G., Mr. Raj Bahadur Yadav, AOR Mr. Rajat Nair, Mr. H R Rao, Mr. Ishaan Sharma, Mr. Sachin Sharma, and Mr. Sarthak Karol, Advocates, appeared for the Respondents.
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