2025 INSC 375
SUPREME COURT OF INDIA
(HON’BLE
ABHAY S OKA, J. AND HON’BLE UJJAL BHUYAN, JJ.)
VAIBHAV
GOEL AND ANR.
Petitioner
VERSUS
DEPUTY
COMMISSIONER OF INCOME TAX AND ANR.
Respondent
Civil
Appeal No. 49 OF 2022-Decided on 20-03-2025
Civil
Insolvency and
Bankruptcy Code, 2016, Section 31(1) – Insolvency and Bankruptcy - Legal
effect of approval of resolution plan - 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 the dues of the
first respondent owed by the CD for the assessment years 2012-13 and 2013-14
stand extinguished - Resolution Plan approved on 21st May 2019 is binding on
the first respondent - Therefore, the subsequent demand raised by the first
respondent for the assessment years 2012-13 and 2013-14 is invalid and cannot
be enforced - Impugned orders of NCLT and NCLAT liable to be set aside.
(Para
8, 11, 13 and 14)
JUDGMENT
Abhay
S. Oka, J.:-
FACTUAL
DETAILS
1.
This appeal under Section 62 of Insolvency and Bankruptcy Code, 2016 (for
short, ‘the IB Code’) takes an exception to the judgment and order dated 25th
November 2021 passed by the National Company Law Appellate Tribunal (‘the
NCLAT’). The Corporate Insolvency Resolution Process (CIRP) was initiated
concerning the corporate debtor M/s. Tehri Iron and
Steel Casting Ltd. (‘the CD’). The appellants are the Joint Resolution
Applicants. They submitted a Resolution Plan dated 21st January 2019. The
National Company Law Tribunal (‘the NCLT’), vide its order dated 21st May
2019, approved the Resolution Plan submitted by the appellants.
2.
The Resolution Plan had referred to the liability of Rs.16,85,79,469/- (Rupees
Sixteen-crores, eighty-five lakhs, seventy-nine
thousand, four-hundred and sixty- nine only) of the first respondent (Income
Tax Department) for the assessment year 2014-15 based on the demand dated 18th
December 2017 which was rectified under section 154 of the Income Tax
Act, 1961 (for short, ‘the 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 dated 26th
December 2019 and 28th December 2019 under the IT Act concerning
assessment years 2012- 13 and 2013-14, respectively, in respect of the CD. However,
admittedly, no claim about the demands for the two assessment years was
submitted before the Resolution Professional. The second respondent, the
Monitoring Professional, addressed a letter to the first respondent, contending
that the demands for the two aforesaid assessment years were unsustainable in
law. As the first respondent issued a letter dated 2nd June 2020 asserting the
said demands, the second respondent applied to the NCLT for declaring 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 by the order dated 21st May 2019. By the order
dated 17th September 2020, the NCLT dismissed the application, holding it to be
frivolous. The costs of Rs.1 lakh were 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 dated 25 th
November, 2021, the NCLAT dismissed the said appeal.
SUBMISSIONS
3.
The learned senior counsel appearing for the appellants submitted that the NCLT
dismissed the application made by the second respondent without assigning any
reasons. He pointed out that though no claim was received from the first
respondent pertaining to the assessment year 2014-15 till the submission of the
Resolution Plan, the Resolution Professional by itself admitted the liability
of payment of income tax for the assessment year 2014-15, which was pending as
a contingent liability of the CD. He relied upon a decision of this Court in
the case of Committee of Creditors of Essar
Steel India Ltd. vs. Satish Kumar Gupta & Ors. [(2020) 8 SCC 531] . He submitted that the issue was
squarely covered by a decision of a Bench of three Hon’ble Judges of this court
in the case of Ghanashyam Mishra
and Sons Pvt. Ltd. through the
authorised signatory v. Edelweiss Asset Reconstruction Company Ltd. through the
Directors & Ors. [(2021) 9 SCC 657].
However, the NCLAT has brushed aside the said binding decision. He, therefore,
submitted that the impugned orders of NCLT and NCLAT deserve to be quashed and
set aside.
4.
Learned ASG appearing for the first respondent supported the impugned orders.
He relied upon paragraph 44 of the order dated 21st May 2019 passed by the
NCLT, which rejected the request for relief and concession with respect to
statutory dues and observed that the issues are left to be decided by
respective government departments. He, therefore, submitted that the NCLAT had
rightly dismissed the appeal.
CONSIDERATION
OF SUBMISSIONS
5.
It is an admitted position 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. In sub-clause (e) of Clause 2 of the approved Resolution Plan, under
the heading ‘Settlement of Outstanding Liabilities’, it was provided thus:
“.. .. .. .. .. .. ..
The Resolution
Applicant however understands from the information made available, all
does (sic dues) pertaining to the Statutory Liabilities being paid on time.
Therefore, the Resolution Applicant proposes to pay all Statutory Liabilities
as appearing in the balance sheet of CIRP commencement date i.e. 31.05.2018 in
the normal course of business.
Post payment as stated
above, the entire Statutory due shall stand satisfied,
settled and extinguished, and no claims whatsoever, of any nature, shall
subsist.”
(emphasis added)
In
sub-clause (g) of Clause 2 of the Resolution Plan, contingent liabilities have
been mentioned. One of the contingent liabilities mentioned is Income-tax
liability as regards the assessment year 2014-15 in the sum of Rs.16,85,79,165/- (Rupees Sixteen-crores,
eighty-five lakhs, seventy-nine thousand, one-hundred and sixty-five only). The
Resolution Plan provides for the manner of resolution regarding the said
contingent liabilities.
6.
We have perused NCLT's order dated 21st May 2019, which approved the Resolution
Plan. Paragraph 46 of the said order reads thus:
“It is hereby declared
that the Resolution Plan is binding on the corporate debtor, members, employees
of the corporate debtor, creditors of the corporate debtor and other
stakeholders involved in the Resolution Plan.”
The first respondent
has relied upon paragraph 44 of the said order, which read thus:
“In the resolution
plan, relief and concession has been sought in respect of statutory dues for
making payment in instalments, no coercive action, waiver
of requirement of pre-deposit for filing appeals, waiver of interest, penal
interest or damages. These are issues to be decided by the respective
government department and appropriate application may be moved before them.”
Now,
the question is whether paragraph 44 has any relevance to the demands for
income tax that were raised after the date of approval of the Resolution Plan.
Sub- clause (g) of clause 2 of the Resolution Plan seeks relief and concessions
referred to in paragraph 44 referred above. The sub-clause (g) relates to
the contingent liabilities mentioned in clause 2. The income-tax liabilities
for the assessment years 2012-13 and 2013-14 have not been shown as contingent
liabilities under the Resolution Plan. Hence, what is observed in paragraph 44
is not relevant at all.
7. Section
31(1) of the IB Code provides for the legal effect of approval of the
Resolution Plan. Section 31(1) reads thus:
“(1) If the Adjudicating Authority is
satisfied that the resolution plan as approved by the committee of creditors
under sub-section (4) of section 30 meets the requirements as
referred to in sub- section (2) of section 30, it shall by order approve
the resolution plan which shall be binding on the corporate debtor and its
employees, members, creditors, [including the Central Government, any State
Government or any local authority to whom a debt in respect of the payment of
dues arising under any law for the time being in force, such as authorities to
whom statutory dues are owed] guarantors and other stakeholders involved in the
resolution plan.
Provided that the
Adjudicating Authority shall, before passing an order for approval of
resolution plan under this sub-section, satisfy that the resolution plan has
provisions for its effective implementation.”
(emphasis added)
The words starting from
‘including’ and ending with ‘owed’ were incorporated in the IB Code with effect
from 16th August 2019. Section 31(1), as it stood before the amendment
mentioned above and after the amendment, came for consideration in the decision
of this Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. Paragraph 102 of the said
decision reads thus:
“102. In the result, we answer the questions
framed by us as under:
102.1. That once a
resolution plan is duly approved by the adjudicating authority under
sub-section (1) of Section 31, the claims as provided in the resolution
plan shall stand frozen and will be binding on the corporate debtor and its
employees, members, creditors, including the Central Government, any State
Government or any local authority, guarantors and other stakeholders. On the
date of approval of resolution plan by the adjudicating authority, all such
claims, which are not a part of resolution plan, shall stand extinguished and
no person will be entitled to initiate or continue any proceedings in respect
to a claim, which is not part of the resolution plan.
102.2. The 2019
Amendment to Section 31 of the I&B Code
is clarificatory and declaratory in nature and
therefore will be effective from the date on which the I&B Code has come
into effect.
102.3. Consequently,
all the dues including the statutory dues owed to the Central Government, any
State Government or any local authority, if not part of the resolution plan,
shall stand extinguished and no proceedings in respect of such dues for the
period prior to the date on which the adjudicating authority grants its
approval under Section 31 could be continued.”
(emphasis added)
8.
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. 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.
9.
We may note here that the decision of this Court in the case of Ghanashyam Mishra and Sons Pvt.
Ltd. was specifically relied upon before the NCLAT. The decision of this Court
was brushed aside by the NCLAT, firstly on the ground that the said
decision was not relied upon before NCLT and, secondly, on the ground that
the appellants have not challenged the Resolution Plan. Unfortunately, the
NCLAT has ignored the binding precedent and the legal effect of the
approval of the Resolution Plan as laid down in paragraphs 102.1 to
102.3 of the aforementioned decision. The reason given by NCLAT that the
decision of this Court cannot be considered as it was not cited before the NCLT
is perverse.
10.
Before we part with this judgment, we may note that on the application made by
the second respondent, the NCLT issued notice to the first respondent by order
dated 27th August 2020. However, by the order dated 17th September 2020, which
was impugned before the NCLAT, without considering the merits and without
recording reasons, the NCLT held that the application was frivolous as the
second respondent was seeking relief, which the Bench did not consider at the
time of the approval of the Resolution Plan. The NCLT also imposed costs of Rs.
one lakh on the appellants and the second respondent. 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.
11.
In view of the above discussion, the Resolution Plan approved on 21st May 2019
is binding on the first respondent. Therefore, the subsequent demand raised by
the first respondent for the assessment years 2012-13 and 2013-14 is invalid.
12. 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. On this aspect,
we may note what is held in paragraph 107 of the decision of this Court in the
case of Committee of Creditors of Essar Steel India
Ltd1. Paragraph 107 reads thus:
“107. For the same
reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine
NCLAT 388] in holding that claims that may exist apart from those decided on
merits by the resolution professional and by the Adjudicating
Authority/Appellate Tribunal can now be decided by an appropriate forum in
terms of Section 60(6) of the Code, also militates against the
rationale of Section 31 of the Code. A successful resolution
applicant cannot suddenly be faced with “undecided” claims after the resolution
plan submitted by him has been accepted as this would amount to a hydra head popping
up which would throw into uncertainty amounts payable by a prospective
resolution applicant who would successfully take over the business of the
corporate debtor. All claims must be submitted to and decided by the
resolution professional so that a prospective resolution applicant knows
exactly what has to be paid in order that it may then take over and run the
business of the corporate debtor. This the successful resolution applicant does
on a fresh slate, as has been pointed out by us hereinabove. For these reasons,
NCLAT judgment must also be set aside on this count.”
(emphasis added)
13.
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.
14.
We, therefore, hold that the demands raised by the
first respondent against the CD in respect of assessment years 2012-13 and
2013-14 are invalid and cannot be enforced. We set aside the impugned orders of
NCLT and NCLAT and allow the appeal accordingly.
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