Supreme Court Upholds Extinguishment of Belated Tax Claims Post-Resolution Plan Approval Under IBC

The Hon’ble Supreme Court, in its judgment in Vaibhav Goel and Another v. Deputy Commissioner of Income Tax and Another, addressed the enforceability of tax demands raised post-approval of a Resolution Plan under the IBC, clarifying the finality of such plans and their impact on statutory dues.

The appellants, joint resolution applicants for M/s. Tehri Iron and Steel Casting Ltd., had their plan approved by the National Company Law Tribunal (NCLT) on May 21, 2019, during the Corporate Insolvency Resolution Process (CIRP) initiated on May 31, 2018. The plan listed a contingent tax liability of INR 16,85,79,469 for 2014-2015 but omitted dues for 2012-2013 and 2013-2014, as the Income Tax Department filed no claims for these years. Post-approval of the Resolution Plan, the Department issued demands on December 26 and 28, 2019, for these earlier years, prompting the Monitoring Professional to seek their invalidation before the NCLT. The NCLT dismissed this plea on September 17, 2020, with costs, and the NCLAT upheld this on November 25, 2021, leading to the Supreme Court appeal under Section 62 of the IBC.

The Supreme Court held as follows:

1. Under Section 31(1) of the IBC, an approved Resolution Plan is binding on all stakeholders, including the Income Tax Department, and claims not included—till that date, such as the 2012-2013 and 2013-2014 demands in the present case—are extinguished. The Court relied on the judgment of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd in this regard.
2. The Court clarified that the plan’s provisions settled statutory dues as of May 31, 2018, and addressed contingent liabilities, but the belated demands were neither claimed nor listed, rendering them unenforceable.
3. Relying on Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020), the Court emphasized that resolution applicants require a “clean slate,” and allowing post-approval claims undermines the IBC’s goal of reviving the corporate debtor.
4. That the NCLT and NCLAT erred in dismissing the appellants’ plea without merit-based reasoning and ignoring binding precedents, a stance the Court deemed perverse and unwarranted, especially given the NCLT’s cost imposition.

The Supreme Court’s decision reinforces the principle that an approved Resolution Plan under Section 31(1) of the IBC is binding on all stakeholders, including government authorities. This ensures that once a plan is approved, all pre-existing claims not included in the plan are extinguished, providing certainty and stability for the resolution applicant. This decision reinforces the sanctity of the CIRP, ensuring that statutory authorities cannot disrupt a debtor’s fresh start with unclaimed dues. It underscores the IBC’s framework as a comprehensive resolution mechanism, prioritizing certainty and revival over belated creditor assertions.