A) ABSTRACT / HEADNOTE

M/s JSW Steel Limited v. Pratishtha Thakur Haritwal & Ors., Contempt Petition (Civil) No. 629 of 2023 arising out of Writ Petition (Civil) No. 1177 of 2020 (decided 27 March 2025) concerns the legal consequence of a Resolution Plan approved under the Insolvency and Bankruptcy Code, 2016 (the I&B Code) and whether post-approval recovery actions by State authorities for pre-transfer statutory dues not included in the approved plan are barred and, if persisted in after specific Supreme Court precedent was brought to their notice, whether such actions constitute contempt.

The Bench reaffirmed the principles laid down in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (paras 95, 140 of that judgment) that on approval of a resolution plan all claims not forming part of that plan stand extinguished and the successful resolution applicant takes over the corporate debtor on a clean slate.

Applying that ratio to the facts where tax demand notices were issued after approval for the period prior to transfer, the Court held such demands to be contemptuous and quashed them, while extending leniency by not imposing punitive sanctions because the revenue officers tendered unconditional apology and were given the benefit of doubt.

The judgment distinguishes State Tax Officer v. Rainbow Papers Ltd. on material facts (there the State had raised claims before the CoC) and relies on precedents such as Essar Steel (CoC v. Satish Kumar Gupta) and the Court’s earlier order in the Income-Tax SLP of August 2018. Practical directions and doctrinal clarity reinforce finality of an approved plan, obliging statutory authorities to assert claims during CIRP.

Keywords: Resolution Plan, Extinguishment of Claims, Section 31 I&B Code, Statutory Dues, Contempt of Court.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The petition arises out of the corporate insolvency resolution process of M/s Monnet Ispat and Energy Ltd. during which M/s JSW Ispat Special Products Ltd. (now M/s JSW Steel Ltd.) was declared the Successful Resolution Applicant (SRA). The Resolution Plan was submitted on 12 December 2017 and approved by the NCLT on 24 July 2018, following public advertisement for claims (advertisement dated 27 July 2017, last date 7 August 2017).

After approval and takeover, revenue authorities issued demand notices for statutory taxes (Central Sales Tax, State VAT and Entry Tax) for the period 1 April 2017 to 30 June 2017 a period antecedent to the transfer date asserted by the SRA. The Petitioner invoked the Supreme Court decision in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss ARC & Ors. (April 13, 2021), which held that once a resolution plan is approved under Section 31(1) of the I&B Code all claims not included in the plan stand extinguished and the SRA takes the corporate debtor free of undecided claims.

The Petitioner sought, by way of contempt proceedings under Section 2(b) of the Contempt of Courts Act, 1971 and Articles 129 & 142 of the Constitution, to quash the impugned recovery steps taken after the precedent was brought to the respondents’ notice.

The background thus frames a clash between the finality of IBC resolution and the State’s statutory revenue assertions where the State had not filed claims during CIRP. The Court was required to decide whether the respondents’ actions were barred by law and, if so, whether they amounted to willful disobedience attracting contempt.

D) FACTS OF THE CASE

Insolvency proceedings were initiated against the erstwhile company and an IRP was appointed; public notice inviting claims was issued on 27 July 2017 with the last date 7 August 2017. Claims were collected and the CoC selected the Petitioner as the SRA; the Resolution Plan was filed on 12 December 2017 and approved by the NCLT on 24 July 2018, after which management was handed over to the Petitioner.

Post-approval, revenue authorities including the Assistant Commissioner, Commercial Taxes, Raipur (respondent no. 3) and the Additional Revenue Collector (respondent no. 2) — issued notices dated 15 September 2021, 17 May 2022 and 9 December 2022 seeking recovery of taxes for the period 1 April 2017–30 June 2017.

The demand notices quantified dues: Central Tax Rs. 1,08,25,666/-; State Tax Rs. 2,66,42,094/-; Entry Tax Rs. 61,51,689/- and directed payment within statutory timeframes. The Petitioner referenced the Ghanshyam Mishra judgment and sought withdrawal; M.A. No. 259 of 2022 seeking clarification was dismissed as withdrawn with liberty to file contempt.

Despite notice of the Supreme Court precedent, respondents proceeded with assessment and issued ex-parte demands prompting the present contempt petition alleging willful disobedience. The respondents replied claiming bona fide action, reliance on Rainbow Papers and that the State had not been party to NCLT proceedings.

E) LEGAL ISSUES RAISED

i. Whether the petitioner-company’s case is covered by the ratio in Ghanshyam Mishra so as to extinguish pre-transfer statutory claims not included in the approved Resolution Plan?
ii. Whether a creditor including the Central/State Government or local authority who failed to submit its claim during CIRP can initiate recovery proceedings post approval of the Resolution Plan?
iii. Whether continuation of recovery proceedings after the Supreme Court’s decision was brought to respondents’ notice constitutes contempt of court under Section 2(b) of the Contempt of Courts Act, 1971?
iv. Whether State’s non-joinder as a party in NCLT proceedings affects the binding effect of an approved Resolution Plan on the State?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsel for the Petitioner submitted that once the Resolution Plan is approved under Section 31(1) I&B Code, all claims not incorporated in the plan are frozen and, on approval date, extinguished this includes statutory dues of Central and State authorities.

The Petitioner argued that the State failed to file its claim despite public notice, and therefore had no legal basis to raise demands after approval. Reliance was placed squarely on Ghanshyam Mishra (para. 95 & para. 140) which, so submitted, answers the three core questions against post-approval recovery.

Counsel urged that proceeding with recovery after that decision was pointed out amounted to willful disobedience.

G) RESPONDENT’S ARGUMENTS

The revenue officers contended that notices were issued in good faith and without intent to flout Court orders. It was argued that the State of Chhattisgarh was not a party to the insolvency proceedings before the NCLT; therefore the State’s dues could not be held extinguished as a matter of res judicata.

Reliance was placed on State Tax Officer v. Rainbow Papers Ltd. (2023) to assert that disputes on tax claims require careful appraisal under Section 30(2)/31 and where State’s claim was not considered by CoC or NCLT approval was vitiated.

The respondents maintained that failure of the erstwhile company to file returns justified assessment under relevant tax statutes and that recovery notices under Section 146 Chhattisgarh Land Revenue Code were legally sustainable.

H) RELATED LEGAL PROVISIONS

i. Section 31(1), Insolvency and Bankruptcy Code, 2016 — approval of resolution plan and binding effect.
ii. Section 238, I&B Code, 2016 — Code overrides inconsistent enactments.
iii. Section 2(b), Contempt of Courts Act, 1971 — definition relevant to civil contempt.
iv. Article 129 & Article 142, Constitution of India — contempt jurisdiction and enforcement.
v. Central Sales Tax Act, 1956; Chhattisgarh Value Added Tax Act, 2005; Entry Tax Act, 1976 — statutory bases for demanded dues.
vi. Section 146, Chhattisgarh Land Revenue Code, 1959 — invoked for demand notices.

I) JUDGEMENT 

The Court examined the Ghanshyam Mishra ratio and the three questions framed therein (binding effect of approved plan on all creditors; nature of 2019 amendment to Section 31; and entitlement to initiate recovery for dues not part of the plan).

Citing paragraph 95 of Ghanshyam Mishra and paragraph 140 which expressly dealt with the Petitioner’s antecedent grievances, the Court reaffirmed that the approval of a resolution plan causes non-included claims to be extinguished on the date of approval; the 2019 amendment to Section 31 is declaratory/clarificatory and operates retrospectively.

The Court relied on earlier precedents including Committee of Creditors of Essar Steel v. Satish Kumar Gupta (to underscore the “no-hydra head” principle) and its SLP order of 10 August 2018 which held that Section 238 enables the Code to override inconsistent statutes including tax laws. Distinguishing Rainbow Papers, the Court noted that in that case the State had pressed its claim before the RP/CoC and therefore factual matrix differed; in the present matter the State and its authorities had not filed claims despite public notice.

Applying precedent, the Court held that the demand notices issued for the pre-transfer period were contemptuous since they sought to recover dues not in the approved plan after the Supreme Court decision was placed before respondents. Notwithstanding the finding of contempt, the Court exercised judicial restraint: respondents tendered unconditional apology, and being among the first authorities confronted with Ghanshyam Mishra fallout, they were given benefit of doubt.

Consequently the Court quashed the demand notices and related recovery proceedings but declined to impose penal consequences. The contempt petition was disposed of on those terms.

a. RATIO DECIDENDI

The definitive ratio is that once an adjudicating authority approves a Resolution Plan under Section 31(1) I&B Code, all claims not part of that plan stand extinguished as of the approval date and cannot be pursued thereafter by any person including the Central/State Government or local authorities.

The 2019 amendment to Section 31 is clarificatory and operative from the Code’s commencement; Section 238 underwrites the Code’s paramountcy over inconsistent fiscal statutes.

A successful resolution applicant must be able to assume the corporate debtor’s business on a clean slate without “undecided” claims surfacing post-approval. Where authorities fail to file claims during CIRP, they are ordinarily precluded from post-approval recovery.

b. OBITER DICTA

The Court observed (obiter) that revenue officers acting bona fide and without knowledge of precedent may be entitled to leniency on first breach; tendering of prompt, unconditional apology is a mitigating factor.

The Court emphasized the need for administrative authorities to be sensitized to the IBC regime, public notices, and timelines of CIRP to avoid disruption of restructuring outcomes.

Also obiter is the reminder that factual distinctions (as in Rainbow Papers) may vitiate NCLT satisfaction under Section 31 where the CoC/NCLT failed to consider a legitimate statutory claim.

c. GUIDELINES 

i. Revenue and local authorities must monitor public notices issued by RPs and file claims within prescribed claim windows during CIRP.
ii. Post-approval, authorities should refrain from initiating recovery for pre-transfer periods that were not decided and included in the approved plan.
iii. If a taxing authority believes it has a valid claim that was not considered, it should raise the issue during CIRP or before appellate fora that can test Section 31 satisfaction, rather than initiate independent recovery after approval.
iv. Adjudicating Authorities must ensure Section 30(2)/31 requirements are satisfied and record consideration of statutory claims where presented.
v. In early implementation cases where authorities acted without awareness of controlling Supreme Court precedent, Courts may quash demands but spare penal contempt for first-time bonafide officers who tender apology.

J) CONCLUSION & COMMENTS

The judgment reinforces finality of the insolvency resolution process and affirms that commercial certainty for an SRA requires that all pre-approval claims either be adjudicated within CIRP or be held extinguished on approval. This protects the commercial bargain struck by the SRA and the economic policy underpinning the IBC.

The Court’s careful calibration declaring the demands void while declining punitive measures balances rule-of-law enforcement with administrative fairness, recognizing initial institutional unfamiliarity with the new jurisprudence.

For revenue authorities the decision is a clear caution: procedural vigilance during CIRP is imperative; post-hoc attempts to recover extinguished claims risk invalidation and contempt allegations. For practitioners the judgment reiterates the centrality of Section 31 and Section 238 in resolving conflicts between insolvency and fiscal statutes.

Policy-wise, the ruling suggests the need for institutional training of tax officers and improved coordination between RPs and State authorities so that legitimate revenue interests are heard during CIRP and that the IBC achieves its dual aims of creditor protection and corporate revival without collateral erosion of tax administration.

The jurisprudential implication is consolidation: Ghanshyam Mishra is confirmed as the controlling precedent on extinguishment of non-included claims and will guide lower fora and administrative practice going forward.

K) REFERENCES

a. Important Cases Referred

1. M/s JSW Steel Ltd. v. Pratishtha Thakur Haritwal & Ors., Contempt Petition (Civil) No. 629 of 2023, [2025] 3 S.C.R. 1200 : 2025 INSC 401.

2. Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. & Ors., Civil Appeal No. 8129 of 2019, [2021] 13 S.C.R. 737 : 2021 INSC 250.

3. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., (2020) 8 S.C.C. 531.

4. State Tax Officer v. Rainbow Papers Ltd., (2023) 9 S.C.C. 545.

5. Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 S.C.C. 407.

6. K. Shashidhar v. Indian Overseas Bank & Ors., (2019) 12 S.C.C. 150.

7. Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. (2000) 5 S.C.C. 694 (cited in SLP order re: income tax).

8. K.N. Rajakumar v. V. Nagarajan & Ors., (2022) 4 S.C.C. 617.

9. Ruchi Soya Industries Ltd. v. Union of India & Ors., (2022) 6 S.C.C. 343.

10. Ajay Kumar R. Goenka v. Tourism Finance Corporation of India Ltd., (2023) 10 S.C.C. 545.

b. Important Statutes Referred

i. Insolvency and Bankruptcy Code, 2016 (Sections 31(1), 238).
ii. Contempt of Courts Act, 1971 (Section 2(b)).
iii. Constitution of India (Articles 129, 142).
iv. Central Sales Tax Act, 1956; Chhattisgarh Value Added Tax Act, 2005; Entry Tax Act, 1976; Chhattisgarh Land Revenue Code, 1959 (s.146).