A) ABSTRACT / HEADNOTE

This analysis examines Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr. where the Supreme Court considered whether post-approval demands by the Income-tax Department for earlier assessment years can be sustained when those dues were not submitted as claims during the Corporate Insolvency Resolution Process (CIRP) and were not part of the approved resolution plan.

The Court reaffirmed the clean-slate effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, relying on the binding precedents of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss ARC. Where statutory dues (including Central Government dues) existing prior to approval are not included in the approved resolution plan, they stand extinguished and cannot be the subject of subsequent proceedings.

The facts showed that income-tax demands for AY 2012-13 and 2013-14 were raised after approval though no claim was filed during CIRP; those dues were not part of the plan. The NCLT had dismissed the Monitoring Professional’s application without reasons and imposed costs; NCLAT affirmed. The Supreme Court set aside both orders, held the post-approval demands invalid, criticised NCLT’s non-consideration and costs order, and emphasised the necessity of finality for a successful resolution applicant to restart business on a clean slate. This analysis draws only on the attached judgment.

Keywords: Resolution Plan, Section 31(1) IBC, clean slate principle, statutory dues, income tax demands.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeal arises from a CIRP of Tehri Iron and Steel Casting Ltd. and the approved resolution plan dated 21 January 2019 which was sanctioned by the NCLT on 21 May 2019. The successful resolution applicants (appellants) had disclosed certain contingent liabilities in the plan (notably an income-tax liability for AY 2014-15), and the plan contained clauses stating that statutory dues shown in the balance sheet as on CIRP commencement would be paid and, once paid, “shall stand satisfied, settled and extinguished”.

After approval, the Income-tax Department issued fresh demands for AY 2012-13 and 2013-14 — years for which no claim had been submitted to the Resolution Professional during CIRP. The Monitoring Professional challenged those post-approval demands before the NCLT; the NCLT dismissed the application as frivolous and imposed costs. NCLAT affirmed.

The central legal question was whether an approved resolution plan, and the doctrine of finality under Section 31(1) of the IBC and related precedents, prevents initiation or continuation of tax proceedings for pre-approval periods where the tax authority had not submitted a claim and the dues were not incorporated in the plan.

The Supreme Court examined the statutory text, the effect of the 2019 amendment to s.31(1) (which expressly included Central/State government dues within the binding character of approved plans), and the binding precedents that interpret the extinguishing effect of approval.

The judgment balanced the need to protect public revenue against the statutory aim of giving a successful resolution applicant certainty to run the business afresh.

D) FACTS OF THE CASE

The CIRP of the corporate debtor commenced and the appellants submitted a resolution plan dated 21 January 2019. The NCLT approved that plan on 21 May 2019, declaring the plan binding on the corporate debtor and all stakeholders. The resolution plan expressly referred to an income-tax contingent liability for AY 2014-15 (approx. Rs. 16.85 crores) and set out that statutory liabilities appearing in the balance sheet as on 31.05.2018 would be paid in the normal course and “post payment the entire Statutory due shall stand satisfied, settled and extinguished”.

No claim had been made by the Income-tax Department in respect of AY 2012-13 and 2013-14 before the Resolution Professional. After approval, demand notices issued on 26 & 28 December 2019 sought taxes for AY 2012-13 and 2013-14. The Monitoring Professional protested; when the Income-tax Department persisted (letter dated 2 June 2020), an application was filed in the NCLT seeking a declaration that those demands were invalid as time-barred by the approved plan and the silence during CIRP.

The NCLT dismissed the application as frivolous on 17 September 2020 and imposed costs of Rs.1 lakh; NCLAT dismissed the appeal on 25 November 2021. The appellants then approached the Supreme Court. The Supreme Court found that the dues for AY 2012-13 & 2013-14 were not part of the approved plan and that the law (as declared in Ghanashyam Mishra and echoed in Essar Steel) extinguished such unclaimed pre-approval dues, making the post-approval demands invalid.

E) LEGAL ISSUES RAISED

i. Whether an approved resolution plan under Section 31(1) IBC extinguishes pre-approval statutory dues of the Central Government that were not submitted as claims during CIRP and not part of the approved plan?
ii. Whether the Income-tax Department could issue and enforce demand notices after the plan approval for assessment years predating approval where no claim was filed during CIRP?
iii. Whether NCLT was justified in dismissing the Monitoring Professional’s application without reasons and in imposing costs?
iv. Whether the 2019 amendment to Section 31(1) alters the effect of approved plans as declared in prior precedents?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioner / Appellant submitted that the resolution plan and the law create a final, binding welfare for the resolution applicant and all stakeholders. They relied on the decisions Committee of Creditors of Essar Steel India Ltd. and Ghanashyam Mishra & Sons, arguing that once the adjudicating authority approves the plan under s.31(1), claims not included therein are extinguished; consequently the Income-tax Department’s belated demands for AY 2012-13 and 2013-14 not claimed in CIRP cannot be enforced.

They pointed out that the Resolution Professional had disclosed and accepted the contingent liability for AY 2014-15 but no claim was made for the earlier years; allowing post-approval taxation would violate the clean-slate principle and frustrate implementation of the plan. They further argued that the NCLT erred in dismissing the application without reasons and wrongly imposed costs.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondent submitted that paragraph 44 of the NCLT approval order expressly left issues regarding statutory dues to the concerned government departments and that appropriate applications could be moved before them. They urged that statutory demands and enforcement are within tax department jurisdiction and that the NCLAT correctly dismissed the appeal. The Revenue relied on the NCLT’s directive that relief and concessions qua statutory dues were matters for the department to decide, implying that the approval order did not preclude subsequent assessment action.

H) RELATED LEGAL PROVISIONS 

i. Section 31(1), Insolvency and Bankruptcy Code, 2016 (effect of approval of resolution plan; binding nature including Central/State dues — post-2019 amendment).
ii. Section 60(6), IBC (forum for certain claims — discussed in Essar Steel).
iii. Income-tax Act, 1961 (provisions governing assessment, demand and recovery; relevant only inasmuch as they create claims which must be filed in CIRP).

I) JUDGEMENT

The Court analysed the resolution plan, the NCLT approval order and binding precedents. It observed that the plan identified statutory liabilities as of CIRP commencement, expressly providing for satisfaction and extinguishment upon payment.

The assessment demands for AY 2012-13 and 2013-14 were raised after plan approval and had not been filed as claims; the Income-tax Department had thereby failed to participate in the CIRP claim process. The Court relied on Ghanashyam Mishra (paragraphs 102.1–102.3) which held that claims not part of an approved plan stand extinguished and no proceedings in respect of such pre-approval claims may continue.

The Court treated the 2019 amendment to s.31(1) as declaratory; it underlined that the amendment expressly makes approved plans binding on government entities. The Court rejected the Revenue’s reliance on paragraph 44 of the NCLT order, explaining that paragraph 44 concerned requests for relief and concession in respect of liabilities identified in the plan (e.g., instalments, waivers), and was not a licence for the Revenue to issue fresh demands for pre-approval periods that were not part of the plan.

The Court held that the NCLT’s dismissal without reasons and imposition of costs was improper, and that NCLAT’s upholding of that order ignored binding precedent. Concluding that the post-approval demands for AY 2012-13 and 2013-14 were invalid and unenforceable, the Court set aside the impugned orders and allowed the appeal.

a. RATIO DECIDENDI

The decisive legal principle is that once a resolution plan is approved by the adjudicating authority under Section 31(1) IBC, all claims provided in the plan are frozen and binding; and claims which were not part of the resolution plan stand extinguished as to pre-approval periods, preventing initiation or continuation of proceedings in respect of such claims.

The 2019 amendment to s.31(1) expressly listing Central/State/local authorities clarifies that government dues are within the binding scope. Therefore, statutory demands issued after approval for pre-approval periods, where no claim was submitted in CIRP and the dues were not part of the plan, cannot be sustained. This ratio rests on the twin aims of finality and predictability for the successful resolution applicant enabling restart of business on a clean slate.

b. OBITER DICTA

The Court emphasised administrative propriety: tribunals should record reasons and avoid imposing costs where a party seeks substantive relief under the Code; NCLT’s brief finding of frivolity without reasons was disapproved. The Court reiterated policy considerations from Essar Steel that allowing “undecided” claims to surface post-approval would defeat Section 31’s rationale and create uncertainty akin to a hydra-headed liability.

Though not strictly necessary to decide the point, the Court endorsed the declaratory nature of the 2019 amendment and the need for the Revenue to participate in CIRP processes rather than circumventing them through post-approval assessments.

c. GUIDELINES

i. Approved resolution plans are final and bind government departments they must participate in CIRP and submit claims within the prescribed process.
ii. Governmental revenue claims for pre-approval periods, if not submitted and not included in the plan, are extinguished on approval and cannot be pursued thereafter.
iii. Tribunals (NCLT/NCLAT) must record reasoned orders when dismissing applications and should refrain from imposing punitive costs absent clear basis.
iv. Revenue authorities seeking concessions or instalment arrangements should engage during CIRP or via established appellate/administrative mechanisms before plan approval — post-approval attempts to resurrect unclaimed pre-approval liabilities will be resisted.
v. The 2019 amendment to s.31(1) should be treated as clarificatory: courts should apply the clean-slate principle to disputes involving statutory dues.

J) CONCLUSION & COMMENTS

This decision reaffirms the primacy of the clean-slate and finality principles in corporate insolvency: a successful resolution applicant must not be confronted with latent, belated pre-approval claims that were never submitted during CIRP. The Court’s reliance on Ghanashyam Mishra and Essar Steel is consistent and ensures predictability for commercial rehabilitation.

Practically, the judgment places a clear onus on revenue authorities to engage with CIRP claim processes in a timely manner; failure to do so will ordinarily preclude later enforcement for pre-approval periods. The Court’s reproach of NCLT’s unreasoned dismissal and costs imposition is salutary; reasoned disposition is essential in matters affecting business reorganisation and rights of multiple stakeholders.

That said, the judgment preserves government revenue where dues were properly claimed and provided for in the plan (e.g., AY 2014-15 contingent liability acknowledged in the plan). The ruling encourages proactive administrative participation in CIRP and reduces litigation uncertainty that would otherwise deter resolution applicants from restarting operations.

For practitioners, the case underscores tactical imperatives:

(i) revenue departments must file claims timely in CIRP,

(ii) resolution professionals must scrupulously list contingent liabilities, and

(iii) tribunals must give reasoned decisions to protect procedural fairness.

Overall, the judgment strengthens the statutory architecture that balances recovery for creditors with the rehabilitative purpose of the IBC.

K) REFERENCES

a. Important Cases Referred

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

2. Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657.

3. Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr., Civil Appeal No. 49 of 2022, Judgment dated 20 March 2025.

b. Important Statutes Referred

1. Insolvency and Bankruptcy Code, 2016, s.31(1).

2. Income-tax Act, 1961 (assessment, demand and recovery provisions as background).