Statutory Dues Not Included in Approved IBC Resolution Plan Stand Extinguished; Post-approval Demands Are Without Jurisdiction

The Bombay High Court has ruled that any statutory dues, including taxes owed to the government, that were not included in an approved insolvency resolution plan under the IBC are considered extinguished. This means that tax authorities cannot issue demands or pursue recovery for periods before the plan's approval if those dues were not part of the plan. The court emphasised that such post-approval demands are 'wholly without jurisdiction'.

The Hon'ble Bombay High Court in the case of Srei Equipment Finance Ltd. v. Assistant Commissioner, CGST & C.Ex., Navi Mumbai & Ors. [WP No. 2220 of 2025, order dated October 16, 2025] held that all claims, including statutory tax dues to the Government, which are not part of an approved insolvency resolution plan under Section 31 IBC, stand extinguished, and any post-approval demand or recovery proceedings for pre-resolution period are wholly without jurisdiction.

Facts:

Srei Equipment Finance Ltd. ("the Petitioner") underwent a Corporate Insolvency Resolution Process ("CIRP") under the Insolvency and Bankruptcy Code, 2016 ("IBC"), initiated by RBI on October 8, 2021, and a resolution order approving the plan was passed on August 11, 2023.

The Assistant Commissioner, CGST&C.Ex., Navi Mumbai ("the Respondent") issued a show-cause notice on November 27, 2024, raising a demand for CGST dues for AY 2020-21, and subsequently passed an order dated February 25, 2025, creating the demand.

The Petitioner contended that as per the Supreme Court's decisions in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 91 GSTR 28 (SC)] and Vaibhav Goel v. DCIT [Civil Appeal No.49 of 2022, dated March 20, 2025], all claims not forming part of the approved plan are extinguished, including government statutory dues, following the 2019 amendment to Section 31 IBC.

The Respondent contended that the demand order was correctly d made and the Petitioner had an alternate remedy of appeal.

The Petitioner approached the High Court by writ petition challenging the jurisdiction to raise the demand, citing statutory and Supreme Court authority.

Issue:

Whether a demand for statutory dues for periods prior to approval of an IBC resolution plan, which were not included in the plan, can be validly raised post-approval under the CGST Act?

Held:

The Hon'ble Bombay High Court in WP No. 2220 of 2025 held as under:

· Observed that, CIRP was initiated before the revenue issued the show-cause notice and demand order, and the respondents did not intervene in the CIRP nor seek relief in it.

· Noted that, the issue was squarely covered by the decisions of the Supreme Court in Ghanashyam Mishra (supra) and Vaibhav Goel (supra).

· Noted that, all claims that do not form part of the approved resolution plan stand extinguished.

· Noted that, the 2019 amendment to Section 31 IBC is clarificatory and therefore applies from the date the Code came into effect.

· Quashed and set aside the impugned order dated February 25, 2025, observing that all such claims and proceedings post-approval are "wholly without jurisdiction" and ruled that it is not a fit case to relegate the petitioner to alternate appeal remedy given the settled Supreme Court law.

Our Comments:

The High Court's reasoning strictly follows the binding Supreme Court rulings in Ghanashyam Mishra (supra),Vaibhav Goel (supra), JSW Steel Limited vs. Pratishtha Thakur Haritwal& Ors [CP (C) No.629 of 2023 in WP (C) No.1177 of 2020], and in the case of M/s. Monet Ispat and Energy Ltd. &Anr. vs. State of Odisha and Anr [WP (C) 1177 of 2020].

Ghanashyam Mishra (supra) held that after the approval of a resolution plan, all claims not included (even governmental or statutory) stands extinguished. JSW Steel (supra) emphasized that non-compliance with Supreme Court judgments in IBC matters is contemptuous. The 2019 amendment to Section 31 IBC was clarified by the Supreme Court to be declaratory, addressing any potential ambiguity as to the effective date.

This High Court ruling aligns with these precedents and confirms that tax authorities or government bodies cannot raise or recover past dues not factored into an approved plan post-resolution; their remedy was to participate in the CIRP and submit claims for admission.

Relevant Provisions:

Section 31, Insolvency and Bankruptcy Code, 2016:

"31. Approval of resolution plan.-

(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, 1[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.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED