TaxTMI 
TaxTMI 
TaxTMI 
In M/s. Era Infra Engineering Limited Versus Joint Commissioner CGST Delhi South Commissionerate & Ors. - 2025 (12) TMI 1133 - DELHI HIGH COURT, the petitioner was in the construction industry. Since the petitioner could not able to pay the debts due to the financial difficulties, it underwent insolvency proceedings before the National Company Law Tribunal, New Delhi. The corporate insolvency of the petitioner was initiated by the Financial Creditor, Union Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘Act’ for short). In this case, the NCLT appointed an Interim Resolution Professional who undertook the process of issuing Public Announcement, collected the claims from the creditor and formed the Committee of Creditors. The Interim Resolution Professional was appointed as Resolution Professional.
The Registration Certificate of the petitioner was cancelled by the Department on 22.07.2020. The Department filed a claim petition before the Resolution Professional to the tune of Rs.4.02 crores. The Resolution Professional, on verification of the claim by the Department confirmed the amount of Rs.1.94 crores. The Resolution Professional called for Expression of Interest from the eligible Resolution Applicants. The resolution plan filed by S.A. Infrastructure Consultants Private Limited was approved by the NCLT, Delhi on 11.06.2024. The new management has taken over the petitioner company.
Meanwhile, the Department passed orders on 14.11.2024 to recover the dues from the petitioner. The same was challenged by the petitioner before the High Court invoking writ jurisdiction. The High Court stayed the impugned orders.
The petitioner filed three writ petitions seeking to quash 3 impugned orders for the financial year 2017 – 18 to 2019 – 20 confirming the total demand of Rs.50 crores. The petitioner contended the total demand would be untenable as they belonged to the period prior to the approval of the resolution plan approved by the NCLT, Delhi. The claims of the Department were considered and made part of the resolution process. Therefore, no fresh demand could not be made by the Department for the impugned periods.
The Department contended that the impugned orders were only to crystallize the amounts. No steps have been taken for the recovery of the said amount.
The High Court heard the submissions of the parties to the present writ petitions. The High Court analysed the orders of the NCLT approving the resolution plan. The NCLT considered all the documents and submissions of Resolution Professional and the Resolution Applicant. The NCLT held that there was no impediment in giving approval to the resolution plan. The NCLT gave approval to the resolution plan. It further held that the said resolution plan shall be binding on the corporate debtor and its employees, shareholders of the corporate debtor, creditors including the Central Government, any State Government or any local authority to whom statutory dues are owned, successful resolution applicant and other shareholders involved.
As per the orders of the NCLT, the new management has taken over the petitioner company. The contention of the petitioner is that subsequent order of NCLT approving the resolution plan coming into effect, no demands can be raised by the Department prior to the period of approving the resolution plan.
The High Court relied on the two judgments of Supreme Court for this purpose. In GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY Versus EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. - 2021 (4) TMI 613 - Supreme Court, in which the Supreme Court held that once a resolution plan is duly approved by the Adjudicating Authority under Section 31(1) of the Code, 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. The Supreme Court further held that on the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not part of a 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.
In SUNDARESH BHATT, LIQUIDATOR OF ABG SHIPYARD Versus CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS - 2022 (8) TMI 1161 - Supreme Court, the Supreme Court held that the Department could only initiate assessment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Section 14 or 35(5) of the Code. The Interim Resolution Professional/Resolution Professional or the Liquidator has an obligation to ensure the assessment is legal and has been provided with sufficient power to question any assessment, if he finds that the same to be excessive. The Department does not have the power to execute its claim beyond the ambit of section 53 of the Code.
The High Court considered that the above said decisions of Supreme Court clearly held that no demand can be raised after the resolution plan has been approved, in respect of a period prior thereto. In this case the GST Department has already participated in the insolvency proceedings and having field its claims, cannot raise further demands as there has to be a final conclusion to the insolvency proceedings. The new management cannot be saddled with any of the additional demands in respect of the previous period. The High Court, thus, set aside the impugned orders.