Moratorium protection under insolvency law bars tax recovery and limits late claims once resolution reaches approval stage.

During moratorium under the Insolvency and Bankruptcy Code, recovery against the corporate debtor is barred, and inconsistent tax recovery action is displaced by the Code's overriding effect; amounts recovered from the debtor's bank account were therefore directed to be reversed and protected under the Resolution Professional's control. The text also states that an operational creditor's claim was rejected as the underlying transaction was found not genuine and was treated as extortionate, preferential, incorrect and fraudulent. A tax claim raised after the resolution plan had already reached the CoC approval stage was not entertained because it would unsettle an advanced resolution process, and no interference was found warranted where the CoC and Resolution Professional followed the prescribed process.

---

---

Issues: (i) Whether the applicant's claim as an operational creditor was liable to be admitted; (ii) whether recovery made by tax authorities during moratorium was impermissible and refundable; (iii) whether a belated tax claim could be entertained after the resolution plan had already reached the stage of approval consideration; and (iv) whether the resolution process and approval of the resolution plan warranted interference for alleged procedural irregularity.

Issue (i): Whether the applicant's claim as an operational creditor was liable to be admitted.

Analysis: The claim was examined on the basis of the Resolution Professional's verification and the report obtained after due diligence under the duties cast by the Insolvency and Bankruptcy Code, 2016. The materials relied on by the Resolution Professional indicated that the transaction was not genuine in the manner asserted by the applicant and was treated as extortionate, preferential, incorrect and fraudulent. On that footing, the alleged operational debt was rejected.

Conclusion: The claim as operational creditor was not admissible and the rejection of the claim was upheld.

Issue (ii): Whether recovery made by tax authorities during moratorium was impermissible and refundable.

Analysis: Once moratorium had commenced on admission of the insolvency petition, Section 14 of the Insolvency and Bankruptcy Code, 2016 barred recovery, alienation or disposal of the corporate debtor's property. The Court also proceeded on the basis that the overriding effect of Section 238 of the Code displaced inconsistent recovery action under the State tax laws during the moratorium period. The amounts recovered from the corporate debtor's bank account were therefore liable to be reversed and kept in a protected account under the control of the Resolution Professional.

Conclusion: The recovery during moratorium was impermissible and refund of the recovered amount was directed.

Issue (iii): Whether a belated tax claim could be entertained after the resolution plan had already reached the stage of approval consideration.

Analysis: The tax claim was lodged after the resolution process had substantially advanced and after the resolution plan was already before the Committee of Creditors for approval. The Court held that claims may be entertained within a reasonable time, but not in a manner that would unsettle an already matured resolution process. In the facts, the claim could not practically be inserted at that stage, and only the provision made in the resolution plan could be considered.

Conclusion: The belated tax claim was not entertained and the application was disposed of as redundant.

Issue (iv): Whether the resolution process and approval of the resolution plan warranted interference for alleged procedural irregularity.

Analysis: The record showed that the Committee of Creditors and the Resolution Professional followed the prescribed process for invitation of expressions of interest, receipt of plans, revision, discussion and voting. The Court emphasized the primacy of the commercial decision of the Committee of Creditors and found no basis to conclude that the resolution plan was processed in violation of the Code or the Regulations.

Conclusion: No interference was called for and the challenge to the resolution process was rejected.

Final Conclusion: The order sustains the rejection of the operational creditor's claim and the unsuccessful resolution applicant's challenge, while granting relief against moratorium-period tax recovery and declining to entertain the belated tax claim at the advanced stage of the resolution process.

Ratio Decidendi: During moratorium, recovery against the corporate debtor is barred by the Insolvency and Bankruptcy Code, and claims or challenges that would unsettle an advanced resolution process cannot be entertained contrary to the commercial wisdom of the Committee of Creditors.

---