State tax first charge yields to insolvency waterfall, leaving the tax authority as an operational creditor.

A State tax claim does not become a secured debt merely because the State enactment creates a first charge, where that provision is expressly made subject to the Central insolvency law. The Tribunal treated Section 53 of the Insolvency and Bankruptcy Code as the controlling distribution mechanism and noted that the appellant had been treated as an operational creditor. On that basis, the earlier precedent relied on was held inapplicable, the appellant was not entitled to secured creditor status, and approval of the resolution plan was not a violation of Section 30(2)(b) of the Code.

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Issues: Whether the appellant State Tax Department could be treated as a secured creditor on the strength of the statutory first-charge provision in the Maharashtra Value Added Tax Act, 2002, and whether the approved resolution plan violated the Insolvency and Bankruptcy Code, 2016.

Analysis: The Tribunal noted that the issue stood covered by its earlier decision. It distinguished the Gujarat Value Added Tax Act provision relied upon in the cited precedent from Section 37 of the Maharashtra Value Added Tax Act, 2002, which is expressly made subject to any provision regarding creation of first charge in any Central Act. The Tribunal further observed that the waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code, 2016 operates as the controlling central law in this context, and that the appellant had been treated as an operational creditor. On that basis, the reliance on the earlier Supreme Court ruling was held to be inapplicable.

Conclusion: The appellant was not entitled to be treated as a secured creditor, and the approval of the resolution plan did not amount to a violation of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016.

Final Conclusion: The appeal failed on the merits and the approved resolution plan remained undisturbed.

Ratio Decidendi: A State tax claim does not become a secured debt merely because the State enactment creates a first charge, where the provision is expressly subject to the Central insolvency law and the statutory distribution scheme under the Insolvency and Bankruptcy Code governs the resolution plan.

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