Statutory tax dues are operational debt in insolvency, and State tax priority yields to IBC override.

Statutory tax dues were treated as operational debt under the Insolvency and Bankruptcy Code, 2016. The claim that section 48 of the Gujarat Value Added Tax Act, 2003 created a secured creditor status for the tax authority was rejected because section 238 of the Code overrides inconsistent State law provisions. Accordingly, the dues could not be asserted with priority or security in insolvency and had to be pursued before the resolution professional in the capacity of an operational creditor. The application was found meritless, with liberty to raise the claim in the insolvency resolution process in the proper form.

---

---

Issues: Whether the State tax dues could be treated as secured debt under section 48 of the Gujarat Value Added Tax Act, 2003 in the insolvency proceedings, and whether the Insolvency and Bankruptcy Code, 2016 overrides such claim so as to treat the claimant only as an operational creditor.

Analysis: The dues payable to the State arise in respect of statutory liabilities and therefore fall within the expression operational debt. The claim that section 48 of the Gujarat Value Added Tax Act, 2003 makes the tax authority a secured creditor was held not maintainable because section 238 of the Insolvency and Bankruptcy Code, 2016 gives the Code overriding effect over inconsistent provisions of other laws. On that basis, the statutory dues could not prevail over the insolvency framework, and the proper course was to present the claim before the resolution professional as an operational creditor.

Conclusion: The claim could not be maintained as a secured creditor claim and was to be pursued only as an operational creditor claim under the insolvency process.

Final Conclusion: The application was found meritless and disposed of, with liberty to assert the claim in the insolvency resolution process in the appropriate capacity.

Ratio Decidendi: Statutory tax dues are operational debt under the Insolvency and Bankruptcy Code, 2016, and any inconsistent claim of priority or security under a State tax law yields to section 238 of the Code.

---