IBC overrides municipal recovery claims against a liquidation asset purchaser for pre-sale dues, and licence decisions must be independent.

A purchaser of a liquidation asset was held not liable for municipal dues that accrued before the sale, because the Insolvency and Bankruptcy Code, 2016 provides a self-contained process for invitation, verification and adjudication of claims in liquidation and has overriding effect over inconsistent municipal law. The municipality's failure to lodge its claim with the liquidator meant it could not bypass the insolvency framework by issuing a demand notice against the auction purchaser. The demand for pre-sale dues was therefore unsustainable, and applications for trade licence, enlistment certificate and mutation had to be considered on their own merits without regard to those dues.

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Issues: Whether the purchaser of a liquidation asset could be made liable for municipal tax dues that had accrued prior to the date of sale, and whether the municipality could withhold trade licence, enlistment certificate, or mutation on the basis of those pre-sale dues.

Analysis: The liquidation of the corporate debtor was governed by the Insolvency and Bankruptcy Code, 2016, which operates as a self-contained mechanism for inviting, verifying, and adjudicating claims in liquidation. The municipality did not lodge its claim with the liquidator after the public announcement and instead sought to recover alleged arrears from the purchaser by issuing a demand notice. The Court held that the municipality could not bypass the insolvency framework and use municipal processes to compel payment of past dues from the auction purchaser. It further held that the reliance placed on the Transfer of Property Act, 1882 and the West Bengal Municipal Act, 1993 was misplaced in view of the overriding effect of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The purchaser was not liable to pay municipal dues accruing before the sale, and the demand notice for such dues was unsustainable. The municipality was directed to consider the applications for licence, enlistment certificate, and mutation on their own merits without being influenced by the pending pre-sale dues.

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