Approved resolution plan extinguishes pre-insolvency tax dues excluded from insolvency claims and bars recovery proceedings.

An approved resolution plan under the Insolvency and Bankruptcy Code, 2016 binds the corporate debtor and all stakeholders, including governmental authorities. Claims for VAT and CST dues relating to the pre-approval period, which were not lodged in the insolvency process and were not included in the approved plan, stood frozen and extinguished. In light of Section 31 and the overriding effect of Section 238, recovery or demand proceedings for such excluded pre-plan dues could not be continued or enforced. The tax recovery notices for the covered period therefore failed.

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Issues: Whether demand notices for VAT and CST dues for a period prior to approval of the resolution plan could be enforced when no such claim had been lodged before the resolution professional and the dues were not included in the approved resolution plan.

Analysis: The approved resolution plan under the Insolvency and Bankruptcy Code, 2016 bound the corporate debtor and all stakeholders, including governmental authorities. Once the plan was approved under Section 31, claims not forming part of the plan stood frozen and extinguished, and no proceedings could be initiated or continued for recovery of such pre-approval dues. The statutory dues in question were not shown to have been lodged in the insolvency process, and the demand notices were founded on recoveries for a period preceding approval of the plan. The non-obstante effect of Section 238 reinforced the primacy of the insolvency regime over inconsistent recovery ctions under the tax law.

Conclusion: The demand notices could not be enforced and the tax recovery proceedings for the covered period were liable to fail.

Final Conclusion: The writ petitions succeeded because tax dues not included in the approved resolution plan stood extinguished and could not be recovered by the respondents.

Ratio Decidendi: Once a resolution plan is duly approved under Section 31 of the Insolvency and Bankruptcy Code, 2016, all claims not forming part of the plan stand extinguished and no recovery proceeding can be continued for such excluded dues.

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