Statutory first charge under insolvency law can make the State a secured creditor, and belated tax claims may survive.

A statutory first charge under the Gujarat Value Added Tax law creates a security interest in favour of the State, bringing it within the IBC definition of secured creditor. A claim for statutory dues is not rejected solely because it was filed after the public announcement deadline where the dues are otherwise identifiable in the debtor's records and recovery material. A resolution plan must comply with section 30(2) of the IBC before approval under section 31(1), and a plan that omits statutory dues payable to the State cannot be approved or treated as binding.

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Issues: (i) whether the State tax authority, by reason of the statutory first charge under the Gujarat Value Added Tax law, was a secured creditor under the Insolvency and Bankruptcy Code, 2016; (ii) whether the claim for statutory dues could be rejected as belated and excluded from the insolvency process merely because it was lodged after the last date in the public announcement; (iii) whether a resolution plan that ignored statutory dues and did not comply with the requirements of the Insolvency and Bankruptcy Code, 2016 could be approved and treated as binding on the State.

Issue (i): whether the State tax authority, by reason of the statutory first charge under the Gujarat Value Added Tax law, was a secured creditor under the Insolvency and Bankruptcy Code, 2016.

Analysis: The statutory first charge created by Section 48 of the Gujarat Value Added Tax, 2003 created a security interest in favour of the State. The definition of secured creditor in Section 3(30) of the Insolvency and Bankruptcy Code, 2016 is wide enough to include a creditor in whose favour security interest is created, and Section 3(31) recognises security interest in inclusive terms. The Court held that the State was not excluded from this definition and that the charge created by law brought the tax dues within the category of secured debt.

Conclusion: The State tax authority was a secured creditor.

Issue (ii): whether the claim for statutory dues could be rejected as belated and excluded from the insolvency process merely because it was lodged after the last date in the public announcement.

Analysis: The timelines in the insolvency regulations, particularly the provisions governing submission and verification of claims, were treated as directory in the context of statutory dues already reflected in the corporate debtor's books and subject to recovery proceedings. The Resolution Professional had a duty to receive, verify and collate claims and to examine relevant records, and a belated filing by itself was not held to be a sufficient ground to deny admission of the State's statutory claim.

Conclusion: The claim could not be rejected solely on the ground of delay.

Issue (iii): whether a resolution plan that ignored statutory dues and did not comply with the requirements of the Insolvency and Bankruptcy Code, 2016 could be approved and treated as binding on the State.

Analysis: A resolution plan must satisfy the requirements of Section 30(2) of the Insolvency and Bankruptcy Code, 2016, and the Adjudicating Authority must be satisfied of such compliance before approval under Section 31(1). A plan that ignores statutory dues payable to a Government or statutory authority and fails to provide for them in accordance with the Code cannot be approved. The Court also held that Section 53 governs liquidation distribution and does not override the State's status as a secured creditor created by the GVAT charge.

Conclusion: The resolution plan could not validly exclude the State's statutory dues and was liable to be set aside.

Final Conclusion: The impugned orders were unsustainable, the resolution plan approval was set aside, and the matter was left open for a fresh plan consistent with the State's secured statutory dues.

Ratio Decidendi: A statutory first charge creates security interest for the purpose of insolvency law, belated filing of a statutory claim is not by itself fatal where the dues are otherwise identifiable, and any resolution plan that fails to comply with the mandatory requirements of Section 30(2) cannot be approved under Section 31(1).

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