Insolvency moratorium and GST recovery: disputed credit-ledger action must first be placed before the NCLT.

GST recovery steps affecting a company under insolvency moratorium were directed to be taken before the NCLT, as the Court held that the department should first seek appropriate orders from the insolvency forum. Blocking of the electronic credit ledger and the show cause notice were not finally adjudicated on merits; instead, limited status quo protection was granted for one week to enable the department to approach the NCLT. Any further adjudication or recovery-related action was made subject to the NCLT's directions if the resolution proceedings continued, while the parties' substantive contentions were left open.

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Issues: Whether the respondents' action of blocking input tax credit and proceeding on the show cause notice in respect of a company under insolvency resolution should be permitted as such, or should be dealt with by the National Company Law Tribunal.

Analysis: The petition arose from a dispute concerning blocking of the company's electronic credit ledger and issuance of a show cause notice under the State GST law while insolvency proceedings and a moratorium under the Insolvency and Bankruptcy Code were pending. In the peculiar facts, the Court found it appropriate that the department first move the NCLT for appropriate orders regarding the action proposed against the petitioner. The Court also directed that status quo be maintained for one week only to enable the department to approach the NCLT, and clarified that any adjudication on the show cause notice affecting recovery would remain subject to the NCLT's orders if the resolution proceedings continued.

Conclusion: The respondents were required to seek appropriate orders from the NCLT, status quo was protected for a limited period, and further recovery-related action was made subject to the NCLT's decision.

Final Conclusion: The petition was disposed of by granting limited interim protection and by channeling the disputed recovery steps through the insolvency forum, while keeping all substantive contentions open.

Ratio Decidendi: Where GST recovery-related action may affect a company under a moratorium in insolvency proceedings, the appropriate course is to seek directions from the NCLT and keep consequential action subject to those directions.

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