Insolvency clean slate principle extinguishes unrecovered tax claims and invalidates revenue charges during moratorium and liquidation.

During CIRP moratorium and liquidation under the Insolvency and Bankruptcy Code, a tax charge or red entry over the corporate debtor's properties could not be created or continued, and any such revenue entry made without notice to the liquidator was void in law. After approval of the acquisition plan and sale of the corporate debtor as a going concern, the clean slate principle applied, so tax dues not preserved in the plan stood extinguished and could not be enforced through revenue charges or priority claims. The revenue authorities were directed to remove the tax charge and red entries from the record.

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Issues: (i) Whether the creation and continuance of the red entry or charge over the corporate debtor's properties for tax dues was valid during the moratorium and liquidation period under the Insolvency and Bankruptcy Code, 2016. (ii) Whether, after approval of the acquisition plan for sale of the corporate debtor as a going concern, the respondents could continue to assert tax claims and retain the charge in the revenue record.

Issue (i): Whether the creation and continuance of the red entry or charge over the corporate debtor's properties for tax dues was valid during the moratorium and liquidation period under the Insolvency and Bankruptcy Code, 2016.

Analysis: Once the corporate insolvency resolution process commenced and moratorium was imposed, no action could be taken against the corporate debtor's property contrary to the statutory bar. After liquidation was ordered, further proceedings against the corporate debtor were also prohibited. The creation of charge in the revenue record during this protected period, without notice to the liquidator, was inconsistent with the statutory framework and could not survive the overriding effect of the insolvency regime.

Conclusion: The charge or red entry created during the moratorium and liquidation period was void in law.

Issue (ii): Whether, after approval of the acquisition plan for sale of the corporate debtor as a going concern, the respondents could continue to assert tax claims and retain the charge in the revenue record.

Analysis: The approved acquisition plan, followed by confirmation of the sale as a going concern and closure of liquidation, operated on the clean slate principle. The statutory scheme and the binding nature of the approved process required all claims not preserved in the plan to stand extinguished. The respondents' tax dues, being treated in liquidation and not surviving the approved process, could not be enforced by maintaining the revenue charge or by invoking priority as crown debt.

Conclusion: The respondents could not continue the tax claim or retain the charge after approval of the acquisition plan and completion of the sale process.

Final Conclusion: The writ petition succeeded, and the revenue authorities were directed to remove the tax charge and red entries from the revenue record.

Ratio Decidendi: In insolvency and liquidation proceedings, any statutory tax claim not preserved under the approved resolution or acquisition process stands extinguished, and revenue entries or charges inconsistent with the insolvency code and its moratorium cannot be maintained.

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