Tax officer cannot recover dues after resolution plan approval extinguishes all claims under Section 31 CIRP

The Gujarat HC quashed a demand notice issued by State Tax Officer for recovery of outstanding dues under Gujarat Value Added Tax Act, 2003. The court held that since the Assistant Commissioner of State Tax had lodged claims as operational creditor during CIRP proceedings before NCLT and did not object to the resolution plan's approval, all claims stood extinguished upon plan approval. The court applied settled legal principle that once resolution plan is approved, no claims can be made by any entity including State Tax Authority.

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Issues:
Challenge to demand notice issued by State Tax Officer for outstanding dues under the Gujarat Value Added Tax Act, 2003 for assessment years.
Interpretation of the effect of a resolution plan approved by the National Company Law Tribunal (NCLT) on pending claims against the corporate debtor.
Application of the principles laid down by the Supreme Court in the case of Ghanashyam Mishra and Sons Private Limited regarding the extinguishment of claims post-approval of a resolution plan.

Detailed Analysis:
The petition challenges a demand notice issued by the State Tax Officer for outstanding dues under the Gujarat Value Added Tax Act, 2003 for specific assessment years. The petitioner, a company engaged in various business activities, had undergone Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). During the CIRP, the Assistant Commissioner of State Tax lodged a claim for dues, which was later admitted by the Resolution Professional. Subsequently, a resolution plan was approved by the NCLT, which allegedly included the waiver of statutory dues. The petitioner argued that as per the IBC and the approved resolution plan, any claims not considered in the plan are extinguished, preventing entities, including State Tax Authorities, from making further claims beyond what is provided in the plan.

The respondent, represented by the Assistant Government Pleader, contended that the NCLT approved the resolution plan without providing an opportunity of hearing to the respondent authorities whose claim was admitted as operational creditors. The respondent authorities were part of the resolution process but were not served with notice before the plan was sanctioned. It was argued that since statutory dues were pending and the resolution plan was approved without their participation, the demand notice was valid. The respondent emphasized the lack of notice and hearing before the approval of the resolution plan as a ground for their claim to remain valid.

Upon considering the submissions and the precedent set by the Supreme Court in the case of Ghanashyam Mishra and Sons Private Limited, the Court held that once a resolution plan is approved, all claims not included in the plan stand extinguished. The Court reiterated that no entity, including State Tax Authorities, can make claims beyond what is provided in the approved resolution plan. The Court, relying on the principle that post-approval of a resolution plan, pending claims are extinguished, quashed and set aside the demand notice issued by the State Tax Officer. Consequently, the demand notice for outstanding dues under the Gujarat Value Added Tax Act, 2003 was declared invalid, and the petition challenging the notice was allowed.

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