Income tax department loses appeal as NCLAT upholds resolution plan approval despite uncrystallized tax claims filed late

NCLAT dismissed the appeal where the income tax department challenged the approval of a resolution plan, claiming their tax demands were not considered. The tribunal held that the appellant failed to file crystallized claims within the stipulated timeframe during CIRP proceedings, merely providing informal intimation without specific amounts. The tax assessment orders were passed after the resolution plan's approval by CoC and adjudicating authority. NCLAT ruled that belated claims cannot be admitted post-approval as it would undermine the finality of resolution processes and burden the successful resolution applicant with undecided liabilities, potentially making approved plans unworkable.

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Issues Involved:

1. Timeliness and treatment of the claim filed by the Appellant.
2. Consideration of statutory demands in the resolution plan.
3. Admissibility of belated claims after the approval of the resolution plan.
4. Compliance with the statutory framework and objectives of the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Timeliness and Treatment of the Claim Filed by the Appellant:

The primary issue was whether the claim by the Appellant, the Assistant Commissioner of Income Tax, was filed within the stipulated time and how it was treated during the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, M/s Diamond Power Infrastructure Ltd. The Appellant filed its claim in Form B on 08.11.2019, indicating a potential heavy income tax liability. However, the claim was not crystallized, and no specific amount was mentioned, leading to its exclusion from the Information Memorandum (IM). The Resolution Professional (RP) published a list of creditors, including the Appellant, but could not include the claim in the resolution plan due to its indeterminate nature. The Tribunal noted that the Appellant failed to submit a firm and determinate claim within the time frame prescribed by the CIRP Regulations, which was crucial for its inclusion in the resolution plan.

2. Consideration of Statutory Demands in the Resolution Plan:

The Appellant argued that the resolution plan ignored statutory demands payable to the government, which should have been considered under Section 30(2) of the IBC. The Tribunal observed that the resolution plan, approved by the Committee of Creditors (CoC) with the requisite majority, included provisions for payment towards CIRP costs, workmen, employees, and operational creditors. The Adjudicating Authority had examined the plan in light of Section 30(2) and found it compliant. The Tribunal emphasized that statutory demands not filed within the stipulated time cannot be included post-approval of the resolution plan, as it would disrupt the CIRP timelines and the principle of a "clean slate."

3. Admissibility of Belated Claims After the Approval of the Resolution Plan:

The Tribunal addressed whether belated claims could be admitted after the resolution plan's approval. The Appellant's claims, finalized after the plan's approval, were deemed inadmissible. The Tribunal reiterated the "clean slate" principle, emphasizing that once a resolution plan is approved, all claims not part of the plan are extinguished. This principle is supported by the Supreme Court's judgments, which highlight the necessity of finality in the resolution process to avoid reopening settled matters and imposing unforeseen liabilities on the Successful Resolution Applicant (SRA).

4. Compliance with the Statutory Framework and Objectives of the IBC:

The Tribunal analyzed the statutory framework of the IBC, which mandates a time-bound insolvency resolution process. The RP is required to invite claims, collate them, and include them in the IM for consideration by resolution applicants and the CoC. The Tribunal noted that the Appellant's failure to file a crystallized claim on time precluded its inclusion in the resolution plan. The Tribunal cited Supreme Court judgments affirming that post-approval claims cannot be entertained, as it would undermine the IBC's objective of reviving the Corporate Debtor as a going concern.

In conclusion, the Tribunal found no error in the Adjudicating Authority's approval of the resolution plan, dismissing the appeal and upholding the principle that all claims must be submitted within the stipulated timeframe to ensure a smooth and effective CIRP.

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