Approved resolution plan finality under the Insolvency and Bankruptcy Code extinguishes unpreserved tax claims and related encumbrances.

Once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, it binds all stakeholders on a clean-slate basis, and pre-existing claims not preserved in the plan stand extinguished. The tax department, having already lodged its claim before the resolution professional, could not continue to assert a contrary claim or retain the encumbrance after approval of the plan. The approval order was appealable under Section 61, but no timely challenge was brought before the NCLAT, so a belated collateral challenge could not defeat the finality of the approved plan.

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Issues: Whether the tax department could continue to assert its claim and retain the encumbrance after approval of the resolution plan under the Insolvency and Bankruptcy Code, and whether the writ petition was maintainable in the absence of a timely challenge to the NCLT order.

Analysis: The resolution plan had been approved by the NCLT under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, and the respondents had already lodged their claim before the resolution professional. The approved plan, once binding, operated on the principle that the successful resolution applicant acquires the corporate debtor on a clean slate and pre-existing claims not forming part of the plan stand extinguished. The order of approval was appealable under Section 61 of the Insolvency and Bankruptcy Code, 2016, but no timely challenge had been brought before the NCLAT within the prescribed period. In those circumstances, the respondents could not take a stand contrary to the approved resolution plan.

Conclusion: The tax authorities were bound by the approved resolution plan and could not continue the encumbrance or assert a contrary claim; the writ petition was therefore allowed.

Ratio Decidendi: Once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, it binds all stakeholders, and pre-existing claims not preserved in the plan stand extinguished; a belated collateral challenge cannot defeat that finality.

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