Insolvency resolution clean slate principle extinguishes unfiled pre-resolution tax dues, while tax waivers still need statutory approval.

Upon approval of a resolution plan, pre-resolution statutory dues and income tax claims that were not filed in the insolvency process and were not included in the plan are treated as extinguished against the successful resolution applicant, reflecting the clean slate principle in insolvency resolution. Reliefs, concessions and waivers relating to income tax liabilities, however, remain subject to the approval mechanism under the Income Tax Act and are not granted merely by plan approval. The tax authority's requirement that such concessions be pursued before the competent authority was upheld.

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Issues: (i) Whether income tax and other statutory dues existing on the date of approval of the resolution plan, but not filed in the corporate insolvency resolution process, stood extinguished upon approval of the plan; (ii) whether reliefs, concessions and waivers relating to income tax liabilities could be granted without prior approval of the competent authority under the Income Tax Act, 1961.

Issue (i): Whether income tax and other statutory dues existing on the date of approval of the resolution plan, but not filed in the corporate insolvency resolution process, stood extinguished upon approval of the plan.

Analysis: The governing principle applied is that the resolution process is intended to revive the corporate debtor on a clean slate. Once a resolution plan is approved, claims not forming part of the plan and not lodged in the process are frozen and cannot survive against the successful resolution applicant. Statutory dues owed to governmental authorities are treated on the same footing if they were not included in the plan.

Conclusion: The unpaid income tax and other statutory dues that existed prior to approval of the resolution plan and were not filed in the insolvency process stood extinguished and could not be continued against the resolution applicant.

Issue (ii): Whether reliefs, concessions and waivers relating to income tax liabilities could be granted without prior approval of the competent authority under the Income Tax Act, 1961.

Analysis: The reliefs, concessions and waivers sought in relation to income tax were treated as matters to be dealt with by the competent authority under the applicable tax law. The approval of the resolution plan did not itself confer a tax waiver or dispense with the statutory approval mechanism for such reliefs.

Conclusion: The observation requiring the resolution applicant to approach the competent authority for income tax-related concessions and waivers was upheld.

Final Conclusion: The appeal succeeded to the extent that pre-resolution, unfiled income tax and other statutory dues were held to be extinguished, while the tax authority's approval requirement for concessions and waivers remained undisturbed.

Ratio Decidendi: Upon approval of a resolution plan, all claims and statutory dues not included in the plan and not lodged in the insolvency process stand extinguished, and the successful resolution applicant takes the corporate debtor free from such past liabilities.

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