TaxTMI 
TaxTMI 
BINDING NATURE OF AN APPROVED RESOLUTION PLAN ON STATUTORY DUES
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....INDING NATURE OF AN APPROVED RESOLUTION PLAN ON STATUTORY DUES<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Corporate Laws / IBC / SEBI<br>Dated:- 31-3-2025<br>Approval of Resolution Plan In a corporate insolvency resolution process ('CIRP' for short) the Resolution Professional called for from the eligible Resolution Applicants to submit the Resolution Plan within the stipulated time. The Resolution Professional shall analyse the resolution plans received by him and put the same before the Committee of Creditors ('CoC' for short). The Resolution Plan is to be approved by the 66% of the members of CoC. Once the resolution plan is approved by the CoC, the Resolution Professional shall file an application before the Adjudicating A....
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....uthority for its approval. Section 31(1) of the Insolvency and Bankruptcy Code, 2016 ('Code' for short) provides that if the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed] guarantors and other stakeholders involved ....
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....in the resolution plan. The Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. Effect of approved resolution plan The Resolution Plan, once approved by the Adjudicating Authority, is binding on the corporate debtor, members, employees of the corporate debtor, creditors of the corporate debtor and other stakeholders involved in the Resolution Plan. Claim after approval of resolution plan Once the resolution plan is approved no claim is entertained by the Resolution Professional. Such claims shall be extinguished and the same cannot be claimed from the Resolution Applicant whose resolutio....
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....n plan is approved. In VAIBHAV GOEL & ANR. VERSUS DEPUTY COMMISSIONER OF INCOME TAX & ANR. - 2025 (3) TMI 1052 - SUPREME COURT, the appellants in the present appeal are joint Resolution Applicants to the Corporate Insolvency Resolution Process initiated against the Corporate Debtor Tehri Iron and Steel Castings Limited. The appellants submitted the resolution plan 21.01.2019. The Adjudicating Authority approved the resolution of the appellants, on the file of the Resolution Professional on 21.05.2019. A monitoring committee was also appointed to supervise the implementation of the resolution plan by the resolution applicants. The Corporate Debtor has to pay a sum of Rs.16.85 crores for the assessment year 2014 - 15 based....
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.... on the demand of the Department on 18.12.2017. This liability was shown in the resolution plan as 'contingent liability'. The Income Tax Department, after the approval of the resolution plan, issued demand notices on 26.12.2019 and 28.12.2019 for the assessment years 2012-13 and 2013 - 14 respectively. But the Department did not file any claim before the Resolution Professional, on the call of the Resolution Professional in the public announcement to claim against the corporate debtor. On receipt of the said demand notices, the Monitoring Professional informed the Department that the claims are not sustainable in law. The Department, again on 02.06.2020, issued a letter to the Monitoring Professional asserting the ....
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....demands. Therefore, the Monitoring Professional filed an application before the Adjudicating Authority for a declaration by the Adjudicating Authority that the claims of the Income Tax Department, after the approval of resolution plan by the Adjudicating Authority, are not valid, since the Department did not file any claim before the approval of the Resolution plan. On 17.09.2020 the Adjudicating Authority dismissed the said application as frivolous. The Adjudicating Authority further imposed Rs.1 lakh on the Department and the Monitoring Professional. Against the said order the Department filed an appeal before the National Company Law Appellate Tribunal ('NCLAT' for short). The NCLAT dismissed the appeal on 25.11.....
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....2021. Against this order the appellants filed the present appeal before the Supreme Court. The appellant submitted the following before the Supreme Court- * The Adjudicating Authority dismissed the application made by the second respondent without assigning any reasons. * Though no claim was received from the first respondent pertaining to the assessment year 2014-15 till the submission of the Resolution Plan, the Resolution Professional by itself admitted the liability of payment of income tax for the assessment year 2014-15, which was pending as a contingent liability of the corporate debtor. * The NCLAT has not considered the decisions of Supreme Court relied on by the appellants and therefore the impugned orders....
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.... of the Adjudicating Authority and NCLAT are liable to be quashed. The first respondent supported the impugned order. The Supreme Court considered the submissions of the parties to the present appeal. The Supreme Court observed the following- * The first respondent (income tax department) did not make any claim regarding income tax dues of the CD for the assessment years 2012-13 and 2013-14. * In para 2(g) of the resolution plan, contingent liabilities are indicated. * In para 44 of the order of Adjudicating Authority it was indicated that in the resolution plan, relief and concession has been sought in respect of statutory dues for making payment in instalments, no coercive action, waiver of requirement of pre-dep....
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....osit for filing appeals, waiver of interest, penal interest or damages. These are issues to be decided by the respective government department and appropriate application may be moved before them. * The income tax department relied on the said para 44 for its defence. * The income-tax liabilities for the assessment years 2012-13 and 2013-14 have not been shown as contingent liabilities under the Resolution Plan. The Supreme Court relied on its own decision in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. - 2021 (4) TMI 613 - SUPREME COURT in which the Supreme Court held that once a resolution plan is duly approved by the adju....
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....dicating authority under Section 31(1) of the Code, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. The Supreme Court held that all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, sh....
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....all stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of the Code. The dues of the corporate debtor to the Income Tax department were not part of the resolution plan. The NCLAT has ignored the binding precedent and the legal effect of the approval of the Resolution Plan. The Supreme Court observed that a successful resolution applicant cannot suddenly be faced with 'undecided' claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would....
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.... successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate. The Supreme Court held that the demands raised by the Income Tax Department against the Corporate Debtor in respect of assessment years 2012-13 and 2013-14 are invalid and cannot be enforced. The Supreme Court set aside the orders of NCLT and NCLAT.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....