M S Prius Commercial Projects PVT LTD vs. The Sales Tax Officer Class Ii Avato Ward 203 Zone 11 New Delhi 110002 & Anr.

Facts

The writ petitioner, M/s Prius Commercial Projects Pvt Ltd, challenged an order dated April 29, 2024, passed by the Sales Tax Officer Class II Avato Ward 203 Zone 11 New Delhi & Anr. This order was purportedly issued under Section 73 of the Central Goods & Services Tax Act, 2017, for the tax period April 2018 to March 2019. The challenge was framed in the context of a Resolution Plan that was approved by the National Company Law Tribunal (NCLT) on January 4, 2021. Clause 15.7 of this approved Resolution Plan stipulated that no person would be entitled to initiate or continue any proceedings, including tax proceedings, to enforce claims or liabilities relating to the period prior to the Upfront Payment Date.

Held

The Court allowed the writ petition and quashed the impugned order. The Court found that the Resolution Plan, approved by the NCLT, contained a specific clause (15.7) that extinguished all claims, including tax claims, relating to the period prior to the Upfront Payment Date. This finding was supported by the Supreme Court's pronouncements in Essar Steel India Ltd. Committee of Creditors and Ghanashyam Mishra & Sons (P) Ltd. These judgments established the principle that upon the approval of a resolution plan by the adjudicating authority, all claims not forming part of the plan are extinguished, and no proceedings can be initiated or continued in respect of such claims. The Court reasoned that allowing the tax proceedings to continue would undermine the finality and certainty provided by the approved Resolution Plan, which is crucial for the successful resolution applicant to take over the business on a 'fresh slate'. Therefore, the impugned order, which sought to pursue tax liabilities for a period prior to the plan's approval, was held to be invalid.

Key Issues

1. Whether the impugned order dated April 29, 2024, passed by the respondents under Section 73 of the CGST Act for the tax period April 2018 to March 2019, is valid in light of the approved Resolution Plan? The petitioner argued that the Resolution Plan, approved by the NCLT on January 4, 2021, contained a specific clause (15.7) that extinguished all claims, debts, or liabilities, including tax proceedings, pertaining to the period prior to the Upfront Payment Date. The petitioner relied on the Supreme Court's decisions in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta and Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., which established that once a resolution plan is approved, all claims not part of the plan stand extinguished, and no proceedings can be initiated or continued for such claims. The respondents did not record any specific arguments against this position.