M/S Srei Equipment Finance Limited vs. Union Of INDIA

CW/11147/2024HC RajasthanGSTCNR RJHC02057181202424 March 2025Bench: AVNEESH JHINGAN,MANEESH SHARMA4 pages

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Facts

The petitioner, M/s Srei Equipment Finance Limited, filed a writ petition challenging an order dated 26.12.2023 passed by the assessing authority under Section 73 of the Central Goods & Services Tax Act, 2017. This order pertained to the tax period July 2017 to March 2018. The petitioner's grievance was that after the National Company Law Tribunal (NCLT) approved a resolution plan on 11.08.2023, any dues not claimed in the Insolvency and Banking Code (IBC) proceedings for the period prior to the resolution plan's approval could not be recovered. The petition was filed before the High Court of Judicature for Rajasthan, Bench at Jaipur.

Held

The Court held that once a resolution plan is duly approved by the Adjudicating Authority under Section 31(1) of the Insolvency and Banking Code, 2016 (IBC), the claims provided in the plan become frozen and binding on all stakeholders, including government authorities. Any claims not part of the resolution plan, including statutory dues for periods prior to the approval, stand extinguished. The Court referred to the Supreme Court's decisions in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelwise Asset Reconstruction Company Pvt. Ltd. and Ruchi Soya Industries Ltd. vs. Union of India, which established this principle. The 2019 amendment to Section 31 of the IBC was noted as being clarificatory and declaratory. Consequently, the impugned order passed under Section 73 of the CGST Act for the period July 2017 to March 2018 was quashed, as the dues were not part of the approved resolution plan and thus extinguished. The writ petition was allowed.

Key Issues

1. Whether statutory dues owed to the Central Government, any State Government, or any local authority, if not part of an approved resolution plan under the Insolvency and Banking Code, 2016, stand extinguished and cannot be pursued for periods prior to the approval of the resolution plan, as per Section 31 of the IBC? The petitioner argued that following the approval of the resolution plan by the NCLT, any dues not included in the plan, particularly statutory dues for periods prior to approval, are extinguished and cannot be recovered. They relied on pronouncements from the Supreme Court. The respondents (Union of India, State of Rajasthan, Chief Commissioner CGST, and Assistant Commissioner CGST) did not record any specific arguments in the judgment provided. However, the court's decision implies a challenge to the petitioner's contention regarding the extinguishment of dues.

Sections Cited

Section 73, Section 31

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Cause title — parties, addresses and appearances

[2025:RJ-JP:13199-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 11147/2024 M/s Srei Equipment Finance Limited, 1 St Floor C 94, Fortune Heights, Subhash Marg, C- Scheme, Jaipur, Rajasthan 302001 Through- Its Associate Vice President Shri Tamojoy Dasgupta ----Petitioner Versus 1. Union Of India, Through Its Secretary, Department Of Revenue, Ministry Of Finance, North Block, New Delhi. 2. State Of Rajasthan, Through Its Secretary, Ministry Of Finance, Government Of Rajasthan, Secretariat, Jaipur. 3. Chief Commissioner, Central Goods And Service Tax Jaipur, New Central Revenue Building, Statute Circle, Jaipur. 4. Assistant Commissioner, Cgst Division H, Sector 10, Vidhyadhar Nagar, Jaipur. ----Respondents For Petitioner(s) : Mr. Vivek Singhal For Respondent(s) : Mr. Ajay Shukla with Mr. Raghav Sharma Mr. Kartikeya Sharma for Mr. Sandeep Taneja, AAG HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE MANEESH SHARMA

Order 24/03/2025 AVNEESH JHINGAN, J (ORAL):-

This petition is filed assailing order dated 26.12.2023 passed by the assessing authority under Section 73 of Central Goods & Services Tax Act, 2017 (for short ‘the Act’) pertaining to period July 2017 to March 2018. [2025:RJ-JP:13199-DB] (2 of 4) [CW-11147/2024]

The grievance raised in this petition is that after approval of resolution plan on 11.08.2023 by the NCLT, the dues not claimed in the Insolvency and Banking Code proceedings for a period prior to approval of the resolution cannot be recovered.

The issue raised is no longer res integra. It has been decided by the Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelwise Asset Reconstruction Company Pvt. Ltd. reported in (2021) 13 SCR 737, wherein it was held. “95. In the result, we answer the questions framed by us as under: (i) That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, 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; (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.”

[2025:RJ-JP:13199-DB] (3 of 4) [CW-11147/2024]

In the case of the petitioner-company on this very issue the “102. In the result, we answer the questions framed by us as under:

102.1.

That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, 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.

102.2.

The 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect.

102.3.

Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.

11.

Admittedly, the claim in respect of the demand which is the subject-matter of the present proceedings was not lodged by Respondent 2 after public announcements were issued under Sections 13 and 15 IBC. As such, on the date on which the resolution plan was approved by the learned NCLT, all claims stood frozen, and no claim, which is not a part of the resolution plan, would survive.”

[2025:RJ-JP:13199-DB] (4 of 4) [CW-11147/2024]

In view of the above, the impugned order is quashed and writ petition is allowed. (MANEESH SHARMA),J (AVNEESH JHINGAN),J Chandan/59 Reportable: No

Reproduced from the public record of the Rajasthan High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.