Statutory Tax Dues For Pre-CIRP Period Stand Extinguished Once Resolution Plan Is Approved Under IBC: Delhi HC

The Delhi High Court has held that statutory dues for pre-CIRP period stand extinguished once resolution plan is approved under Insolvency and Bankruptcy Code (IBC). The bench of Justice Prathiba M. Singh and Justice Shail Jain has set aside multiple Goods and Services Tax (GST) demand orders holding that no tax demands can be raised for periods prior to the approval of a resolution plan by the National Company Law Tribunal (NCLT). The petitioner/assessee, ERA Infra Engineering Limited, engaged in the construction sector, had undergone corporate insolvency resolution proceedings (CIRP) due to financial distress. Insolvency proceedings were initiated in June 2017 on an application filed by Union Bank of India under Section 7 of the IBC. During the CIRP, claims were invited and a Resolution Professional (RP) was appointed, later confirmed by the NCLT. The GST Department participated in the insolvency process and filed claims amounting to over Rs. 4.02 crore, which were subsequently crystallised at ₹1.94 crore during the resolution process. Eventually, the NCLT, Delhi approved the resolution plan submitted by M/s S.A. Infrastructure Consultants Pvt. Ltd. on 11 June 2024, making it binding on all stakeholders, including the Central and State Governments. Despite this, the GST Department issued orders in November 2024 raising fresh demands aggregating to several crores of rupees for financial years 2017–18, 2018–19 and 2019–20. These demands were challenged before the High Court. At an earlier stage, the High Court had stayed the impugned GST orders, observing that the resolution plan had already been approved and that the GST Department had been duly notified and had participated in the CIRP. ERA Infra argued that once the resolution plan was approved, all prior claims stood frozen and any claim not forming part of the plan stood extinguished. On the other hand, the GST Department contended that the impugned orders were merely meant to crystallise the tax liability and that no recovery steps had been taken. After examining the statutory framework and precedents, the High Court relied heavily on landmark Supreme Court judgments, including Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta. The Court reiterated that once a resolution plan is approved under Section 31 of the IBC, all claims not included in the plan stand extinguished and are binding on all stakeholders, including government authorities. The Bench clarified that while tax authorities may assess or quantify dues during insolvency, they cannot seek to enforce or recover claims beyond what is provided for in the approved resolution plan. Allowing such post-approval demands, the Court noted, would defeat the very objective of the IBC, which seeks to provide finality and certainty to insolvency resolution and enable a clean slate for the successful resolution applicant. Holding the GST demands to be legally unsustainable, the Delhi High Court quashed the Orders-in-Original dated 14 November 2024 and 25 November 2024 along with all consequential demands. The Court emphasised that the new management which took over ERA Infra pursuant to the approved resolution plan could not be burdened with legacy tax liabilities relating to periods prior to the plan’s approval. However, the court clarified that it had not examined the merits of the tax demands themselves, as the issue was purely one of jurisdiction and maintainability in light of the IBC. Case Details Case Title: M/S Era Infra Engineering Limited Versus Joint Commissioner Cgst Delhi South Commissionerate & Ors. Case No.: W.P.(C) 2281/2025, CM APPL. 10744/2025&CM APPL. 56666/2025 Date: 16/12/2025 Counsel For Appellant: Kavita Jha, Sr. Adv. Counsel For Respondent: R. Ramchandran, SSCN Click Here To Read Order Read More: Presumption of Illegal Export Can’t Justify Confiscation: CESTAT Quashes Customs Seizure for Lack of Evidence

Statutory Tax Dues For Pre-CIRP Period Stand Extinguished Once Resolution Plan Is Approved Under IBC: Delhi HC

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