The Allahabad High Court has set aside four ex parte appellate orders passed against a company after it had been ordered to be wound up, observing that the liquidator’s authority to appoint counsel and safeguard the company’s interests was a vital issue requiring consideration.
The bench of Justice Vikas Budhwar remitted the matters to the GST appellate authority for fresh adjudication after issuing notice to the company’s liquidator and providing an adequate opportunity for personal hearing.
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The petitioner/assessee was engaged in supplying products used for agricultural purposes. According to the company, a dispute arose between its directors during the financial year 2018-19, resulting in the suspension of its business operations from October 28, 2019. Proceedings between the directors were subsequently initiated before the National Company Law Tribunal at Hyderabad.
The State GST authorities initiated proceedings under Section 74, read with Section 122(1), of the Uttar Pradesh Goods and Services Tax Act, 2017 for four financial years.
The proceedings concerned three principal issues: the valuation of leftover stock transferred from the Kanpur branch to the company’s factory at Wardha; the classification of “light traps” used in agricultural fields to protect crops from insects; and the company’s reverse charge mechanism liability on inward freight, legal expenses and outward freight.
Four adjudication orders were passed by the Deputy Commissioner of State Tax for financial years 2017-18, 2018-19, 2019-20 and 2020-21. Recovery proceedings under Section 79 of the GST law were also initiated.
The company had earlier approached the Allahabad High Court contending that the department could not directly initiate proceedings under Section 74 without first issuing a scrutiny notice in Form GST ASMT-10 under Section 61.
That contention was rejected in separate writ petitions decided in 2023. The High Court held that scrutiny of returns under Section 61 and proceedings for determination of tax under Section 74 operate in distinct fields.
The Court had clarified that issuance of a notice under Section 61(3) was not a condition precedent for initiating action under Section 74. It nevertheless permitted the company to file statutory appeals within two weeks without facing an objection on limitation.
Acting on that liberty, the company filed four appeals before the Additional Commissioner, Grade-II (Appeals)-I, State Tax, Kanpur on May 3, 2023.
While the GST appeals were pending, the NCLT, Hyderabad, passed an order on March 7, 2025 directing the winding up of the company under Section 242(1)(b) of the Companies Act, 2013. A liquidator was appointed with directions to complete the liquidation proceedings.
The counsel who had instituted the GST appeals informed the appellate authority about the NCLT proceedings and the winding-up order through an email dated July 15, 2025. A request was made to keep the appellate proceedings in abeyance.
The NCLT subsequently replaced the original liquidator and appointed Chevuturi Murali Mohan as liquidator on December 9, 2025.
The company also stated that the National Company Law Appellate Tribunal had, on April 7, 2025, kept the liquidation proceedings in abeyance. However, the NCLAT had not stayed the NCLT’s winding-up order itself and had only deferred future steps arising from that order.
Despite these developments, the GST appellate authority proceeded to reject all four appeals through orders dated November 10, 2025.
The company argued that after the winding-up order, lawyers previously appointed by the company or its directors could no longer automatically represent it.
It was contended that the liquidator had stepped into control of the company’s affairs and, consequently, only the liquidator was competent to appoint an advocate for prosecuting the appeals and protecting the company’s interests.
The company further relied upon Section 279 of the Companies Act, which restricts the commencement or continuation of legal proceedings by or against a company after a winding-up order unless leave of the Tribunal is obtained.
Section 279 expressly provides that where a winding-up order has been passed or a provisional liquidator appointed, no suit or other legal proceeding shall be commenced—or, if already pending on the date of the winding-up order, proceeded with—by or against the company without the Tribunal’s permission.
An exception is provided for proceedings pending in appeal before the Supreme Court or a High Court.
The department argued that the restriction under Section 279 applied only to fresh proceedings instituted after the company’s winding up and not to proceedings already pending on that date.
The High Court found that this interpretation could not be accepted on a plain reading of the provision.
Justice Budhwar noted that Section 279 expressly uses the words “if pending” while dealing with legal proceedings existing on the date of the winding-up order. The Court observed that every word used by the legislature must be given meaning and cannot be treated as superfluous.
The Court also noted that it was undisputed that the company had been ordered to be wound up on March 7, 2025 and that a liquidator had been appointed. The liquidator had consequently stepped into the shoes of the erstwhile management.
In these circumstances, the Court said that the question of who was authorised to appoint counsel, prosecute the proceedings and protect the company’s interests after liquidation was a vital matter requiring consideration.
The company alleged that it had not been heard and that the appellate orders had been passed ex parte in violation of the principles of natural justice.
During the proceedings, the State’s standing counsel also acknowledged that the appellate orders had been passed ex parte without considering the company’s case. The State agreed that the orders could be set aside and the appeals remanded for reconsideration.
Considering the lack of hearing and the State’s position, the High Court refrained from making a final determination on the wider legal questions and ordered fresh adjudication.
The High Court set aside all four appellate orders dated November 10, 2025 relating to financial years 2017-18 to 2020-21 and remitted the appeals to the Additional Commissioner, Grade-II (Appeals)-I, State Tax, Kanpur.
The company’s counsel was directed to communicate the High Court’s order to the liquidator within three weeks. The appellate authority was separately directed to issue notice to the liquidator at the appropriate address within one month.
The Court ordered that the date of personal hearing must be fixed in advance by giving at least three weeks’ notice. The appellate authority must thereafter hear the parties and pass fresh orders within a further period of four months.
The High Court clarified that it had not examined or expressed any opinion on the merits of the underlying GST dispute. The appellate authority was directed to decide the appeals strictly in accordance with law and without being influenced by any observations contained in the High Court’s order.
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