The Delhi High Court has quashed a customs order confirming differential duty, interest and penalty holding that a statutory claim arising from a pre-insolvency transaction cannot be adjudicated and enforced after approval of a resolution plan when the Customs Department failed to lodge the claim during the Corporate Insolvency Resolution Process.
The bench of Justice Anil Kshetrapal and Justice Shail Jain ruled that the subsequent quantification or adjudication of a liability does not change the date or character of the underlying claim for the purposes of the Insolvency and Bankruptcy Code, 2016.
The Court observed that the Customs Department could not remain outside the CIRP, wait for adjudication of a pre-CIRP liability and subsequently attempt to enforce that liability against the resolved corporate debtor.
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The writ petition challenged an Order-in-Original passed by the Additional Commissioner of Customs, Air Cargo Complex (Import), New Delhi. Through the order, the Customs authority had confirmed differential customs duty of Rs.5,89,366 under Section 28(1) of the Customs Act, 1962. It also directed the recovery of interest under Section 28AA and imposed a penalty of Rs.4 lakh under Section 117 of the Customs Act.
The demand related to Digital and Network Video Recorders imported by Jaiprakash Associates through a Bill of Entry dated September 15, 2023.
The company had classified the goods under Customs Tariff Heading 85219090 and claimed a concessional Basic Customs Duty rate of 10% under Serial No.499A of Notification No.50/2017-Customs dated June 30, 2017.
The Customs Department subsequently alleged that the imported goods were not eligible for the benefit of the notification and were liable to Basic Customs Duty at 20%, resulting in the alleged short payment of Rs.5,89,366.
The import took place on September 15, 2023. Subsequently, on June 3, 2024, the Allahabad Bench of the National Company Law Tribunal admitted an insolvency petition filed by ICICI Bank Limited and commenced CIRP against Jaiprakash Associates.
A public announcement inviting claims from creditors was issued on June 6, 2024, and June 17, 2024, was prescribed as the last date for submitting claims.
The Customs Department did not submit any claim to the Resolution Professional during the CIRP.
More than a year after commencement of the insolvency process, the Additional Commissioner of Customs issued a pre-notice consultation letter on July 24, 2025. A show-cause notice was subsequently issued on September 10, 2025, proposing differential customs duty, interest and penalty.
Meanwhile, the Committee of Creditors approved the resolution plan submitted by Adani Enterprises Limited on October 31, 2025. The NCLT approved the resolution plan on March 17, 2026.
Jaiprakash Associates informed the Customs authority about the approved plan through written submissions dated May 18, 2026. It also relied on Clause 4.12.1 of the plan, under which claims relating to the pre-CIRP period that were not submitted, rejected or not verified by the Resolution Professional stood extinguished and became nil.
Despite these submissions, the Customs authority passed the order on June 2, 2026, confirming the duty, interest and penalty.
The principal question before the High Court was whether the Customs Department could continue adjudication and enforce a liability arising from a pre-CIRP transaction when it had not submitted its claim during the insolvency process and the resolution plan had already been approved.
Answering the question against the Department, the Court examined the definition of “claim” under Section 3(6) of the IBC.
It noted that the definition covers a right to payment irrespective of whether the right has been reduced to a judgment or whether it is fixed, disputed, undisputed, matured or unmatured.
The Court held that the existence of a claim is connected to the underlying right to payment and not merely to its subsequent adjudication or quantification.
Consequently, the fact that the differential customs duty had not been adjudicated on the insolvency commencement date did not take the liability outside the scope of a “claim” under the IBC.
The underlying import had taken place in September 2023, several months before the commencement of CIRP in June 2024. The later issuance of the pre-notice consultation letter and show-cause notice did not change the pre-CIRP character of the liability.
“A claim under Section 3(6) of the IBC is not rendered a post-CIRP claim merely because its quantification or adjudication takes place subsequently,” the Court observed.
The Customs Department argued that it had not been separately informed about the insolvency proceedings and that Jaiprakash Associates disclosed the CIRP only at the stage of the final personal hearing.
The High Court rejected this argument.
It observed that the IBC and the applicable regulations prescribe a public announcement mechanism for inviting claims from creditors. Once that statutory procedure has been followed, the corporate debtor is not required to individually approach and inform every possible creditor or statutory authority.
The responsibility to identify and submit a claim lies with the creditor, the Court said.
The Customs Department could not rely on the absence of individual intimation to overcome its failure to participate in the CIRP, particularly when the public announcement had admittedly been issued.
The Court emphasised that Section 31(1) of the IBC expressly makes an approved resolution plan binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders.
Following the 2019 amendment, the provision specifically includes the Central Government, State Governments, local authorities and other authorities to whom statutory dues are owed.
Relying on the Supreme Court’s decision in Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, the High Court reiterated that claims not forming part of an approved resolution plan stand extinguished.
The purpose of this principle is to permit the successful resolution applicant to take over the corporate debtor on a “clean slate” without subsequently facing unexpected liabilities that were not factored into the resolution plan.
The Court said that the binding effect of a resolution plan does not depend on whether a creditor consciously agreed to the extinguishment of its claim. It operates by virtue of Section 31(1) of the IBC.
Failure to submit a claim cannot allow a creditor to remain outside the insolvency process and preserve an independent right to proceed against the corporate debtor after the plan is approved.
The High Court also relied on Section 238 of the IBC, which gives the Code overriding effect over inconsistent provisions contained in any other law.
While acknowledging that the Customs Act is a special enactment governing the levy, assessment and collection of customs duties, the Court clarified that customs powers cannot be exercised in a manner that defeats the binding consequences of an approved resolution plan.
The Customs Act and the IBC operate in their respective fields. However, when the exercise of powers under the Customs Act conflicts with the consequences of an approved resolution plan, the IBC prevails because of Section 238.
The Customs Department relied upon the Supreme Court’s decision in ABG Shipyard Liquidator v. Central Board of Indirect Taxes and Customs to argue that insolvency proceedings do not prevent Customs authorities from determining duty, interest or penalty.
The High Court distinguished the ruling.
It explained that ABG Shipyard permits Customs authorities to determine the quantum of statutory dues during insolvency proceedings, subject to the restrictions imposed by the IBC. Recovery, however, cannot be undertaken contrary to the moratorium or the insolvency framework.
The present dispute arose at a later stage—after the resolution plan had been approved and an unfiled pre-CIRP claim had consequently stood extinguished.
The Customs Department was entitled to determine the liability during the CIRP, subject to the IBC. But after the NCLT approved the resolution plan, it could not continue enforcing a pre-CIRP claim that had never been submitted to the Resolution Professional.
The Department also relied on the Supreme Court’s decision in State Tax Officer v. Rainbow Papers Limited to contend that statutory dues cannot be disregarded in insolvency proceedings.
The High Court found the reliance misplaced.
It noted that the Supreme Court subsequently considered Rainbow Papers in Paschimanchal Vidyut Vitran Nigam Limited v. Raman Ispat Private Limited and confined that judgment to its particular facts and statutory context.
There is no general principle that statutory dues enjoy a position allowing government authorities to enforce them outside the IBC framework, the Court held.
The impugned customs order proceeded on the ground that Jaiprakash Associates had failed to show that the disputed customs liability was disclosed before the Resolution Professional, considered by the Committee of Creditors or placed before the NCLT.
The High Court held that this reasoning reversed the statutory scheme.
The relevant question was not whether the corporate debtor had placed the Customs Department’s claim before the Resolution Professional. The question was whether the Department had submitted its claim after the public announcement and within the opportunities available under the CIRP Regulations.
It was undisputed that the Department had not done so.
The absence of the customs claim from the material placed before the NCLT could not subsequently be used as a reason for allowing the Department to proceed independently.
Clause 4.12.1 of the approved resolution plan also specifically provided that pre-CIRP claims not submitted to the Resolution Professional would stand extinguished and become nil.
The Customs authority had recorded that the company’s authorised representative expressed willingness during the personal hearing to pay the disputed dues but could not make the payment because of technical difficulties on the ICEGATE portal.
The High Court held that this statement did not conclude the legal issue.
An isolated statement made during adjudication could not confer jurisdiction on the Customs authority to enforce a liability that had ceased to be enforceable by operation of the IBC.
The statutory consequence flowing from Section 31(1) could neither be waived nor defeated by such a statement, the Court said.
Rejecting the Department’s objection regarding the availability of an appellate remedy under the Customs Act, the High Court held that the dispute did not primarily concern classification, valuation or the calculation of customs duty.
The central issue concerned the Customs authority’s legal power and jurisdiction to continue proceedings after the underlying claim had been extinguished under an approved resolution plan.
The existence of a Customs appellate remedy did not require the company to pursue an appeal under a statute that was itself subject to the overriding provisions of the IBC in the circumstances of the case.
Allowing the writ petition, the High Court quashed the Order-in-Original dated June 2, 2026.
The Court clarified that it had not expressed any opinion on the classification of the imported Digital and Network Video Recorders or the company’s eligibility for the benefit of Serial No.499A of Notification No.50/2017-Customs.
The order was set aside solely because the liability arose from a pre-CIRP transaction and could not be adjudicated and enforced against the company after approval of the resolution plan.
The Court concluded that allowing a statutory creditor to stay outside the CIRP and pursue an unfiled claim after approval of the plan would undermine the finality of the insolvency resolution process and expose the successful resolution applicant to unexpected liabilities.
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