IBC Resolution Plan Approval Extinguishes All Pre-Plan Government and Statutory Claims: Gujarat High Court
- REEDLAW
- 2 hours ago
- 3 min read
REEDLAW Legal News Network reports: In a significant affirmation of the clean slate principle under the Insolvency and Bankruptcy Code, the Gujarat High Court has reiterated that once a resolution plan attains approval under Section 31, all past statutory dues and tax-related claims not forming part of the plan stand irrevocably extinguished. The ruling reinforces that the successful resolution applicant acquires the corporate debtor free from historical liabilities, preserving commercial finality and preventing post-resolution litigation over past government dues.
The Gujarat High Court Division Bench comprising Justice Bhargav D. Karia and Justice D.N. Ray, while adjudicating a Special Civil Application, held that once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, all statutory claims— including government tax demands— that are not incorporated in the approved plan stand extinguished, and no authority may pursue proceedings for any period prior to the plan’s approval. The Court reaffirmed that the corporate debtor is acquired by the successful resolution applicant on a clean slate, in line with binding Supreme Court precedent.
The Petitioner, a company manufacturing plastic film, was subjected to the Corporate Insolvency Resolution Process upon an application by an operational creditor before the Tribunal, following which a resolution plan was approved for the Corporate Debtor. A single financial creditor, the Financial Creditor, comprised the Committee of Creditors that subsequently approved a resolution plan submitted by a resolution applicant with full voting in its favour. The Tribunal sanctioned the resolution plan, ordering that the settlement provisions outlined in the plan, including for statutory authorities, were binding on all stakeholders involved.
After approval of the resolution plan, the Respondent, as the income tax authority, issued penalty and demand notices relating to periods that preceded the approval date. Aggrieved, the Petitioner filed a writ petition seeking quashing of the penalty and assessment orders and restraining the Respondent from enforcing any claims for the period prior to the effective date of the resolution plan. The Petitioner relied upon settled law, citing Ghanashyam Mishra and Sons private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534 and Vaibhav Goel and Another v. Deputy Commissioner of Income Tax and Another, REEDLAW 2025 SC 03561, arguing that statutory dues and government claims which are not incorporated in a resolution plan, stand extinguished by operation of Section 31 of the Code.
The Tribunal found that, in line with Supreme Court authority, post-approval of the resolution plan, only claims incorporated in the plan remain actionable against the Corporate Debtor; all other statutory claims are extinguished, and no belated demands may be raised. It was thus held that all assessment, penalty, and demand notices for dues not made part of the approved resolution plan for periods prior to its effective date were not enforceable and stood quashed, in keeping with the principle that a successful resolution applicant must have certainty and a clean slate after taking over the Corporate Debtor.
Mr. M.R. Bhatt, Sr. Advocate, with Ms. Shailee S. Joshi, Advocate, represented the Petitioner.
Mr. Varun K. Patel, Advocate, appeared for the R-3 & R-4.
Ms. Maithili D. Mehta, Advocate, appeared for the R-1 & R-2.
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