Facts of the Case:

M/s Era Infra Engineering Ltd. (“Petitioner”), engaged in construction, underwent insolvency proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT, Delhi. During the Corporate Insolvency Resolution Process (CIRP), the GST registration of the Petitioner was cancelled, and the GST Department filed its statutory claims before the Resolution Professional. These claims were crystallised and included in the resolution plan approved by the NCLT on 11 June 2024.

Subsequently, the GST authorities issued demand‑cum‑show cause notices dated 14 and 25 November 2024 for GST dues relating to financial years 2017‑18, 2018‑19 and 2019‑20, totalling substantial sums. The Petitioner challenged these notices and consequential demand orders by way of writ petitions in the Delhi High Court contending that once a resolution plan is approved under Section 31 of the IBC, claims not included in the approved plan stand extinguished and no fresh demands can be raised in respect of pre‑approval periods. 

Issues Involved:

  1. Whether the GST Department could issue fresh GST demand notices and orders for pre‑resolution periods after the resolution plan approval by the NCLT.
  2. Whether the approved resolution plan binds statutory authorities, such as the GST department, preventing fresh claims outside the plan post‑approval under Section 31 of the IBC. 

Petitioner’s Arguments:

The Petitioner argued that the GST department’s claims were considered and included in the resolution plan approved by the NCLT.
 Following Supreme Court precedents (including Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd.), once a resolution plan is approved, claims not part of that plan as finally crystallised stand extinguished.
 Therefore, the GST demand orders issued after approval of the resolution plan for periods prior to approval were impermissible and legally untenable. 

Respondent’s Arguments:

The GST Department contended that the impugned demand orders were only meant to crystallise the amounts and had not initiated any recovery.
 It argued that fresh demands could be raised notwithstanding the resolution plan approval, asserting statutory powers to assess and demand taxes. 

Court’s Order & Findings:

The Delhi High Court (Coram: Justice Prathiba M. Singh & Justice Shail Jain) accepted the Petitioner’s contention.
 Relying on the settled principles under the IBC and decisions of the Supreme Court, the Court held that once a resolution plan is approved under Section 31 of the IBC, all claims against the corporate debtor that are not part of the approved plan stand extinguished and cannot be revived by statutory authorities.
 The GST department, having participated in the CIRP and had its claims considered, could not issue fresh demands for pre‑approval periods after plan approval.
 The impugned demand‑cum‑show cause notices and consequential orders dated 14 and 25 November 2024 were held to be unsustainable and were set aside.
 The Court expressly did not delve into merits of each demand, addressing only their legal viability post‑IBC approval. 

Important Clarifications:

• IBC Section 31 Effect: Approval of a resolution plan binds the corporate debtor and all stakeholders (including government authorities), and extinguishes claims not provided for in the approved plan, as per Supreme Court jurisprudence.
• Statutory Claims Post‑Approval: Fresh statutory demands by authorities for past periods after resolution plan approval cannot be raised if the plan has crystallised and dealt with such claims.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/75415122025CW22812025_154656.pdf 

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