Facts of the Case

The Petitioner, Patanjali Foods Limited, challenged a GST demand order dated 21 January 2025 issued by the Respondent authorities. The demand pertained to a period prior to 4 September 2019, i.e., before the approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC).

The Petitioner contended that after the approval of the Resolution Plan, all past claims not forming part of the plan stood extinguished, and therefore, the impugned demand was unsustainable in law. 

Issues Involved

  1. Whether GST authorities can raise or continue demands for the period prior to approval of a Resolution Plan under the IBC.
  2. Whether statutory dues not included in the Resolution Plan survive after its approval.
  3. Scope and effect of Section 31 of the Insolvency and Bankruptcy Code, 2016. 

Petitioner’s Arguments

  • The Resolution Plan, once approved under Section 31(1) of the IBC, is binding on all stakeholders, including government authorities.
  • All claims not included in the approved Resolution Plan stand extinguished.
  • The GST demand raised relates to a period prior to approval of the Resolution Plan and hence cannot be enforced.
  • Continuation of such proceedings defeats the object of the IBC, which aims at providing a fresh start to the successful resolution applicant. 

Respondent’s Arguments

  • The GST department argued that statutory dues are recoverable and cannot be automatically extinguished unless specifically addressed.
  • It was contended that tax liabilities are governed by statutory provisions and enforcement mechanisms under GST law.
  • The department sought to justify the issuance of the demand order.

Court’s Findings / Order

  • The Delhi High Court held that once a Resolution Plan is approved under Section 31(1) of the IBC, it is binding on all creditors, including statutory authorities.
  • Any claim that is not part of the approved Resolution Plan stands extinguished.
  • No proceedings can be initiated or continued in respect of such extinguished claims.
  • The GST demand order dated 21 January 2025 was quashed as it related to a period prior to the approval of the Resolution Plan.

Important Clarification by Court

  • Government authorities, including tax departments, are bound by the Resolution Plan.
  • The objective of the IBC is to ensure finality and certainty in resolution.
  • Allowing fresh or continued claims post-approval would defeat the purpose of insolvency resolution.
  • The ruling reinforces that statutory dues are treated as “operational debt” and must be included in the resolution process.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/75411122025CW57842025_172036.pdf

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