Srei Equipment Finance Ltd vs State Of UP And 2 Others - The underlying principle of the Code is to give a fresh start to the Resolution Applicant. Any new liability being fastened after the approval of the Resolution Plan would inherently and palpably be illegal and go beyond the Lakshman Rekha of the Code.

 HC Allahabad (2025.07.09) in Srei Equipment Finance Ltd vs State Of UP And 2 Others [2025:AHC:108978-DB, WRIT TAX No. - 155 of 2024] held that;-

• Even assuming that the department was not informed about the proceedings, the law is very clear as expounded in the judgments cited above. The resolution applicant cannot be saddled with new claims once a resolution plan has been approved.

• The underlying principle of the Code is to give a fresh start to the Resolution Applicant. Any new liability being fastened after the approval of the Resolution Plan would inherently and palpably be illegal and go beyond the Lakshman Rekha of the Code.

Excerpts of the Order;

# 1. Heard Sri Vinay Sharma with Sri Vedant Agarwal, learned counsel appearing on behalf of the petitioners and Sri Nimai Das, learned Additional Chief Standing Counsel appearing on behalf of the State.

# 2. This is a writ petition under Article 226 of the Constitution of India, wherein the writ petitioners have sought for the following substantial reliefs:

• "(i) Issue a writ, order or direction in the nature of Certiorari quashing the impugned order dated 26.12.2023 passed under Section 73 of the U.P. Goods and Services Tax Act, 2017 by the Joint Commissioner, Corporate Circle, Meerut (Annexure-1 to the writ petition) as well as show-cause notice dated 15.01.2024 (Annexure-2 to the writ petition) issued to the petitioner for the period 2018-19;

• (ii) Issue a writ, order or direction in the nature of mandamus restraining the respondents from initiating any proceedings against the petitioner company in respect of the period prior to the Effective Date of the taking over of the petitioner company by the Resolution Applicant upon conclusion of the CIRP under IBC, 2016."

# 3. The case of the petitioner is that the petitioner went into a Corporate Insolvency Resolution Process (hereinafter referred to as CIRP), on October 8, 2021. A Resolution Professional was appointed on the same day and thereafter proceedings continued before the National Company Law Tribunal (in brevity NCLT). As per the procedure, the creditors were asked to submit their claims before the Resolution Professional. Specific notice was also sent to G.S.T. Department, Meerut by the Resolution Professional of the petitioner. The impugned order, with regard to the Tax Period 2017-18 was passed by the respondent No.3 on December 26, 2023 and show cause notice was issued by the respondent No.3 for the Tax Period 2019-19 on January 15, 2024. On August 11, 2023, the Resolution Plan was approved by the NCLT and affirmed by NCLAT, New Delhi on January 5, 2024.

# 4. Learned counsel appearing on behalf of the petitioner, to buttress his argument that once the Resolution Plan has been approved by the NCLT, the G.S.T. Department cannot create further dues by way of passing orders, has relied upon the following judgments, viz. 

• (i) Ghanshyam Mishra and Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., reported in [SC] [2021] 126 Taxmann.com 132/166 SCL 237 (SC), 

• (ii) N.S. Papers Ltd. Vs. Union of India and Others [Writ Tax No. 408 of 2021, decided on December 11, 2024], 

• (iii) Vaibhav Goyal & Another Vs. Deputy Commissioner of Income Tax & Another [Civil Appeal No. 49 of 2022, decided on March 20, 2025] (SC) and 

• (iv) Committee of Creditors of Essar Steel India Ltd. Through Authorised Signatory Vs. Satish Kumar Gupta & Others [2019] 16 S.C.R. 275].

# 5. This Court, in Writ Tax No. 408 of 2021 [M/S NS Papers Limited And Another Vs. Union of India Through Secretary and Others], after dealing with a catena of judgments rendered by the Supreme Court and also other High Courts held as follows:

• "11. He further submits that if proceedings under the Act could be initiated, continued with and culminated during the course of CIRP and institution of Moratorium u/s 14 of the Code, the following may also kindly be considered, for these have a bearing on the fact that income tax proceedings should not get shadowed or extinguished merely by the institution of CRIP and passage of a moratorium order, unless the proceedings were clearly inconsistent with or repugnant to any provisions of the Code, which is not the case here. 

• 12. Upon considering the facts and circumstances of the case, we are of the view that the arguments raised by the learned counsel appearing on behalf of the respondents is without any merit on two counts. Firstly, it is clear by the letter dated March 8, 2021 that the petitioner had informed the Income Tax Authorities with regard to approval of resolution plan. Secondly, the department itself had filed a claim before the Resolution Professional, and accordingly, the argument that the department was not aware of the IBC proceedings holds no water.

• 13. Even assuming that the department was not informed about the proceedings, the law is very clear as expounded in the judgments cited above. The resolution applicant cannot be saddled with new claims once a resolution plan has been approved.

• 14. The argument that an assessment that has been kept pending for a prior period and is quantified subsequent to the approval of the Resolution Plan is an argument in sophistry. If this argument is accepted then all authorities would be in a position to keep assessment/re-assessment pending till completion of the Resolution Plan, and thereafter, culminate the same and saddle the successful Resolution Applicant with an unknown burden. Such an action cannot be countenanced as the same would be an anathema to the fundamental principles of the moratorium provided under the Code. The law cannot be read in a manner wherein the basic structure of the Code is breached by hindering the flow of the same by creation of roadblocks and dams ? the underlying principle of the Code is to give a fresh start to the Resolution Applicant. Any new liability being fastened after the approval of the Resolution Plan would inherently and palpably be illegal and go beyond the Lakshman Rekha of the Code. 15. In light of the above, the impugned assessment order dated April 28, 2021 is quashed and set aside. In the event any penalty proceedings have been initiated by the department, the writ petitioner shall be at liberty to challenge the same in accordance with law."

# 6. The above view has been fortified by the Supreme Court in Vaibhav Goyal & Another Vs. Deputy Commissioner of Income Tax & Another [Civil Appeal No. 49 of 2022, decided on March 20, 2025] (SC). The relevant paragraphs are delineated below:

• "8. In view of the declaration of law made by this Court, all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of the IB Code. In this case, the income tax dues of the CD for the assessment years 2012-13 and 2013-14 were not part of the approved Resolution Plan. Therefore, in view of sub-section (1) of Section 31, as interpreted by this Court in the above  decision, the dues of the first respondent owed by the CD for the assessment years 2012-13 and 2013-14 stand extinguished. 

• 12. Once the Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier. If such demands are taken into consideration, the appellants will not be in a position to recommence the business of the CD on a clean slate. On this aspect, we may note what is held in paragraph 107 of the decision of this Court in the case of Committee of Creditors of Essar Steel India Ltd. [Civil Appeal No. 49 of 2022]. Paragraph 107 reads thus:

• "107. For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count."

• (emphasis added)

• 13. The additional demands made by the first respondent in respect of the assessment years 2012-13 and 2013-14 will operate as roadblocks in implementing the approved Resolution Plan, and appellants will not be able to restart the operations of the CD on a clean slate.

• 14. We, therefore, hold that the demands raised by the first respondent against the CD in respect of assessment years 2012-13 and 2013-14 are invalid and cannot be enforced. We set aside the impugned orders of NCLT and NCLAT and allow the appeal accordingly."

# 7. In view of the above law laid down by the Supreme Court, we are of the view that the principle is crystal clear that once Resolution Plan has been approved by the NCLT, all other creditors are barred from raising their claims subsequently, as the same would disrupt the entire resolution process. The Supreme Court has categorically held the same as indicated above.

# 8. In light of the same, we find no reason to keep this matter pending, and accordingly, the impugned Assessment order dated December 26, 2023 passed under Section 73 of the CGST/UPGST Act, 2017 by the Joint Commissioner (respondent No.3) for tax period 2017-18 as well as impugned show cause notice dated January 15, 2024 issued under Section 73 of the CGST/UPGST Act, 2017 against the petitioner relating to tax period 2018-2019, are quashed.

# 9. The writ petition is accordingly allowed.

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M/s Bgr Energy Systems Ltd. Vs. State of U.P. and Another - Clearly once the petitioner was undergoing resolution before the Interim Resolution Professional and the fact of IRP appointment was communicated to the adjudicating authority, it may not have passed the impugned order during pendency of that CIRP.

 HC Allahabad (2024.07.29) in M/s Bgr Energy Systems Ltd. Vs.  State of U.P. and Another [Neutral Citation No. - 2024:AHC:121321-DB , Writ Tax No. - 1026 of 2024 ] held that; 

• Clearly once the petitioner was undergoing resolution before the Interim Resolution Professional and the fact of IRP appointment was communicated to the adjudicating authority, it may not have passed the impugned order during pendency of that CIRP.

Blogger’s Comments; 

This order says no assessment order can be passed during CIRP, but 

i). Supreme Court (26.08.2022) in Sundaresh Bhatt, Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs [Civil Appeal No. 7667 of 2021 ] held that;

• “We hold that the respondent (Tax Authorities) could only initiate assessment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC.

ii). SCI (03.12.2019) in M/s Embassy Property Developments Pvt. Ltd. Vs State of Karnataka & Ors. [Civil Appeal No. 9170 of 2019] held that;

• Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016   it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.

Excerpts of the order;

# 1. Heard Shri Shubham Agrawal, learned counsel for the petitioner and Shri Ankur Agrawal, learned Standing Counsel for the revenue. 2. Challenge has been raised to the order dated 26.04.2024 passed by the respondent no.2 under Section 73 of the U.P. GST Act, 2017. 

# 2. Undeniably the petitioner was issued show cause notice dated 10.04.2024 fixing the date 15.04.2024. It is admitted to the respondent- adjudicating authority that the petitioner submitted partial reply to that notice, dated 12.04.2024. In that it was clearly informed that at that stage the petitioner corporation was undergoing a process of resolution before the Interim Resolution Profession (IRP in short) which has been appointed. Therefore the petitioner informed respondent- adjudicating authority the need to issue appropriate notice and to grant the petitioner time to seek permission of the IRP to contest the adjudication proceedings. 

# 3. No further notice was issued or date was fixed in the adjudication proceedings. The impugned order came to be passed within a fortnight therefrom. 

# 4. Also it is not in dispute that subsequently vide order dated 15.04.2024 passed by the National Company Law Appellate Tribunal, Chennai, the order dated 03.04.2024 passed by the NCLT appointing the IRP has been set aside. 

# 5. As to the current status of the petitioner the petitioner is out of insolvency proceedings.

# 6. In view of such facts, no useful purpose would be served in keeping this petition pending or calling for a counter affidavit at this stage. Clearly once the petitioner was undergoing resolution before the Interim Resolution Professional and the fact of IRP appointment was communicated to the adjudicating authority, it may not have passed the impugned order during pendency of that CIRP. The umbrella of the Insolvency and Bankruptcy Code was lifted only on 15.04.2024. However that fact could not be informed to the adjudicating authority before it passed the order dated 26.04.2024. In any case the petitioner was not granted any further opportunity thereafter. 

# 7. Accordingly, the impugned order is set aside, the writ petition is disposed of as below. Petitioner undertakes to file his detailed reply to the show cause notice within a period of two weeks from today. Thereupon adjudicating authority may fix a fresh date for personal hearing with at least 15 days prior notice to the petitioner. The petitioner undertakes to participate and cooperate in those proceedings such that fresh adjudication order may be passed within a further period of two months. 

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Deputy Commissioner (Works Contract) KS GST Vs. NCLT & Anr. - Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

 HC Kerala (2024.01.30) in Deputy Commissioner (Works Contract) KS GST Vs. NCLT & Anr. [WP(C) NO. 39185 OF 2022] held that; 

• Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. 

• After such assessment, the respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority. 

• In any case, the IRP/RP/liquidator can immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC.

Excerpts of the order;

The petitioner, Deputy Commissioner (Works Contract), has approached this Court under Article 227 of the Constitution of India impugning the Order dated 26.10.2022 passed by the National Company Law Tribunal, Kochi Bench, under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 (for short, ‘IBC’). 

# 2. The 2nd respondent Company is under liquidation. The 2nd respondent, M/s Albanna Engineering (India) Private Limited, a Corporate Debtor, was admitted into Corporate Insolvency Resolution Process (CIRP) on 25.10.2019. M/s Sanghvi Movers Ltd filed IBA No.38/2019 under Section 9 of the IBC against the 2nd respondent. The CIRP effected public commencement on 03.11.2019. The CIRP order was passed against the Corporate Debtor, and the moratorium was declared as provided under Section 14 of the IBC. The moratorium declared against the Corporate Debtor existed till 02.12.2021, the day on which the liquidation order was passed in I.A. No.147/KOB/2021. 

# 2.1 On verification of the assessment records of the 2nd respondent Company pertaining to the period 2015-16 certain irregularities were noticed. Hence, notice under Section 25(1) of the KVAT Act was issued to the 2nd respondent. The assessment for the year 2015-16 was completed vide Order dated 25.02.2021, and the total liability of KVAT was determined to be Rs.11,76,35,628.70, which would include interest of Rs.4,31,82,699.14. The Department had claimed Rs.11,76,35,626.70 in Form-C dated 04.01.2022 before the resolution professional appointed by the Company Law Board for M/s Albanna Engineering (India) Private Limited. 

# 2.2 Against the petitioner’s Form-C application, the 2nd respondent had filed an application before the National Company Law Tribunal, Kochi Bench, under Section 33(5) of the IBC seeking permission to prefer an appeal against the order of assessment dated 25.02.2021 passed by the petitioner. Though the application was only for seeking permission to file an appeal against the assessment order dated 25.02.2021, the National Company Law Tribunal had passed the impugned order stating that the Assessment Order was passed in violation of the prohibition provided under Section 14(1)(a) of IBC. Therefore, the Assessment Order was declared void ab initio. The National Company Law Tribunal dismissed the application of the 2nd respondent and directed the 2nd respondent to consider the claim submitted by the KVAT Works Contract Authorities independently, ignoring the assessment order dated 25.02.2021. 

# 3. The question which falls for consideration in this writ petition before this Court is whether the NCLT is empowered to declare the assessment order as void ab initio under Section 33(5) of IBC? 

# 4. Section 14 of IBC provides that when the insolvency process commences, the NCLT is mandated to declare a moratorium on the initiation of any coercive legal action against the Corporate Debtor. Section 14 of the IBC on reproduction reads as under:  . . . 

# 4.1 From the provisions of Section 14 of the IBC it is evident that Section 14 prescribes a moratorium on the initiation of CIRP proceedings and its effects. The Supreme Court, in its judgment in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes & Customs [(2023) 1 SCC 472] , after considering the February 2020 Report of the Insolvency Law Committee, held that one of the purposes of the moratorium is to keep the assets of the Corporate Debtor together during the insolvency resolution process and to facilitate orderly completion of the processes envisaged under the Statute. Moratorium under Section 14 is to ensure the curtailing of parallel proceedings and reduce the possibility of conflicting outcomes in the process. Section 14(1)(a), (b) and (c) of the IBC shields and protects against pecuniary attacks against the Corporate Debtor. This is to provide the Corporate Debtor with breathing space to allow it to continue as a going concern and rehabilitate itself. 

# 4.2 Section 33(5) of the IBC, under which the impugned order has been passed, on reproduction reads as under: 

• “33. (5) Subject to Section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the adjudicating authority." 

# 4.3 Under Section 238, the provisions of IBC have an overriding effect on any other law for the time being in force or any instrument having effect by virtue of any law. 

# 5. The Supreme Court, in the case of S V Kandoakar v. V M Deshpande [ (1972) 1 SCC 438] held that the authorities can only take steps to determine the tax, interest, fines or any such penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. The Supreme Court in Sundaresh Bhatt (supra) agreed with the said ratio laid down in V M Deshpande (supra) and held that the authority could only initiate assessment or reassessment of the duties or other levies. However, they cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 and 33(5) of the IBC. The Interim Resolution Professional or the Liquidator, as the case may be, is empowered to question the legality of the assessment order before the deputed authority. 

# 5.1 Paragraphs 47 to 49 of the judgment in the case of Sundaresh Bhatt (supra), are extracted hereunder: 

• “47. Therefore, this Court in V.M. Deshpande cases held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context. 

• 48. From the above discussion, we hold that the respondent could only initiate assessment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive. 

• 49. There is another aspect of this case that needs to be highlighted to portray the inconsistency of the Customs Act vis-à-vis the IBC during the moratorium period. In the present case, the demand notice dated 11-7-2019 was issued by the respondent under Section 72 of the Customs Act, in clear breach of the moratorium imposed under Section 33(5) of the IBC. Issuing a notice under Section 72 of the Customs Act for non-payment of customs duty falls squarely within the ambit of initiating legal proceedings against a corporate debtor. Even under the liquidation process, the liquidator is given the responsibility to secure assets and goods of the corporate debtor under Section 35(1)(b) of the IBC.” 

# 5.2 The twin questions framed by the Court have been answered in paragraph 57 of the aforesaid judgment. Paragraphs 56 and 57 are reproduced hereunder: 

• “56. For the sake of clarity following questions, may be answered as under: (a) Whether the provisions of the IBC would prevail over the Customs Act, and if so, to what extent? 

• 56.1. The IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/ confiscation, as provided under the Customs Act. 

• (b) Whether the respondent could claim title over the goods and issue notice to sell the goods in terms of the Customs Act when the liquidation process has been initiated? 

• 56.2. Answered in negative. 

• 57. On the basis of the above discussions, following are our conclusions: 

• 57.1. Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. 

• 57.2. After such assessment, the respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority. 

• 57.3. In any case, the IRP/RP/liquidator can immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC.” 

# 5.3 Thus, after declaring the moratorium, there is an embargo on enforcing the demand, but there is no embargo under Section 14, read with Section 33(5) of the IBC, for determining the quantum of tax and other levies, if any, against the Corporate Debtor. 

# 6. This Court finds the impugned order passed by the National Company Law Tribunal, Kochi Bench, as preposterous and untenable. The Company Law Tribunal has no power and authority under the IBC to declare an assessment order as void ab initio and non est in law. Such an order only reflects the competence of the persons who are manning such an important Tribunal. The Order shows the lack of basic understanding of the law. Instead of considering the application by the 2nd respondent for permission to file an appeal against the assessment order, the National Company Law Tribunal, Kochi Bench, has assumed the jurisdiction of the Constitutional Court to declare the assessment order as void ab initio. 

# 7. In view thereof, the impugned order is unsustainable, and the same is set aside. The writ petition is allowed. The matter is remitted back to the National Company Law Tribunal, Kochi Bench, to consider and pass an order on the application of the 2nd respondent in IA(IBC) 331/KOB/2022 in IBA/38/KOB/2019 at an early date.

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