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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P.SAM KOSHY, N.TUKARAMJI, JJ.
M/s. Thalaiver Steels Limited – Appellant
Versus
The Union of India represented by its Secretary and Ors. – Respondent
Writ Petition No.7338 of 2024
Decided on : 20-03-2024
Insolvency - Income Tax Act - Section 143(1), Section 31 of IBC - The court held that once a resolution plan is approved, all claims not included in the plan are extinguished, including tax liabilities, ensuring the successful resolution applicant starts afresh.
Fact of the Case:
The petitioner challenged the withholding of a tax refund after a resolution plan was approved under the Insolvency and Bankruptcy Code, arguing that all prior liabilities were extinguished.
Finding of the Court:
The court found that the resolution plan approved by the NCLT extinguished all claims not included in it, including tax liabilities, and thus the withholding of the refund was unlawful.
Issues: Whether the authorities could withhold a tax refund after the approval of a resolution plan that extinguished prior liabilities.
Ratio Decidendi: The court emphasized that once a resolution plan is approved, it is binding on all stakeholders, and any claims not included in the plan are extinguished.
Result: The writ petition is allowed, and the authorities are directed to refund the excess tax within 45 days.
ORDER :
P.SAM KOSHY, J.
The present writ petition has been filed seeking for issuance of a Writ of Mandamus challenging the decision to withhold the refund which is issued proposing adjustment of refund towards outstanding demand. The petitioner also seeks for setting aside the impugned order dated 10.01.2023 (Annexure P7) passed by respondent No.2 under Section 143(1) of the Income Tax Act, 1961 (for short, ‘the Act’) for the assessment year 2022-2023.
2. Heard Mr. Govinda Rao, learned counsel for the petitioner and Mr. Vijhay K.Punna, learned Senior Standing Counsel for Income Tax appearing for respondents.
3. The brief facts relevant for adjudication of the present writ petition are that the petitioner establishment namely M/s. Thalaivar Steels Limited which was earlier known as Splendid Metal Product Limited filed a company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal, Hyderabad Bench, Hyderabad (briefly referred to hereinafter as ‘NCLT’) which was registered as C.P. (IB) No.666/7/HDB/2018 The said company petition stood admitted and proceedings for Corporate Insolvency Resolution Process (CIRP) was initiated. One Mr. T.Sathisan was appointed as the Resolution Professional to oversee the Corporate Insolvency Resolution Process. In the process, a Committee of Creditors (CoC) was constituted to inter alia evaluate the resolution plans received in respect of the Corporate Insolvency Resolution Process of the petitioner and public announcements were made and Expression of Interest (EoI) from entities interested in submitting resolution plans were invited.
4. M/s. Antanium Holdings Pvt. Limited and M/s. Invent Assets Securitization and Reconstruction Pvt. Ltd. was the successful bidder and their resolution plan was accepted and approved by the Committee of Creditors vide order dated 08.09.2020 in I.A.No. 981of 2020 in C.P. (IB) No. 666/7/HDB/2018 . By virtue of the resolution plan approved by the NCLT, M/s. Antanium Holdings Pte. Limited and M/s. Invent Assets Securitization and Reconstruction Pvt. Ltd. took over the management and control of the affairs of the petitioner establishment and stepped into the shoes of the petitioner in the course of taking over the management.
5. According to the learned counsel for the petitioner, once when the resolution plan stood approved by the NCLT and the successful resolution applicant i.e. M/s. Antanium Holdings Pte. Limited and M/s. Invent Assets Securitization and Reconstruction Pvt. Ltd. having taken over the management including its management and control, the authorities concerned could not have issued any further notices in respect of any further liability which till then was not claimed or raised. M/s. Antanium Holdings Pte. Limited and M/s.Invent Assets Securitization and Reconstruction Pvt. Ltd. the successful resolution applicant had taken over the petitioner establishment on a clean slate basis. All earlier liabilities other than those which are reflected in the resolution plan stands extinguished.
6. In terms of the resolution plan so far as the liabilities of the corporate debtor i.e. the petitioner is concerned, it was in the plan itself envisaged as under:
(iv) The Financial Creditors shall have no rights or claims against the Company (including but not limited to, in rel
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities, ensuring a fresh start for the corporate debtor.
Once a resolution plan is approved under the IBC, the claims provided in the plan are binding and any claims not included in the plan are extinguished.
The approved Resolution Plan under the Insolvency and Bankruptcy Code binds all creditors, extinguishing claims not included, ensuring no surprise liabilities arise post-approval.
Approved resolution plans under the Insolvency and Bankruptcy Code extinguish all pre-CIRP claims not included, including statutory dues from tax authorities.
Approved resolution plans under the Insolvency Code extinguish claims not included, barring enforcement actions for pre-existing statutory dues.
Tax liabilities arising during corporate insolvency resolution cannot be extinguished by a resolution plan unless explicitly provided, as affirmed by recent Supreme Court rulings.
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