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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P. SAM KOSHY, N. TUKARAMJI, JJ.
M/s. Sujana Universal Industries Limited – Petitioner
Versus
The Assistant Director of Income Tax - Respondent
Writ Petition No.7349 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 a fresh start for the corporate debtor.
Fact of the Case:
The petitioner challenged the withholding of a tax refund, arguing that after a resolution plan was approved under the IBC, all prior liabilities, including tax claims, 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, based on established legal precedents.
Issues: Whether the tax authorities could withhold a refund based on claims that were extinguished by the approval of a resolution plan under the IBC.
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, preventing further claims against the corporate debtor.
Result: The writ petition is allowed, and the impugned order is quashed, directing the refund of excess tax to the petitioner.
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 22.11.2023 (Annexure P7) passed by respondent No.1 under Section 143(1)of the Income Tax Act, 1961 (for short, ‘the Act’) for the assessment year2023-2024.
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.Sujana Universal Industries 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.186/9/HDB/2019. The said company petition stood admitted and proceedings for Corporate Insolvency Resolution Process (CIRP) was initiated. One Mr. Nethi Mallikarjuna Setty 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.Triterras Holdings Pte. 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 24.12.2020 in I.A.No.868 of 2020 in C.P. (IB) No.186/9/HDB/2019. By virtue of the resolution plan approved by the NCLT, M/s.Triterras 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.Triterras 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.Triterras 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:
(ix) That, pursuant to Section 32A of the IBC, all existing legal proceedings including those under the PMLA Act, 2002 initiated in relation to the Company shall stand extinguished from and on the NCLT Approval Date. Further, the approval of this Plan shall pr
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.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities.
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.
(1) Insolvency Resolution Plan – Once resolution plan is approved by Adjudicating Authority, after it is satisfied, that resolution plan as approved by Committee of Creditors (CoC) meets requirements....
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