The National Company Law Appellate Tribunal (NCLAT) has officially dismissed an appeal filed by the Deputy Commissioner of Commercial Taxes, Mangaluru, affirming that government departments cannot bypass the strict timelines mandated by the Insolvency and Bankruptcy Code (IBC) for filing claims during liquidation. In a decision delivered by a bench comprising Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha, the tribunal ruled that statutory authorities must adhere to the same procedural discipline as any other operational creditor, regardless of the timing of tax assessment orders.

The dispute centered on the liquidation of Doshion Private Limited, a firm previously engaged in water treatment and industrial wastewater management. Following the initiation of liquidation proceedings against the company on October 3, 2023, the liquidator issued a public announcement in Form B, which clearly specified November 8, 2023, as the terminal date for stakeholders to submit their claims. The tax department failed to submit any proof of claim before this date, only attempting to lodge its filing on April 22, 2026—an delay amounting to 896 days.

Timeline of Disputed Assessment The tax department’s late filing originated from an adjudication process concerning the company’s tax returns for the period spanning April 2019 to March 2020. Despite the company entering liquidation in 2023, the department initiated separate proceedings under Section 74 of the Central Goods and Services Tax Act and the Karnataka Goods and Services Tax Act in September 2025. Following these proceedings, the department issued an adjudication order on February 21, 2026, which fixed a tax liability of ₹8.10 lakh against the corporate debtor.

The department contended that because the tax liability was only crystallized upon the completion of the adjudication process in February 2026, it was entitled to file its claim immediately thereafter. It argued that the delay was not a matter of negligence but a procedural necessity following the determination of statutory dues. However, the liquidator rejected this claim in May 2026 on the grounds that it was filed far beyond the statutory deadline provided under the Liquidation Process Regulations.

Upholding the Integrity of Liquidation In its judgment, the NCLAT bench examined the core tension between the powers of tax authorities to assess revenue and the necessity of a time-bound insolvency process. While the Supreme Court of India has previously clarified that authorities may continue to assess tax liabilities during liquidation, the NCLAT emphasized that such assessments must occur within the parameters of the insolvency framework.

The tribunal explicitly rejected the notion that the State holds a superior position simply by virtue of its nature as a sovereign entity. As the bench noted: “A statutory creditor stands in the same line as other operational creditors, and Section 53 of the Code does not put it ahead of the rest merely because it is the State.”

The tribunal further highlighted that admitting a claim so significantly late would unravel the orderly distribution process that the IBC is specifically designed to protect. The court noted that other creditors had already organized their financial expectations based on the list of stakeholders finalized after the November 2023 deadline. Allowing an exception in this case would set a precedent that could undermine the entire liquidation timeline.

The bench elaborated on the potential systemic impact of such a waiver: “The amount is small, but the test is not the amount. If this claim is admitted, other late claimants will ask for the same. We feel that it is not the intention of the code. We find that no sufficient cause is shown for the delay of 896 days.”

Jurisdiction and Statutory Limitations The appellant had further attempted to invoke Section 60(5) of the IBC, which grants the Adjudicating Authority wide jurisdiction over questions of law and fact arising from liquidation. The NCLAT acknowledged this broad power but held that it is meant to facilitate justice within the framework of the law, not to serve as an instrument for rewriting the mandatory timelines established by the regulations. The tribunal clarified that the liquidator lacks the inherent authority to condone such a substantial delay and that the Adjudicating Authority could not justify an extension where no sufficient cause had been demonstrated.

Furthermore, the NCLAT pointed out that the definition of a "claim" under Section 3(6) of the IBC encompasses rights to payment that may be disputed or unquantified. Consequently, the department was not precluded from filing a placeholder claim at the onset of the liquidation process, even before the completion of the adjudication proceedings. By choosing to wait until the tax liability was finalized, the department had consciously opted to operate outside the timelines established by the insolvency framework.

The final order of the NCLAT confirms the decision of the National Company Law Tribunal, Ahmedabad Bench, which had earlier refused to condone the delay. The dismissal of the appeal marks a final resolution in this matter, reinforcing the principle that statutory bodies are subject to the same strict adherence to procedural timelines as private claimants, ensuring that the liquidation of corporate entities proceeds with certainty and efficiency for all stakeholders involved. The appeal stands dismissed with no order as to costs, and all pending interlocutory applications have been closed.