Post-CIRP Customs Demand Extinguished as Claim Not Filed During Insolvency Process: NCLT - 2025-04-19

Laws, Courts & Judgments.

Patanjali Foods Wins Relief as NCLT Quashes Post-CIRP Customs Demand

Ahmedabad, India – In a significant ruling for corporate insolvency jurisprudence, the National Company Law Tribunal (NCLT) Ahmedabad Bench has quashed a demand raised by the Additional Commissioner of Customs, Kandla, against Patanjali Foods Limited (formerly Ruchi Soya Industries Limited ). The tribunal, comprising Hon’ble Member (Judicial) Justice Virendrasingh G. Bisht (Retd.) and Hon’ble Member (Technical) Sh. Prabhat Kumar, ruled that the customs authority's demand, pertaining to a period prior to the approval of Patanjali Foods' resolution plan and for which no claim was filed during the Corporate Insolvency Resolution Process (CIRP), stands extinguished.

Background of the Case

The case arose from a demand initiated by the customs department against Patanjali Foods concerning duty drawback claimed on the export of Soyabean De -Oiled Cake (DOC) in 2009-2010. The customs department contended that the DOC was manufactured using hexane procured without payment of central excise duty, rendering the duty drawback inadmissible. While Patanjali Foods had deposited ₹95,21,009 under protest in 2010, a formal show cause notice was issued later.

Subsequently, CIRP was initiated against Ruchi Soya Industries Limited in 2017. A resolution plan submitted by the Patanjali Consortium was approved by the NCLT in 2019. Importantly, the customs department did not file any claim during the CIRP process. Years later, in 2022, the customs authority issued the impugned order demanding ₹95,52,613 along with interest and penalties, relating to the pre-CIRP period. Patanjali Foods approached the NCLT seeking to quash this order.

Arguments Presented

Patanjali Foods , represented by Senior Advocate Mr. J. P. Sen, argued that the demand related to a period prior to the resolution plan approval and should be considered extinguished as no claim was filed during CIRP. They emphasized the ‘clean slate’ principle under the Insolvency and Bankruptcy Code (IBC), citing precedents like Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. and Ghanshyam Mishra & Ors. v. Edelweiss Asset Reconstruction Company from the Supreme Court. Patanjali Foods contended that under Section 60(5) of the IBC, the NCLT had jurisdiction to grant relief.

The Respondents , represented by Sr. Standing Counsel Mr. Subir Kumar and Advocate Ms. Disha Shah, argued that the NCLT lacked jurisdiction and Patanjali Foods should have appealed under the Customs Act. They maintained that the demand was based on pre-deposited amounts and not a fresh claim. They further argued that the Resolution Professional should have included these dues in the Information Memorandum.

Tribunal's Observations and Decision

The NCLT bench squarely addressed the central issue: whether a demand for a pre-CIRP period, for which no claim was filed, could be raised post-CIRP completion. The tribunal relied heavily on the Supreme Court’s decision in Ghanshyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. , quoting extensively from paragraph 95 of the judgment:

> "That once a resolution plan is duly approved by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan..."

The NCLT concluded that the customs demand was unsustainable as it pertained to a pre-resolution plan period and no claim was filed. Furthermore, referencing the Supreme Court’s judgment in Ruchi Soya Industries Ltd. v. Union of India & Ors. , the tribunal directed the customs authority to refund ₹95,21,009, which Patanjali Foods had deposited under protest.

Implications of the Judgment

This order reinforces the ‘clean slate’ principle enshrined in the IBC. It clarifies that government and statutory authorities are also bound by the CIRP process and must file their claims within the stipulated timeframe. Failure to do so results in the extinguishment of such claims once a resolution plan is approved. The judgment also reaffirms the NCLT's jurisdiction under Section 60(5) to address such issues arising from or in relation to the insolvency resolution process. This ruling provides further clarity and certainty for businesses undergoing CIRP and for entities engaging with them post-resolution.