Pre-CIRP Tax & Statutory Dues Extinguished Once Resolution Plan Is Approved: Delhi High Court in Garg Inox Ltd. & Anr. Vs Union of India & Ors.

1. Background of the Dispute

The Delhi High Court in Garg Inox Ltd. & Anr. Vs Union of India & Ors. (W.P.(C) 6855/2021, judgment dated 22/04/2026) examined whether tax and other statutory authorities could raise or enforce demands for periods prior to the commencement of the Corporate Insolvency Resolution Process (CIRP) after a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) had already been approved.

  • Petitioner No. 1: Garg Inox Ltd., the corporate debtor against whom CIRP had been initiated.
  • Petitioner No. 2: The Successful Resolution Applicant (SRA) whose resolution plan had been approved.

Key dates:

  • 25.07.2017: CIRP commenced against Petitioner No. 1 by order of the National Company Law Tribunal, New Delhi (NCLT).
  • 04.12.2018: Resolution plan submitted by Petitioner No. 2 was approved under Section 31 of the IBC by NCLT.

Post-approval of the resolution plan, various authorities including the Income Tax Department, Regional Provident Fund Commissioner, Customs, GST authorities and a local body issued or pursued demands in relation to periods preceding 25.07.2017. The assessee approached the High Court contending that such claims stood extinguished upon approval of the resolution plan and could not be enforced against the SRA or the corporate debtor.

2. Reliefs Sought in the Writ Petition

The petition prayed for multiple writs and directions, principally seeking:

  • A declaration that various demand notices and orders issued by different statutory authorities in respect of periods prior to 25.07.2017 were illegal, arbitrary and liable to be quashed.
  • A restraint against the respondents from issuing any further demand or notice for any period prior to the CIRP commencement date.

Specifically, the petition challenged, inter alia:

  1. Demand notice dated 24.12.2018 from Respondent No. 3 for FY 2009-10 demanding Rs. 50,00,000/-, relating to a period before 25.07.2017.
  2. Income Tax Department (Respondent No. 4) notices for FYs 2009-10, 2013-14, 2015-16 and 2016-17, all predating the CIRP commencement.
  3. Dues from Respondent No. 5/Regional Provident Fund Commissioner under demand dated 18.11.2015, covering 2009-10 and May 2010 to January 2015.
  4. Demand-cum-show cause notice from Respondent No. 6/Commissioner of Customs, Mumbai dated 22.08.2019, linked to a bill dated 27.12.12.
  5. Notice from Respondent No. 7/DGGSTI Department dated 02.08.2019 for the period 2016-17.
  6. Notice from Respondent No. 8/Gram Panchayat Karegaon, MIDC, Pune dated 23.10.20 for 2015-16 and 2016-17.

The assessee contended that all such historical demands stood closed by virtue of the approved resolution plan under Section 31 of the IBC.

3. CIRP and Approval of the Resolution Plan

The factual matrix regarding insolvency proceedings was not in dispute:

  • An order dated 25.07.2017 of the NCLT, New Delhi commenced CIRP against Petitioner No. 1 under the IBC.
  • Petitioner No. 2 submitted a resolution plan which underwent the required process and was ultimately sanctioned by the NCLT on 04.12.2018 under Section 31 of the IBC.

Once the resolution plan was approved:

  • The assessees maintained that all pre-CIRP claims, including statutory dues of every nature, could only be enforced to the extent they were admitted and provided for in the resolution plan.
  • Any claim not lodged or not recognised within the insolvency process, according to them, conclusively stood extinguished and could not form the basis of further recovery action.

4. Income Tax Demands Highlighted in the Petition

Among the several disputed demands, the Court noted specific details of the Income Tax Department’s actions against Petitioner No. 1:

  • Notice dated 29.05.2020 under Section 143(1) of the Income Tax Act 1961 in respect of Financial Year 2009-2010 (AY 2009-2010):

    • Total demand: Rs. 6,83,244/-
    • Break-up:
      • Tax demand: Rs. 3,38,280/-
      • Interest: Rs. 3,44,964/-
    • This amount was proposed to be adjusted against a TDS refund for FY 2019-20. A sum of Rs. 51,15,856/- was ultimately refunded.

  • Assessment order dated 31.03.2016 for AY 2013-14 under Section 143(3):

    • Assessed total income: Rs. 10,78,46,585/-
    • Penalty proceedings were directed to be initiated under Section 27 (as recorded in the petition).

These demands were all rooted in periods prior to the CIRP commencement date and, as per the assessees, were therefore barred from subsequent enforcement in view of the approved resolution plan.

During the pendency of the petition, an interim order dated 22.07.2021 had already crystallised the core legal issue.