The Allahabad High Court recently clarified that once a Resolution Plan is approved by the National Company Law Tribunal (NCLT), the Goods and Service Tax (GST) Department cannot raise any further claims against the corporate debtor. The judgment was delivered by a Division Bench comprising Justice Shekhar B. Saraf and Justice Dr. Yogendra Kumar Srivastava in the case M/S Arena Superstructures Private Limited vs. Union of India and Others.

The petitioner had undergone the Corporate Insolvency Resolution Process (CIRP) starting from October 10, 2020. A Resolution Professional was appointed, and creditors were invited to submit their claims, including a specific notice sent to the GST Department. On July 19, 2022, the NCLT approved the Resolution Plan.

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Despite this, on February 4, 2025, the GST Department passed an order under Section 74(9) of the CGST/UPGST Act, 2017 concerning the financial year 2017-2018. The petitioner challenged this order and the subsequent demand notice before the Allahabad High Court.

Highlighting a critical principle, the Court stated:

"Once the Resolution Plan has been approved by the NCLT, all other creditors are barred from raising their claims subsequently, as the same would disrupt the entire resolution process."

The Court heavily relied on several key judgments, notably:

• Vaibhav Goyal & Another vs. Deputy Commissioner of Income Tax & Another, where the Supreme Court held: "If statutory dues owed to the Government are not included in the Resolution Plan at the time of its approval, such dues are extinguished. Allowing revival of such claims would obstruct the fresh start granted to the corporate debtor."
• M/S NS Papers Limited vs. Union of India, where it was emphasized: "The law cannot be read to create roadblocks that hinder the fresh start intended for the Resolution Applicant. Any new liability post-approval of the Resolution Plan is illegal and crosses the fundamental limits (‘Lakshman Rekha’) set by the Insolvency and Bankruptcy Code."

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The Court also referenced the Supreme Court's observations in the Committee of Creditors of Essar Steel India Ltd. case:

"A successful resolution applicant should not be burdened with undecided claims after the resolution plan is accepted. This would defeat the purpose of providing a clean slate for the corporate debtor’s new beginning."

The Allahabad High Court concluded that both the assessment order dated February 4, 2025, and the corresponding demand notice issued by the GST Department were illegal and quashed them accordingly.

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In the judgment, it was made clear:

"We accordingly find no reason to keep this matter pending and quash the impugned assessment order and demand notice."

Thus, the Court allowed the writ petition, reinforcing that creditors, including government departments, cannot pursue fresh claims once a resolution plan is finalized and approved by the NCLT.

Case Title: M/S Arena Superstructures Private Limited v. Union Of India And 4 Others [WRIT TAX No. - 1716 of 2025]

Counsel for Petitioner :- Ami Tandon, Rahul Agarwal, Saumya Srivastava