Once the National Company Law Tribunal (NCLT) approves an insolvency resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC), pre-approval tax claims against the company that are not included in the plan are generally extinguished. Government tax authorities are bound by the approved plan, and ordinarily cannot later pursue the corporate debtor for omitted dues relating to the period before approval. The outcome in a particular case depends on the plan, the claim record, the period and transactions behind the tax liability, and who is legally liable.
What is the rule after the NCLT approves a plan?
The key date is the NCLT’s approval of the resolution plan under IBC Section 31. In Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, the Supreme Court held that claims in the approved plan are frozen and bind the corporate debtor and relevant stakeholders, including the Central Government, State Governments and local authorities. Pre-approval statutory dues omitted from the plan stand extinguished, and proceedings to recover them against the corporate debtor cannot be initiated or continued. Read the Supreme Court judgment.
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The Court also held that the 2019 amendment to Section 31, which expressly refers to government authorities, was clarificatory and declaratory, with effect from the IBC’s commencement. The principle is therefore not limited to plans approved after that amendment.
Are income-tax and GST dues covered?
Yes, the rule covers statutory dues owed to government authorities. The Supreme Court reasoned that statutory dues payable to government are operational debt under Section 5(21) of the IBC, making the authority owed those dues an operational creditor. The rule applies to income-tax and GST claims as examples of statutory dues, provided the claim is against the corporate debtor, relates to the pre-approval period, and was not included in the plan.
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Can the tax department raise a demand after approval?
The date a demand notice or assessment is issued does not, by itself, establish that the liability arose after resolution. A later assessment may quantify a claim arising from earlier operations. In Uttam Value Steels Ltd. v. Assistant Commissioner of Income Tax, decided on 28 August 2024, the Bombay High Court applied the Supreme Court rule to income-tax proceedings concerning pre-insolvency operations. It rejected the argument that the liability became a future due merely because the amount had not crystallised by plan approval, and held that the omitted dues could not be pursued on the facts before it. Read the Bombay High Court decision.
That decision applies the principle to its particular facts; it does not settle every question about when a tax claim arises. To assess a later demand, identify the underlying taxable event or operations and compare them with the NCLT approval date, rather than relying only on the assessment or demand date.
What if the tax authority did not file a claim?
Claim records can be important. In a GST-related appeal decided on 10 November 2021, the National Company Law Appellate Tribunal (NCLAT) noted that the department had not shown when or in what form it submitted a claim to the resolution professional. The tribunal declined to consider the late claim after approval. Read the NCLAT decision.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsFor a real dispute, check whether a claim was submitted and how it was recorded, but do not treat the absence of a filing alone as a complete answer without reading the approved plan and the case record. The Supreme Court’s rule concerns whether a pre-approval claim was included in the plan; the relevant documents show how that rule may apply to the particular liability.
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What did the Supreme Court reaffirm in 2025?
In a contempt order dated 27 March 2025 concerning post-plan demands, the Supreme Court reiterated that authorities could not raise demands for pre-approval periods when those demands were not included in the plan. It stressed that an applicant taking over a company should not later face undecided claims that undermine certainty about the liabilities assumed. The order reinforces the finality principle; it does not eliminate the need to examine the plan and facts of an individual case. Read the official document reproducing the order.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does the plan discharge directors, guarantors or other people?
Not automatically. The cited rulings address claims against the corporate debtor and do not establish that approval of its plan extinguishes a distinct liability imposed on a director, guarantor or another person under a separate legal basis. Identify the person named in the demand and the provision relied on before drawing a conclusion about that person’s exposure.
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How to assess a specific tax demand
- Identify the demand: note the tax type, issuing authority, relevant tax periods and transactions or operations said to create the liability.
- Confirm the cutoff: obtain the NCLT order and record its plan-approval date under Section 31.
- Review the claim record: check filings made to the resolution professional, the information memorandum and the claim list for the authority’s claim and its treatment.
- Read the approved plan: examine its schedules and definitions of claims or liabilities, and determine whether the statutory claim was included or otherwise addressed.
- Separate liability from quantification: compare the period and underlying taxable activity with the approval date; a later assessment date alone does not show that the underlying liability is post-approval.
- Identify the liable person and proceeding: determine whether the demand is against the corporate debtor or someone else, and whether the matter is recovery of an omitted claim or a different request, such as tax relief that must be decided by the competent tax authority.
- Compare the demand with the record: assess the post-approval notice or proceeding against the plan, approval order and claim documents. Those materials—not the age of the demand alone—are needed to apply the general rule.
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