Extinguishment of Unasserted Statutory Claims After Approval of Resolution Plan – A Detailed Commentary

1. Introduction

The Supreme Court of India’s decision in Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr. (2025 INSC 375) addresses a monumental issue regarding the finality and binding nature of a resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 (the “IBC” or “IB Code”). In this case, the appellants, namely Mr. Vaibhav Goel and another, submitted a resolution plan for a corporate debtor under the Corporate Insolvency Resolution Process (“CIRP”). After the plan was duly approved by the National Company Law Tribunal (“NCLT”), fresh income tax demands were raised by the tax authorities for certain assessment years that were not included as “claims” in the resolution plan.

The key questions before the Supreme Court were whether demands – including statutory dues – can be raised post-approval of the resolution plan and whether such demands for which no claim was filed manage to survive notwithstanding the plan’s approval. The Court’s judgment unambiguously concludes that once a resolution plan is approved, all claims relating to the pre-approval period that have not been included in it stand extinguished.

2. Summary of the Judgment

This judgment flowed from an appeal against the orders passed by the NCLT and the National Company Law Appellate Tribunal (“NCLAT”), both of which dismissed the appellants’ attempt to nullify fresh income tax demands made by the Deputy Commissioner of Income Tax (“DCIT”) for assessment years 2012–13 and 2013–14.

The Supreme Court reversed the decisions of the NCLT and NCLAT. It held:

• All statutory claims or dues owed to the Central Government or any government authority and not made part of the approved resolution plan stand extinguished upon the plan’s approval.
• This is in line with Section 31(1) of the Insolvency and Bankruptcy Code, 2016, and the established precedent of the Court in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd.
• The imposition of costs and dismissal of the application by the NCLT for want of reasons was perverse and unwarranted.

As a result, the fresh demands raised by the DCIT against the corporate debtor were declared invalid and unenforceable.

3. Analysis

A. Precedents Cited

Two pivotal Supreme Court rulings guided the Court’s decision in this matter:

1. Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657:

   This landmark judgment clarified that once a resolution plan is approved under Section 31 of the IB Code, all debts, including statutory liabilities not incorporated in the resolution plan, stand extinguished. The Court was emphatic that no proceedings can continue with respect to unasserted claims relating to periods prior to the approval.

2. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531:

   The Court established the principle of providing a “clean slate” to the successful resolution applicant. A resolution applicant must know the exact quantum of liabilities it is inheriting upon taking over the business of the corporate debtor, thereby eliminating the possibility of unknown or unasserted claims arising late in the process.

B. Legal Reasoning

Central to the Court’s legal reasoning is Section 31 of the IBC, which mandates that after the Adjudicating Authority (NCLT) approves a resolution plan, it becomes binding on the corporate debtor, its creditors, and all other stakeholders, including statutory bodies and government authorities. The Supreme Court noted that the Legislature, by introducing words such as “including the Central Government, any State Government or any local authority” into Section 31(1) of the IB Code, has clarified and reinforced the finality of resolution plan approvals.

Applying the Court’s own ruling in Ghanashyam Mishra, it reiterated that for statutory dues not forming part of the resolution plan, no retrospective or prospective claims can be pressed against the corporate debtor once the plan is approved. As per the “clean slate” principle, it would defeat the purpose of corporate rescue and revival if such claims were permitted to surface again.

C. Impact

This judgment has far-reaching implications on the resolution process under the IBC:

• Certainty for Resolution Applicants: Prospective resolution applicants can be more confident that, once their plan is approved, no subsequent claims or demands (including statutory dues) for the period prior to plan approval will surface. This encourages more robust participation in the CIRP.
• Efficiency and Finality: The Court underscores that the resolution process aims to achieve a one-time settlement of all claims relating to the corporate debtor. Finality ensures that the corporate debtor can start operations afresh and that the object of the IBC – to maximize value and promote entrepreneurship – is effectively achieved.
• Clarity on Government Claims: Tax authorities and other statutory bodies must file their claims in a timely manner during the CIRP. Failing that, the Supreme Court has made it clear those claims are forever barred following the plan’s approval.

4. Complex Concepts Simplified

Below are some of the key legal terms and concepts simplified:

• Corporate Insolvency Resolution Process (CIRP): A process under the IBC wherein a financially distressed corporate debtor tries to reorganize or restructure its debts through a resolution plan proposed by resolution applicants.
• Resolution Plan: A plan submitted by potential investors or resolution applicants to revive the corporate debtor’s business. If approved by the Committee of Creditors (CoC) and then by the NCLT, it becomes binding on all interested parties.
• Section 31 of the IB Code: The key legislative provision specifying that the approved resolution plan is binding on everyone, including government authorities, and that no claims can be raised for any liabilities not accounted for within the plan.
• Clean Slate Principle: Once the resolution plan is approved, the successful resolution applicant must be free to run the business unencumbered by prior, unasserted claims. This principle upholds the IBC’s objective of timely resolution and maximizing the corporate debtor’s value.

5. Conclusion

In Vaibhav Goel & Anr. v. Deputy Commissioner of Income Tax & Anr. (2025 INSC 375), the Supreme Court has once again reiterated and tightened the rule that no additional claims, particularly statutory claims that were not submitted during the CIRP, may be enforced against a corporate debtor post-approval of its resolution plan.

This judgment cements the principle that the debtor begins operations on a “clean slate” after the plan’s approval. The Court’s refusal to entertain belated tax demands reassures resolution applicants that their liabilities are conclusively defined at the time the plan is sanctioned by the NCLT. Additionally, it underscores the importance of diligent claim filing by governmental authorities within the statutory timelines.

Overall, this ruling strengthens the effectiveness and clarity of the CIRP framework, ensuring that revival of genuinely distressed companies is not thwarted by unforeseeable liabilities.