SC: No tax demand after resolution plan approval

The Supreme Court (SC) has said that no tax demand, even if raised by the income-tax (I-T) department, can be allowed to be included in a resolution plan after the said plan has been approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC).

- BHAVINI MISHRA

"A successful resolution applicant cannot suddenly be faced with 'undecided' claims after the resolution plan submitted by him has been accepted, as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor," Justices Abhay S Oka and Ujjal Bhuyan observed in their judgment on Thursday.

A corporate debtor, under IBC, is a company or limited liability partnership (LLP) that owes a debt to any person. A successful resolution applicant is a person or entity whose resolution plan is approved by the lenders and the NCLT.