Imposition of Moratorium Prevents Pre-CIRP Tax Dues From Being Recovered During CIRP: NCLT [Read Order]
Section 14(2) stipulates that the supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended, or interrupted during the CIRP period
![Imposition of Moratorium Prevents Pre-CIRP Tax Dues From Being Recovered During CIRP: NCLT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/CIRP-Imposition-of-Moratorium-NCLT-taxscan.jpg "Imposition of Moratorium Prevents Pre-CIRP Tax Dues From Being Recovered During CIRP: NCLT [Read Order]")
While disposing of an application filed by the Resolution Professional ( RP ) against the Commissioner, Greater Hyderabad Municipal Corporation ( GHMC ),the Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that once the CIRP has commenced, proceedings for property tax arrears cannot be initiated against the Corporate Debtor. The tribunal also emphasized the overriding...
While disposing of an application filed by the Resolution Professional ( RP ) against the Commissioner, Greater Hyderabad Municipal Corporation ( GHMC ),the Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that once the CIRP has commenced, proceedings for property tax arrears cannot be initiated against the Corporate Debtor. The tribunal also emphasized the overriding effect of the IBC, 2016, and upheld that the moratorium under section 14 bars all types of coercive action during the CIRP.
The application was filed by the RP of Sri Pavana Keerthi Hotels India Private Limited against the GHMC. Prithvi Asset Reconstruction and Securitization Company Ltd., a financial creditor, petitioned the Adjudicating Authority to start CIRP against the corporate debtor. The Resolution Professional (RP) was assigned to manage the Corporate Debtor's hotel in Hyderabad after the Corporate Debtor was accepted into the CIRP.
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The corporate debtor received warnings from GHMC regarding tax arrears of Rs 38.54 lakhs, of which Rs 12.24 lakhs were owed for the CIRP period and Rs 26.29 lakhs for the pre-CIRP period. The warning pointed to non-renewal of trading licenses and unpaid taxes as violations of the GHMC Act, notably sections 521 and 622.
The GHMC was advised by the resolution specialist to file their claim in accordance with the IBC; however, the respondent authority neglected to do so for the pre-CIRP period. The resolution professional requested authorization to settle the arrears in installments during the CIRP term. The resolution professional was warned by the respondent authority to stop and seal the hotel if the arrears are not paid within the allotted time, but they were also informed that the CIRP period arrears would not be accepted until the previous tax arrears were paid.
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The Adjudicating Authority consisting of Dr. Venkata Ramakrishna Badrinath (Member - Judicial) and Shri Charan Singh (Member - Technical), held that Section 14 prohibits any action to foreclose, recover, or enforce any security interest created by the Corporate Debtor with respect to its property while the moratorium has been imposed. The panel underlined that all attempts to collect past-due amounts stop once a corporate debtor is admitted into CIRP. Creditors must submit a properly formatted claim to the resolution expert in order to recover such obligations.
The tribunal determined that, in accordance with the GHMC Act, the respondent authority does not have the authority to begin the process of recovering dues through the use of sale, confiscation, or other measures; rather, it only has the restricted jurisdiction to assess or determine the amount of property tax. Therefore, claims may be filed in accordance with the process outlined in the IBC.
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The only exception to this rule is section 14(2A), which permits such a suspension in the event that the Corporate Debtor defaults on payments during the moratorium period. Section 14(2) stipulates that the supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended, or interrupted during the CIRP period. The respondents were given the option by the adjudicating authority to submit their claim for tax arrears during the pre-CIRP era within 15 days.
To Read the full text of the Order CLICK HERE
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