No Apparent Error to Interfere with Liquidation Proceedings: NCLAT Rejects Tax Claim Filed After Liquidation Cut-Off Period [Read Order]

The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has held that a belated statutory claim raised during liquidation proceedings cannot be entertained once the prescribed timelines under the Insolvency and Bankruptcy Code, 2016, have expired and the liquidation process has concluded.

The appeal was filed by the Commercial Taxes and Registration Department of the State of Tamil Nadu, challenging an order of the National Company Law Tribunal, Chennai. The order refused to condone an inordinate delay in filing an appeal against rejection of a tax claim.

The Tribunal noted that despite a fixed deadline for submission of claims, the tax department filed its claim nearly a year after the expiry of the prescribed period, in February 2020. The claim, amounting to over Rs.1.70, was rejected by the liquidator on the grounds that it was not filed in the prescribed form. Further, it did not comply with the applicable regulations and was also barred by limitation.

After rejection of the claim, no appeal was filed within the statutory period of 14 days as provided under Section 42 of the Code. Instead, the tax department approached the Adjudicating Authority more than three years later, seeking to set aside the rejection order along with an application for condonation of delay. Both applications were dismissed by the NCLT, prompting the present appeal before the NCLAT.

The Bench comprising Justice Sharad KumarSharma (Judicial Member) and Jatindranath Swain (Technical Member) upheld the impugned order. They observed that strict adherence to timelines is essential to ensure certainty in insolvency and liquidation proceedings. The Bench held that even after granting the benefit of the Covid-19 extensions by the Supreme Court, the appeal remained time-barred.

The NCLAT relied on settled jurisprudence to reiterate that liquidation proceedings cannot be reopened on equitable considerations once the process has attained finality.

Finding no error in the order passed by the Adjudicating Authority, the Appellate Tribunal dismissed the appeal and closed all pending interlocutory applications.

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