Pre-IBC GST Dues Stand Extinguished After Final NCLT Approval of Resolution Plan: Delhi HC in Patanjali Foods Case [Read Order]

In a recent ruling, the Delhi High Court held that GST dues relating to the period before the approval of an insolvency resolution plan stand extinguished once the plan is finally approved by the National Company Law Tribunal. The court clarified that the relevant approval date is the final NCLT order, not an earlier conditional order.

Patanjali Foods Limited, the petitioner, filed a writ petition challenging the order-in-original dated 21 January 2025 along with a corrigendum dated 3 February 2025 passed by the Assistant Commissioner, CGST, Narela Division. The impugned order raised GST demands for the financial year 2017–18, which related to a period before the insolvency resolution plan of Ruchi Soya Industries Limited was finally approved.

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The case arose from insolvency proceedings against Ruchi Soya Industries Limited before the NCLT, Mumbai Bench. A resolution plan submitted by a consortium led by Patanjali Ayurved Limited was approved, pursuant to which the company was taken over as a going concern and later renamed Patanjali Foods Limited. The takeover was claimed to be on a clean slate basis.

The petitioner’s counsel argued that under Section 31 of the Insolvency and Bankruptcy Code, 2016, once a resolution plan is approved, all claims and statutory dues not included in the plan stand extinguished. They also argued that the final approval of the resolution plan took place only on 4 September 2019, since the earlier NCLT order dated 24 July 2019 was conditional and subject to compliance with further directions.

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The GST department’s counsel argued that the resolution plan stood approved on 24 July 2019 and contended that the tax demands were valid. They relied on the earlier NCLT order and related records to support its stand.

A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain observed that the order dated 24 July 2019 approved the resolution plan only subject to fulfillment of specific conditions, including clarification of funding sources. The court explained that the plan attained final and unconditional approval only on 4 September 2019, when the NCLT expressly approved its implementation.

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The court further observed that settled law makes it clear that statutory dues for periods prior to approval of a resolution plan cannot be enforced unless they are specifically included in the plan. Since the GST demands related to a period before 4 September 2019, the court found them legally unsustainable.

The court quashed the GST demand insofar as it related to the period prior to the final approval of the resolution plan. The court allowed the GST authorities to issue a fresh show cause notice for the period after 4 September 2019, subject to limitation, and disposed of the writ petition accordingly.

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