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In India, once the National Company Law Tribunal (NCLT) approves an insolvency resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC), a tax claim relating to the pre-approval period that the plan omits is generally extinguished. The tax authority cannot continue an existing proceeding or start a new one to recover that claim. The rule can apply even if the tax amount had not yet been assessed or quantified when the plan was approved.
What is the rule for a tax proceeding already underway?
The date the proceeding began does not decide whether it can continue. The key questions are whether the tax claim relates to a period before approval of the plan and whether the claim is included in or otherwise dealt with by the approved plan.
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In Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., the Supreme Court held that claims not included in an approved plan stand extinguished and that no person may initiate or continue proceedings to pursue them. The Court expressly applied this rule to statutory dues owed to the Central Government, State Governments and local authorities. Read the Supreme Court judgment, including paragraphs 95 and 102.
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That is the Court’s conclusion in paragraph 102.1 of Ghanshyam Mishra. It covers both continuing a proceeding already in progress and starting a proceeding after approval to pursue an omitted claim.
Does it matter if the tax was assessed after plan approval?
Not necessarily. A later assessment or quantification does not, by itself, turn a claim about an earlier tax period into a post-approval liability. The relevant distinction is between a claim arising from pre-approval operations and a distinct liability relating to a later period—not simply whether the amount was known or finalized on the approval date.
On 28 August 2024, the Bombay High Court applied the rule to tax proceedings concerning pre-CIRP operations and rejected the argument that an uncrystallised assessment should be treated as a future due. Read the judgment copy hosted by the Insolvency and Bankruptcy Board of India.
On 27 March 2025, the Supreme Court reiterated in an order concerning JSW Steel Limited v. Pratishtha Thakur Haritwal that tax demands for periods before plan approval, if not included in the plan, could not be pursued after approval. Read the Supreme Court order.
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Does the rule include government tax and statutory dues?
Yes. Ghanshyam Mishra held that an approved plan binds government authorities as well as other stakeholders, and that omitted statutory dues for the pre-approval period cannot be pursued afterward. The Court treated the 2019 amendment to Section 31, which expressly named government authorities, as declaratory and clarificatory, effective from the IBC’s commencement. It reasoned that government dues were already covered by the Code’s framework. See the Court’s discussion in paragraphs 66–71 and 91–95.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to assess a particular tax demand
Use the approved plan and the demand documents to identify which side of the rule applies. These checks do not replace case-specific legal advice, but they help frame the issue:
- Find the approval date. Check the NCLT order approving the resolution plan. That is the relevant cutoff for the rule.
- Identify the tax period and basis. Establish which operations, transactions or tax period the demand concerns. A proceeding issued later may still relate to a pre-approval period.
- Check the plan’s treatment. Determine whether the tax claim is included or otherwise dealt with in the approved plan. The rule concerns claims omitted from it.
- Note the procedural posture. Record whether the authority is continuing an assessment or recovery proceeding that began earlier, or initiating one after approval. The Supreme Court’s rule addresses both.
- Separate later liabilities. A distinct liability for a post-approval period is not the same as a later assessment of an earlier-period claim; assess its legal basis separately.
The cited decisions establish the general treatment of omitted pre-approval claims. Whether a particular demand falls within that rule depends on the approved plan, the relevant tax period and the basis of the claim.
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