NCLAT Delhi: Income Tax Department’s Claim Cannot Be Reopened Post Resolution; Appeal Dismissed in Solar Voltaic Case

Key Facts and Tribunal Findings

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed an appeal filed by the Income Tax Department challenging approval of a resolution plan for M/s Solar Voltaic Power LLP, holding that no infirmity existed in the plan or its implementation.The appeal arose from the Income Tax Department’s grievance that its claim of ₹3.11 crore towards outstanding tax dues was not adequately considered during the Corporate Insolvency Resolution Process (CIRP), and that only ₹1.5 lakh was allocated under the approved resolution plan.

The Tribunal noted that although the department had filed its claim, it failed to furnish enforceable assessment orders despite repeated requests by the Resolution Professional (RP). The assessment order was submitted only after the Committee of Creditors (CoC) had already approved the resolution plan and the application for approval had been filed before the Adjudicating Authority. The NCLAT rejected the department’s contention that it missed key communication due to an email being routed to spam, observing that prior communications were consistently received and responded to. It held that the failure to act in time was attributable to the appellant and not the RP.

On merits, the Tribunal examined the distribution under the resolution plan and noted that out of a total plan value of ₹20 lakh, ₹13.5 lakh was allocated towards CIRP costs, leaving only ₹6.5 lakh for distribution among all other creditors. Government dues ranked lower in priority under Section 53 of the Insolvency and Bankruptcy Code. The Tribunal further observed that even if the Income Tax Department’s claim had been admitted in full, it would have received approximately ₹75,000 based on proportional distribution. In contrast, the plan allocated ₹1.5 lakh—twice the notional entitlement.

Legal Analysis

The Tribunal reaffirmed that claims not properly substantiated or admitted during the CIRP cannot be revisited post-approval of the resolution plan. It emphasized that timely submission of complete documentation is essential for claim crystallisation. It also reiterated the binding nature of the waterfall mechanism under Section 53, where government dues rank below financial creditors, thereby limiting recovery in resolution scenarios with constrained asset value.

The decision underscores that once a resolution plan is approved and implemented, subsequent challenges seeking enhancement of claims are not sustainable. The Tribunal also criticised the appeal as an unnecessary exercise, noting that the department ought to have been aware of its limited recovery prospects under the statutory framework.

Accordingly, the appeal was dismissed, with the Tribunal observing that no injustice had been caused to the appellant.