Delhi High Court Quashes Pre- Insolvency Resolution GST Demands Against Patanjali Foods

The Delhi High Court has set aside GST demands raised against Patanjali Foods Limited (Ruchi Soya) for periods preceding the final approval of its insolvency resolution plan on September 4, 2019. The court held that all statutory dues not included in the approved plan stood extinguished.

A division bench of Justice Prathiba M Singh and Justice Shail Jain, in a judgment delivered on December 11, 2025, allowed Patanjali Foods' writ petition challenging an order dated January 21, 2025, along with a corrigendum issued on February 3, 2025, passed by the Assistant Commissioner, CGST, Narela Division.

The dispute arose from insolvency proceedings initiated against Ruchi Soya Industries Ltd. (now Patanjali Foods) before the National Company Law Tribunal, Mumbai Bench. A resolution plan for the company was submitted by a consortium led by Patanjali Ayurved Limited.

The NCLT passed an order on July 24, 2019 approving the resolution plan with modifications. The approval was subject to compliance with pending conditions, including clarification on the source of funds and CIRP costs. The order did not permit an immediate takeover by the new management.

A subsequent NCLT order dated September 4, 2019 expressly approved the resolution plan. The tribunal also directed the new management to take over the company.

In the High Court proceedings, the tax authorities relied on the July 24, 2019 order to contend that the resolution plan stood approved on that date. Patanjali Foods, on the other hand, maintained that the approval became final only on September 4, 2019.

After examining both NCLT orders, the High Court accepted the latter position. It held that September 4, 2019 must be treated as the date of final approval for the purpose of extinguishment of pre-resolution claims.

The court also relied on earlier rulings of the Andhra Pradesh High Court and the Bombay High Court in Patanjali Foods' own cases, which had reached the same conclusion that September 4, 2019 must be treated as the date of final approval after which the new management assumed control of the company.

Accordingly, the High Court set aside the GST demand insofar as it related to the period prior to September 4, 2019. It granted liberty to the tax authorities to issue a fresh show cause notice for periods after that date, to be adjudicated in accordance with law.

The court further clarified that if such a notice is issued by February 15, 2026, it shall be deemed to be within the period of limitation, with the pendency of the writ petition excluded from the limitation calculation.

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