Govt Authority Can't Seek Status Of Secured Operational Creditor Based On Dues Arising From HPGST Or CGST Acts: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that GST dues arising from the Himachal Pradesh Goods and Services Tax Act (HPGST) and Central Goods and Services Tax (CGST) cannot be given precedence over other dues under the Insolvency Proceedings. Therefore, based on such dues, the government authority cannot seek the status of a secured Operational Creditor. The present appeal has been filed against an order passed by National Company Law Tribunal (NCLT) by which it dismissed an application seeking to recall the order of the approval of the Resolution Plan. The Appellant submitted that the resolution plan approved by the CoC was unjust and inequitable. The total admitted Government Dues as per resolution plan was Rs. 33,53,21,166/-. However, the allocation in the plan for Government Dues was only Rs 6,45,373/- which was less than 1% of the total claim under the Government Due. It was further contended that claim for priority of State Debt rested on the well-recognised principle that the State is entitled to revenue to use the proceeds to discharge its sovereign functions. In reply, the Respondent submitted that the Appellant had never actually filed their claims of Rs 13.60 Cr. regarding alleged tax arrears. Further, the Appellant was all along aware of its status as Operational Creditor and never objected for not having been treated as Secured Creditor. The present recall application was therefore only a disguise to restart the Corporate Insolvency Resolution Process (CIRP) having failed to file their claims on time. The Tribunal noted that the Appellant after filing the initial claims of Rs. 2.61 crore failed to act in a timely manner and submit its additional claims for Rs. 13.61. Additionally, no valid reasons were provided by the Appellant except sending two vague communications to the RP. While agreeing with the findings of the Adjudicating Authority, it held that since the Appellant failed to act in a diligent manner therefore it cannot now seek equitable relief as allowing such belated claims to be filed would derail the insolvency process and affect the commercial viability of the Resolution Plan. It held that “If belated claims are allowed for any specific party, there is all likelihood from others to also seek reopening of the claim window. In these circumstances, we are inclined to agree with the Adjudicating Authority that allowing the belated claims of the Appellant will open flood gates of the multiple such claims.” It further observed that the Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. while clarifying the ration of its own judgments held that the ratio of the Rainbow Papers must be confined to its specific facts. Unlike the GVAT Act in Rainbow Papers, section 82 of the CGST Act expressly gives precedence to the Insolvency and Bankruptcy Code, 2016 (IBC) over the GST dues and excludes the GST dues from being treated as secured debts in the insolvency proceedings. It concluded that since the Appellant in the present case is governed by HPGST/CGST Acts, they cannot claim the status of a secured Operational Creditor. Furthermore, the Appellant has been provided for more than what it is entitled to get under section 53 of the IBC therefore it cannot be said that the resolution plan contravenes the IBC provisions. Accordingly, the present appeal was dismissed. Case Title:Joint Commissioner of State Taxes & Excise Versus M/s Radiant Castings Private Limited and Ors. Case Number: Company Appeal (AT) (Insolvency) No. 684 of 2025 Judgment Date: 09/07/2025 For Appellant : Ms. Mandakini Singh and Ms. Ashima Mandla, Advocates. For Respondent : Mr. Vikram Singh Baid, Advocate for Respondent No.1. Mr. Adarsh Tripathi, Advocate for Respondent No.2. Click Here To Read/Download The Order

Govt Authority Can't Seek Status Of Secured Operational Creditor Based On Dues Arising From HPGST Or CGST Acts: NCLAT

Mohd Malik Chauhan

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