Set-Off Of Pre-CIRP Tax Dues Is Not Permitted Against Post-CIRP Tax Refund In Absence Of Pre-Existing Contractual Provision: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai Bench of Sh. Prabhat Kumar (Technical Member) and Sh. Sushil Mahadeorao Kochey (Judicial Member) has held that pre-CIRP tax dues cannot be adjusted against post-CIRP tax refunds determined during the CIRP, in the absence of any pre-existing contractual set-off provision. The present application has been filed by the Resolution Professional under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking declaration that adjustment of pre CIRP tax dues against post Corporate Insolvency Resolution Process (CIRP) tax refunds is illegal and against the IBC. The Tribunal noted that the Supreme Court in Bharti Airtel Ltd. held that the statutory set off under Order VIII Rule VI and the insolvency set off under Regulation 29 of the Liquidations Regulations do not apply during the CIRP except where the contractual set off exists before the commencement of the CIRP. It further held that pre-existing contractual set offs are not affected by the CIRP. However their recoveries are barred due to moratorium. It held that in the present case, the Income Tax Department has set off income tax dues accrued before CIRP against the post CIRP tax refunds determined during the CIRP. The exception carved out with respect to contractual set off does not apply in the present case as there was no pre-existing contractual set off therefore adjustment done was impermissible under the IBC. The Tribunal further observed that the second exception carved out in the above judgment by the Apex Court was related to equitable set off where claims and counter claims arise from the same transaction which are clearly established in fact and law including monetary claim only. However, this exception is not applicable in the present case since the tax dues and refunds relate to different assessment years and therefore are not connected. Accordingly, the Income Tax Authority was directed to release the amount. Case Title: PUNJAB NATIONAL BANK V/s UNIJULES LIFE SCIENCES LIMITED Case Number: IA(I.B.C)/1811( MB)2025 IN C.P. (IB)/3080(MB)2018 Order Date: 30/07/2025 Click Here To Read/Download The Order

Set-Off Of Pre-CIRP Tax Dues Is Not Permitted Against Post-CIRP Tax Refund In Absence Of Pre-Existing Contractual Provision: NCLT Mumbai

Mohd Malik Chauhan

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