Property Tax Dues Pre-Dating CIRP Approval Can’t Be Claimed by MCD | Petitioner to Pay Post-CIRP Dues

Case Details: Bhushan Power & Steel Ltd. v. Municipal Corporation of Delhi - [2024] 166 taxmann.com 588 (Delhi)

Judiciary and Counsel Details

• Sachin Datta, J
• Gopal Jain, Sr. Adv., Chandra Shekhar Yadav, Nilotpal Sharma, Pratyush Kr. Yadav, Gauransh Singh Chauhan & Harshit Bhadani, Advs. for the Petitioner.
• Tushar Sannu, SC & Manoviraj Singh, Advs. for MCD. for the Respondent.

Facts of the Case

In the instant case, the petitioner (corporate debtor) underwent Corporate Insolvency Resolution Process (CIRP) and consequently, a resolution plan submitted by JSW Steel was approved by the NCLT.

In terms of the resolution plan, all liabilities and obligations of the petitioner in relation to outstanding Government dues prior to the effective date i.e. 26-3-2021 stood written off in full and were deemed to have been permanently extinguished.

However, the Municipal Corporation of Delhi (MCD) passed a common assessment order demanding property tax from the petitioner in respect of flats owned by it for the period spanning from 1-4-2004 to 31-3-2024.

Subsequently, the petitioner filed an instant writ petition seeking a direction to MCD not to raise any demand towards property tax in respect of said flats owned by the petitioner for the period prior to 26-3-2021.

High Court Held

The High Court observed that since MCD did not lodge its claim in respect of property tax dues against petitioner during CIRP and claim of MCD was not a part of approved resolution plan, any statutory dues owed to MCD by petitioner prior to date on which resolution plan was approved i.e. 26-3-2021, could not be demanded/recovered.

Thus, operation of impugned common assessment order was to be stayed to extent it related to flats owned by the petitioner. however, petitioner was directed to pay property tax for period after 26-3-2021.

Further, the High Court held that once a resolution plan is approved by Adjudicating Authority under section 31(1), any claims or dues including statutory dues owed to Governmental agencies which are not a part of approved resolution plan are extinguished; it is impermissible to pursue or initiate proceedings in respect of such dues for period prior to ‘effective date’ of resolution plan.

List of Cases Reviewed

• State Tax Officer v. Rainbow Papers Ltd. [2022] 142 taxmann.com 157 (SC) (para 14) distinguished.

List of Cases Referred to

• Sanjay Kumar Agarwal v. State Tax Officer (2024) 2 SCC 362 (para 6)
• State Tax Officer v. Rainbow Papers Ltd. (2023) 9 SCC 545 (para 6).