Safiya Malik

The Supreme Court Division bench of  Justice B.R. Gavai and Justice Augustine George Masih, held that any claims not forming part of a duly approved Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 “shall stand extinguished” and that no proceedings can be initiated or continued in respect of such claims. The Court directed that demand notices issued by the State of Chhattisgarh to a resolution applicant company were “contemptuous in nature” and quashed them. The Bench observed that the act of initiating tax recovery proceedings post-approval of the Resolution Plan constituted a breach of the Court's earlier judgment in Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, holding that all dues not included in a Resolution Plan are “deemed to be frozen and binding on all the stakeholders”, including government authorities.

The matter arose from a contempt petition filed by M/s JSW Steel Limited under Article 129 read with Article 142 of the Constitution of India and Section 2(b) of the Contempt of Courts Act, 1971. The company alleged willful disobedience of the judgment dated 13 April 2021 in Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, wherein the Court held that all claims not forming part of the approved Resolution Plan stand extinguished.

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Insolvency proceedings had been initiated against M/s Monnet Ispat and Energy Ltd. under the Insolvency and Bankruptcy Code, 2016. An Interim Resolution Professional was appointed, and claims were invited from creditors via public advertisement dated 27 July 2017, with 7 August 2017 as the cut-off for submission. The Petitioner Company was declared the Successful Resolution Applicant, and its Resolution Plan, submitted on 12 December 2017, was approved by the National Company Law Tribunal (NCLT), Mumbai Bench, on 24 July 2018.

Following this approval, the Petitioner Company took over the management of the erstwhile company. However, demand notices were subsequently issued by authorities of the State of Chhattisgarh for recovery of taxes pertaining to the period between 1 April 2017 and 30 June 2017.

A notice dated 15 September 2021 was issued by the Assistant Commissioner, Commercial Taxes, Division-II, Raipur, seeking to assess the company for non-filing of returns. The Petitioner responded, referring to the Supreme Court judgment in Ghanshyam Mishra, and asserting that no tax liabilities prior to the Resolution Plan approval were payable. Despite this, a further notice was issued on 17 May 2022, demanding payment of Rs. 1,08,25,666/- (Central Tax), Rs. 2,66,42,094/- (State Tax), and Rs. 61,51,689/- (Entry Tax).

Additional recovery proceedings were initiated through a demand notice dated 9 December 2022 under Section 146 of the Chhattisgarh Land Revenue Code, 1959.

The Petitioner asserted that these actions amounted to contempt, given the prior Supreme Court declaration extinguishing all pre-resolution claims not forming part of the approved plan.

Justice B.R. Gavai, writing for the Bench, referred extensively to the Ghanshyam Mishra judgment, observing: “Once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders.”

The Court reiterated that claims not forming part of the approved plan are “extinguished” and no person is entitled to initiate or continue any proceedings in respect of them. It further held that the 2019 amendment to Section 31 of the Code was “clarificatory and declaratory in nature” and applied retrospectively.

The Court found that in the present case, the Petitioner Company’s Writ Petition (Civil) No. 1177 of 2020 had been part of the batch decided in Ghanshyam Mishra. Referring to paragraph 140 of that decision, the Court quoted: “We hold and declare, that the respondents are not entitled to recover any claims or claim any debts owed to them from the Corporate Debtor accruing prior to the transfer date.”

It observed that despite the judgment having been brought to the notice of the authorities, demand notices were issued, constituting contempt. The Court noted that even as early as 2018, it had dismissed Special Leave Petitions in similar matters, reinforcing the primacy of the Code via Section 238.

Further citing Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, the Court emphasized that successful resolution applicants must not be exposed to uncertain or “undecided” claims. It held that “all claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid.”

The Court clarified that judgments such as State Tax Officer v. Rainbow Papers Limited, cited by the respondents, did not apply as those involved tax claims that had been properly submitted during the insolvency process. In contrast, in the present case, the State of Chhattisgarh and its authorities had not submitted any claims despite public notice.

The Court held: “The continuation of such proceedings despite the judgment and order of this Court being pointed out to their notice is nothing but contemptuous in nature.”

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However, citing the novelty of the issue and the authorities’ tendered unconditional apology, the Court declined to impose penalties or initiate further action, stating: “Though we hold that the act of the alleged contemnors is contemptuous in nature, we do not propose to take any action against them.”

The Court ordered: “The demand notices issued by the contemnors on the Petitioner Company and all proceedings pursuant thereto are held to be illegal and the same are quashed and set aside.”

Advocates Representing the Parties

For the Petitioners: Mr. Gopal Jain, Senior Advocate

For the Respondents: Ms. Pragati Neekhra, Advocate

Case Title: M/s JSW Steel Limited v. Pratishta Thakur Haritwal & Ors.
Neutral Citation: 2025 INSC 401
Case Number: Contempt Petition (Civil) No. 629 of 2023 in Writ Petition (Civil) No. 1177 of 2020
Bench: Justice B.R. Gavai and Justice Augustine George Masih

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