Belated Tax Claims Cannot Reopen Concluded Liquidation: NCLAT Dismisses Tamil Nadu State Tax Dept Appeal
Sangeetha Prathap
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, has dismissed an appeal filed by the Tamil Nadu State Tax Department, holding that belated statutory claims cannot be entertained once the liquidation process of a corporate debtor has reached finality. The Appellate Tribunal reiterated that the Insolvency and Bankruptcy Code, 2016 mandates strict adherence to timelines, and concluded liquidation proceedings cannot be reopened merely to accommodate delayed claims.
Also Read: NCLAT Reiterates: Amendment of Date of Default Permissible Before Final Adjudication
A Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) observed that the statutory framework governing liquidation leaves no scope for reviving proceedings after distribution of assets has been completed in accordance with law. The Tribunal held that the appeal lacked merit and deserved outright dismissal.
The appeal arose out of the liquidation proceedings of Sri NagaNanthana Mills Ltd, which was ordered to be liquidated by the National Company Law Tribunal, Chennai Bench, on June 21, 2018. Pursuant to the liquidation order, the liquidator issued a public announcement on June 27, 2018, inviting claims from all stakeholders, with July 26, 2018 fixed as the last date for submission of claims.
Despite the public notice, the Tamil Nadu State Tax Department filed its claim after a delay of 351 days. The liquidator rejected the claim on multiple grounds, including that it was not filed within the prescribed time, was not submitted in the manner required under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, and was barred by limitation under Regulation 16(1).
The Appellate Tribunal noted that the rejection of the claim was duly communicated to the tax department. However, the department failed to challenge the rejection within the statutory period of limitation provided under Section 42 of the IBC, which allows a claimant to prefer an appeal before the Adjudicating Authority within 14 days from receipt of the decision of the liquidator.
Instead of availing the statutory remedy in time, the department approached the NCLT at a much later stage by filing applications seeking condonation of delay and setting aside of the rejection order. These applications were dismissed by the NCLT, prompting the present appeal before the NCLAT.
Upholding the decision of the NCLT, the Appellate Tribunal observed that the appellant had consistently failed to act within the timelines prescribed under the Code at every stage. It further held that even after accounting for the exclusion of limitation during the Covid-19 period as directed by the Supreme Court, the applications filed by the tax department in 2023 were hopelessly time-barred.
The Tribunal also took note of the fact that by the time the department approached the forum, the liquidation process had substantially progressed and the assets of the corporate debtor had already been distributed in accordance with the waterfall mechanism prescribed under Section 53 of the IBC.
Emphasising the finality attached to liquidation proceedings, the NCLAT observed that once the stage under Section 53 has been crossed, no interference is permissible. The Tribunal held that reopening liquidation proceedings at such an advanced stage would defeat the very objective of the insolvency framework, which seeks certainty, finality and time-bound resolution.
Also Read: Covid-Era IBC Suspension Does Not Protect Personal Guarantors: NCLAT Delhi
In clear terms, the Appellate Tribunal ruled that liquidation proceedings, once concluded, cannot be reopened for the purpose of entertaining belated claims, even if such claims are raised by statutory authorities. Finding no infirmity in the order passed by the NCLT, the NCLAT dismissed the appeal and declined to grant any relief to the Tamil Nadu State Tax Department.
Appearance
For Appellant: Advocate P Sathish
Cause Title: State of Tamil Nadu V Mr. S. Muthuraju
Case No: Company Appeal (AT) (CH) (Ins) No.151/2025 (IA Nos.1276 & 1277/2025)
Coram: Justice Sharad Kumar Sharma (Judicial Member), Jatindranath Swain (Technical Member)
