Customs Department’s claim for differential duty on pre-CIRP imports denied enforcement post-approval; Emphasizes clean slate principle under Section 31(1) of Insolvency and Bankruptcy Code, 2016
In a landmark judgment dated September 2, 2026, the Delhi High Court (Division Bench of Justices Anil Kshetarpal and Shail Jain) quashed a customs duty demand and penalty imposed on Jaiprakash Associates Limited, holding that once a Resolution Plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), all claims—including statutory dues—that were not submitted during the Corporate Insolvency Resolution Process (CIRP) stand extinguished and cannot be enforced thereafter.
The case arose from a customs duty dispute involving the import of Digital and Network Video Recorders by Jaiprakash Associates Limited on September 15, 2023, before the commencement of its insolvency proceedings on June 3, 2024. The Customs Department alleged short levy of customs duty and issued a Show Cause Notice (SCN) during the CIRP but failed to submit any claim during the insolvency resolution process.
The key legal question was whether the Customs Department could proceed with adjudication and recovery of differential duty post-approval of the Resolution Plan by the National Company Law Tribunal (NCLT) on March 17, 2026, despite not having submitted its claim during the CIRP.
The Court examined the statutory framework of the IBC and emphasized the wide definition of “claim” under Section 3(6), which includes rights to payment whether or not reduced to judgment or adjudication. The Court held that the duty liability arising from the pre-CIRP import constituted a claim that ought to have been submitted within the CIRP timeline.
The judgment extensively relied on the Supreme Court’s decision in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021), which clarified that the 2019 amendment to Section 31(1) of the IBC expressly makes Resolution Plans binding on governmental authorities to whom statutory dues are owed, thereby extinguishing claims not included in the Resolution Plan. The Court reiterated the “clean slate” principle that the successful resolution applicant must start business free from undisclosed liabilities.
Rejecting the Customs Department’s contention that it could proceed with recovery despite non-submission of claim, the Court held that the IBC has overriding effect over other laws pursuant to Section 238 and that the customs authority could not enforce recovery contrary to the binding nature of an approved Resolution Plan. The Court clarified that while the Customs Act empowers determination of customs liability, enforcement after approval of the Resolution Plan is barred for claims not submitted during CIRP.
Further, the Court distinguished the present case from precedents where statutory dues enjoyed priority or were treated differently, emphasizing that the facts showed failure of the Customs Department to avail the statutory mechanism of claim submission via public announcement under the CIRP Regulations.
The judgment also addressed the availability of alternate remedies under the Customs Act, observing that writ jurisdiction was justified as the core issue was the extinguishment of claims under the IBC, not a mere assessment dispute.
Consequently, the Court quashed the Impugned Order dated June 2, 2026, which confirmed customs duty demand, interest, and penalty against Jaiprakash Associates Limited. However, the Court refrained from commenting on the merits of the classification of the goods or eligibility for customs exemptions, limiting its decision strictly to the enforceability of pre-CIRP claims post-Resolution Plan approval.
This ruling reinforces the finality of the insolvency resolution process under the IBC and clarifies that governmental authorities must actively participate in CIRP to protect their claims. It upholds the legislative intent to enable successful resolution applicants to operate on a clean slate free from “surprise claims,” thereby promoting certainty and value maximization in insolvency proceedings.
Bottom Line:
Once a Resolution Plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), all claims not forming part of the Resolution Plan, including statutory dues owed to the Central Government or other authorities, stand extinguished, and no proceedings for such claims can be initiated or continued.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 3(6), 3(11), 7, 30(4), 30(6), 31(1), 238;
Customs Act, 1962 - Sections 28(1), 28AA, 112(a)(ii), 117;
IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Regulation 6, 12(1), 13(1B), 13(1C).
