Statutory Tax Authority's 896-Day Late Claim Against Liquidated Company Dismissed; Tribunal Rules Liquidator and Adjudicating Authority Cannot Extend Deadline Post-Liquidation Commencement
In a significant judgment dated October 29, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed an appeal filed by the Deputy Commissioner of Commercial Taxes, Mangaluru, against the rejection of its delayed Goods and Services Tax (GST) claim in the liquidation proceedings of M/s Doshion Private Limited. The appellate tribunal upheld the order of the National Company Law Tribunal (NCLT), Ahmedabad Bench, which refused to condone a delay of 896 days in filing the claim, emphasizing that the timelines prescribed under the Insolvency and Bankruptcy Code, 2016 (IBC), and the associated Liquidation Process Regulations must be strictly observed, even by statutory authorities.
Background and Facts:
M/s Doshion Private Limited, engaged in water treatment and industrial wastewater purification, was ordered into liquidation by the NCLT on October 3, 2023. The liquidation process included a public announcement fixing November 8, 2023, as the last date for submission of claims against the corporate debtor. The Deputy Commissioner of Commercial Taxes (Audit)-1, Mangaluru (the Appellant), responsible for assessing the company's GST liabilities, initiated adjudication proceedings under Section 74 of the CGST and KGST Acts to determine discrepancies concerning tax paid on intra-State supplies.
The tax liability was crystallized only on February 21, 2026, upon issuance of an adjudication order fixing a total tax liability of ₹8,10,000. Subsequently, the Appellant filed its proof of claim on April 22, 2026, which was rejected by the Liquidator as belated, being filed well beyond the stipulated deadline.
Legal Issues and Arguments:
The Appellant contended that since the tax liability was adjudicated after the liquidation commencement date, the claim filing period should be reckoned from the date of adjudication. It argued that it filed the claim promptly after the liability crystallized and sought condonation of the delay under Section 60(5) of the IBC, asserting that statutory dues deserve equitable treatment. The Appellant further relied on the Supreme Court's decision in Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs (2022), to support its position that tax assessment can continue post-liquidation and claimed that the timelines should accommodate such crystallization.
On the other hand, the Liquidator and Respondents argued that the IBC and Liquidation Process Regulations mandate strict adherence to timelines fixed from the liquidation commencement date, and the Liquidator has no power to entertain claims filed after the prescribed period. They emphasized that allowing belated claims would disrupt the time-bound liquidation process and prejudice other stakeholders.
Judgment and Reasoning:
The NCLAT bench comprising Mr. Justice Mohammad Faiz Alam Khan and Mr. Naresh Salecha affirmed the NCLT's dismissal of the Appellant's application for condonation of delay. The Tribunal highlighted several key points:
1.Time-bound Liquidation Process:
The IBC (Section 38 and Regulations 12, 16, and 30 of the Liquidation Process Regulations) requires the Liquidator to receive claims within thirty days from the liquidation commencement date and verify them within a further thirty days. This timeline is deliberate to ensure an orderly and time-bound liquidation process.
2. No Power to Extend Deadline:
The Liquidator has no authority to admit claims beyond the prescribed period. Section 42 of the IBC provides a remedy against the Liquidator's decision but does not create a new right to file claims after closure of the claim period. The Adjudicating Authority's wide powers under Section 60(5) cannot override statutory timelines.
3. Nature of Claim and Timing:
The Tribunal rejected the Appellant's argument that the claim period should start only from the date of crystallization of the liability. It reasoned that a claim is a right to payment existing from the relevant tax period, whether quantified or disputed. Therefore, the claim could and should have been filed by the deadline set in the liquidation process.
4. Impact on Stakeholders:
Allowing an 896-day belated claim would necessitate reopening verification, revising stakeholder lists, and disturb distributions already made, harming the liquidation's integrity and prejudicing other creditors.
5. Statutory Authority Status Does Not Confer Privilege:
The Tribunal emphasized that the State tax authority stands on the same footing as other operational creditors under the IBC's waterfall mechanism, and statutory dues do not warrant special treatment in terms of filing timelines.
6. Interpretation of Supreme Court's ABG Shipyard Judgment:
While acknowledging that tax assessment can continue during moratorium or liquidation, the Tribunal clarified that this does not mean the claim filing deadline resets upon adjudication. The statutory authority must still file claims within the timelines prescribed under the IBC.
Outcome:
The NCLAT dismissed the appeal, upholding the rejection of the delayed GST claim. The Tribunal held that no sufficient cause was shown for condoning the delay and that the claim arising from a liability determined after the liquidation commencement date cannot be admitted under the current scheme of the IBC and related regulations.
Significance:
This judgment reaffirms the strict adherence to the timelines prescribed under the Insolvency and Bankruptcy Code and Liquidation Process Regulations, even for claims by statutory authorities like tax departments. It clarifies that the liability adjudicated post-liquidation commencement does not reset or extend the claim submission period. The ruling balances the interests of statutory authorities in recovering dues with the need to maintain an orderly, time-bound liquidation process protecting all stakeholders' rights.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - In liquidation, statutory tax authority cannot have a belated claim admitted merely because tax liability was adjudicated after liquidation commencement date - Claim under GST laws must still conform to timelines and scheme of IBC and Liquidation Process Regulations - Liquidator has no power to accept claim filed after prescribed period and no sufficient cause was shown for condoning delay of 896 days.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 3(6), 5(21), 38, 39, 40, 42, 53, 60(5), 61, 238A; IBBI (Liquidation Process) Regulations, 2016 Regulations 12, 16, 30; Central Goods and Services Tax Act, 2017 Section 74; Karnataka Goods and Services Tax Act, 2017 Section 74.
