Pre-CIRP statutory dues not part of an approved resolution plan stand extinguished and must be refunded if paid under protest.

The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (CD) commenced on 02.12.2020

A Resolution Plan submitted by the Successful Resolution Applicant (SRA) was approved by the Adjudicating Authority (NCLT Ahmedabad) and subsequently upheld by the NCLAT

Although the Appellant (Surat Municipal Corporation) did not file a formal claim, the plan proposed a payment of ₹27,368 to keep the CD a going concern

Post-approval, the Appellant refused to remove a seal placed on the CD’s premises for unpaid pre-CIRP property taxes totaling ₹39,96,685.

To operationalize the unit, the SRA paid this amount "under protest" and subsequently sought a refund before the NCLT

The NCLT directed the Appellant to refund the amount, leading to this appeal

The court primarily applied the "Clean Slate" doctrine as established by the Hon’ble Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, which mandates that once a Resolution Plan is approved, all dues (including statutory/government dues) not included in the plan stand extinguished

The court also addressed the principle of "harmony" between secured creditors and statutory service providers, distinguishing the Madras High Court's ruling in Empee Distilleries Limited v. Superintending Engineer, which dealt with pending litigations and lack of proper CIRP notice

The Appellant argued that it was entitled to its dues regardless of the claim process, relying on Empee Distilleries to suggest that property taxes follow the asset

The NCLAT rejected this, distinguishing the cited case on facts: in Empee, there was a lack of publication and an active pre-existing litigation regarding tariffs, whereas here, the CIRP process was duly followed and the Resolution Plan even proactively allocated a sum for the Appellant despite its failure to file a claim

The Tribunal reasoned that since the Resolution Plan is binding and has attained finality, the SRA cannot be forced to pay sums beyond the plan to access the CD's property

Under Section 31 of the IBC, once the plan is approved, the SRA starts with a "clean slate," and any pre-CIRP debt not claimed or included in the plan is extinguished

The court held that the issues are fully covered by the Ghanshyam Mishra precedent; consequently, the Appellant had no legal right to withhold the seal or demand pre-CIRP dues paid under protest

Delay in refiling the appeal was condoned