Statutory pre-CIRP dues not claimed during insolvency process stand extinguished upon approval of Resolution Plan.

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).

Although the Appellant (Surat Municipal Corporation) did not file a formal claim for its property tax dues, the Plan proposed a payment of ₹27,368 to keep the CD as a going concern.

Despite receiving this amount, the Appellant refused to remove the seal from the CD's premises, demanding payment of pre-CIRP dues totaling ₹39,96,685.

To operationalize the unit, the SRA paid the said amount "under protest" and subsequently moved the NCLT for a refund.

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

The Court primarily applied the "Clean Slate" doctrine established by the Hon’ble Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, which mandates that upon approval of a Resolution Plan, all dues (including statutory dues to Central/State Governments or local authorities) which are not part of the Plan stand extinguished.

It further distinguished the Madras High Court decision in Empee Distilleries Limited v. Superintending Engineer, noting that the "clean slate" benefit is available unless specific statutory charges are created on assets that do not conflict with the IBC’s primacy.

The Tribunal reasoned that since the Appellant failed to file a claim during the CIRP, any pre-CIRP debt not included in the Resolution Plan was legally extinguished upon the Plan's approval.

The Tribunal rejected the Appellant's reliance on the Empee Distilleries case, noting that in that instance, litigation was pending during CIRP and no payment was proposed in the plan, whereas in the present case, the Resolution Plan specifically allocated a sum for the Appellant which was duly paid.

The Tribunal held that the Appellant had no legal authority to coerce the SRA into paying extinguished pre-CIRP dues by withholding the seal on the property.

Consequently, the payment made "under protest" by the SRA was not a voluntary discharge of debt but a payment made under duress to ensure the CD remained a going concern, justifying a refund.

The Tribunal held that once a Resolution Plan is approved and implemented, any claims not included therein are extinguished, and statutory authorities cannot bypass the IBC framework to recover arrears through coercive measures.

Refiling delay was condoned, but the appeal was dismissed on merits.