1 hr ago
Delhi High Court Bars Old Government Dues After Insolvency Approval
A company called Jaiprakash Associates went through a legal process to settle its debts.
The Customs department later said the company owed more money on equipment imported before that process began.
Customs had not submitted this claim during the insolvency process.
The Delhi High Court said government departments must submit old claims on time.
They cannot wait until the process ends and then demand payment.
The court cancelled Customs’ demand for extra duty, interest, and a penalty.
It did not decide whether the company was originally right to pay the lower duty rate.
The decision is meant to give the company’s new owner a clear idea of its liabilities.
The Delhi High Court quashed Customs’ demand for ₹589,000 in additional duty, plus interest and penalty, against Jaiprakash Associates.
Customs alleged the company had paid basic customs duty at 10% instead of 20% on imported equipment.
The imports occurred in September 2023, before Jaiprakash Associates entered insolvency on 3 June 2024.
The court said government authorities must file claims during the insolvency process and cannot pursue omitted old dues afterward.
The ruling protects the resolution plan’s “clean slate” by preventing unexpected pre-insolvency liabilities from reaching the new owner.
- Who
- The Delhi High Court, Jaiprakash Associates, the Customs department, and creditors involved in the insolvency process.
- What
- The court ruled that government authorities cannot pursue pre-insolvency dues omitted from the insolvency process after a resolution plan is approved.
- Where
- The case was decided by the Delhi High Court and concerned Jaiprakash Associates’ insolvency proceedings.
- When
- The equipment was imported in September 2023; insolvency began on 3 June 2024; the Customs demand was made on 2 June 2026; and the resolution plan was approved on 17 March 2026.
- Why
- The court said allowing omitted claims later would undermine the Insolvency and Bankruptcy Code and deprive the successful buyer of a clean slate.
Court and company’s position
Customs’ position
When old dues must be raised
Court and company’s position
The court said all creditors, including government agencies, must submit pre-insolvency claims during the insolvency process, even if the exact amount is not yet determined.
Customs’ position
Customs pursued the alleged additional duty after the process, claiming that the company had paid basic customs duty at 10% rather than 20%.
Effect of the resolution plan
Court and company’s position
The court said allowing Customs’ claim would undermine the approved plan and leave the new owner facing unexpected liabilities.
Customs’ position
Customs’ order sought recovery of the alleged duty shortfall, along with interest and penalty, despite the claim not having been filed during the insolvency process.
Key facts
- Additional duty demanded
- ₹589,000, besides interest and penalty
- Customs duty rates at issue
- 10% paid by the company versus 20% alleged by Customs
- Import date
- September 2023
- Insolvency commencement
- 3 June 2024
- Claim submission deadline
- 17 June 2024
- Resolution plan value
- More than ₹15,000 crore
- Resolution plan approval
- National Company Law Tribunal approved it on 17 March 2026
Quotes
Delhi High Court
The court deciding Jaiprakash Associates’ challenge to the Customs demand
“The object of the IBC would be defeated if a creditor, including a statutory authority, were permitted to stand outside the CIRP (Corporate Insolvency Resolution Process), await adjudication of a pre-CIRP liability and thereafter seek enforcement against the resolved Corporate Debtor.”
livemint.com
“The responsibility of identifying and filing its claim lies upon the creditor.”
livemint.com
Gauhar Mirza
Senior partner at Saraf and Partners representing Jaiprakash Associates
“Failure to do so may result in the claim being extinguished upon approval of the Resolution Plan”
livemint.com
Sources
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