GST Demands Prior to IBC Resolution Plan Approval Quashed for Patanjali Foods

Ruchi Soya Industries Ltd. underwent corporate insolvency resolution proceedings before the NCLT, Mumbai. A resolution plan submitted by the Patanjali Consortium was approved, pursuant to which the company was taken over as a going concern on a clean slate basis and later renamed Patanjali Foods Limited.

Thereafter, CGST authorities issued a show cause notice dated 18 June 2024 and passed an order-in-original dated 21 January 2025 (with corrigendum dated 3 February 2025), raising GST demands for the period FY 2017-18 onwards. Patanjali Foods thereby challenged these demands before the Delhi High Court.

Issue Before HC: Whether GST demands for periods prior to approval of the resolution plan could survive after takeover of the corporate debtor on a clean slate basis, and what was the effective date of approval of the resolution plan under Section 31 of the IBC.

HC Decided: The Delhi High Court held that although the NCLT order dated 24 July 2019 recorded approval of the resolution plan, the approval was made subject to fulfilment of pending conditions, including clarification of funding sources. The final and unconditional approval was granted only by the later NCLT order dated 4 September 2019.

Relying on Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. and Bombay High Court in Patanjali Foods’ own cases, the Court held that all statutory dues, including GST, for periods prior to 4 September 2019 stood extinguished and could not be enforced against the petitioner.

Therefore, the impugned GST order raising demands for periods prior to 4 September 2019 was set aside. The tax authorities were granted liberty to issue a fresh show cause notice to be adjudicated in accordance with law.

To Read Full Judgment, Download PDF Given Below