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Judgment
18.02.2026 CA (AT) (Ins.) No. 1798 of 2025, CA (AT) (Ins.) No. 1799 of 2025 and CA (AT) (Ins.) No. 2051 of 2025: All these Appeals arise out of common facts and from the same CIRP, are being heard and decided together.
CA (AT) (Ins.) No. 1798 of 2025 has been filed by Raj Radhe Finance Ltd., lead Financial Creditor challenging the order dated 06.11.2025 by which Adjudicating Authority has rejected IA (Plan)/15 (AHM)/2025.
CA (AT) (Ins.) No. 1799 of 2025 has been filed by Successful Resolution Applicant challenging the same order rejecting the plan approval application IA (Plan)/15 (AHM)/2025
CA (AT) (Ins.) No. 2051 of 2025 has been filed, challenging the order dated 06.11.2025 by which order IA/1152(AHM)2025 filed by State Tax Officer has been allowed, declaring the State Tax Officer with respect to CST dues as secured creditor.
Brief facts of the case necessary to be noticed for deciding the Appeals are:
The CIRP against the Corporate Debtor commenced on 08.04.2024. In pursuance of the Form-G issued by Resolution Professional, the resolution plans were submitted. Seven Prospective Resolution Applicants had submitted expression of interest, three PRA’s submitted their resolution plan. The resolution plan came to be considered in the meeting of the Committee of Creditors and on 03/04.07.2025 resolution plan submitted by Sandeep Vadodoria (in consortium) has been approved. RP in consequence to that filed application IA (Plan)/15 (AHM)/2025 for approval of the Resolution Plan before the Adjudicating Authority.
The State Tax Officer has filed I.A. No. 1152 of 2025 before the Adjudicating Authority claiming that the dues of the State Tax Officer under Central Tax Act be declared as secured debt. The dues of State Tax Officer under Gujrat Vat Tax Act were accepted as secured debt.
The Adjudicating Authority by the order dated 06.11.2025 has rejected the application for approving the resolution plan and by the order dated 06.11.2025 passed in I.A. No. 1152 of 2025 allowed the application of the State Tax Officer and declared the State Tax Officer in so far as CST dues are concerned as secured creditor.
We have heard Ld. Counsel for the Appellant, who is Financial Creditor as well as Ld. Counsel for the SRA, Ld. Counsel for the State Tax Officer and Ld. Counsel for the RP.
Ld. Counsel for the Appellant challenging the order in so far as Adjudicating Authority rejected the plan approval application submits that only reason which is given in the order is that the plan does not treat the claim of the dues of Central Sales Tax as secured debt, hence, the plan is not compliant under Section 30(2) and deserve to be rejected. It is submitted that the law is already settled by the Judgment of this Tribunal in CA (AT) (Ins.) No. 1804 of 2025, State Tax Officer Vs. Nitin Narang, RP of Afcan Impex Pvt. Ltd. & Ors., decided on 07.01.2026 that the dues of State Tax Officer under Central Sales Tax are not secured debt and the reasons for which the Adjudicating Authority has rejected the plan is not in accordance with law.
Coming to the CA(AT)(Ins.) No. 2051 of 2025, Ld. Counsel for the Appellant also contended that in view of the Judgment of this Tribunal in State Tax Officer Vs. Nitin Narang, RP of Afcan Impex Pvt. Ltd. & Ors., the dues of CST are not secured debt, hence, the Adjudicating Authority committed error in allowing the I.A. No. 1152 of 2025 filed by the State Tax Officer.
Ld. Counsel appearing for the State Tax Officer has also been heard, who does not dispute the law laid down by the Judgment of this Tribunal in State Tax Officer Vs. Nitin Narang, RP of Afcan Impex Pvt. Ltd. & Ors., he submits that ground given in the Appeal with respect to overriding effect under Section 238 to the Central Sales Tax Act are not correct.
We have considered the submissions of the Ld. Counsel for the parties and perused the record.
The Adjudicating Authority in its order dated 06.11.2025 rejecting the application for approving the resolution plan has given the reason for the plan being not in compliance is that Sales Tax Department dues qua Central Sales Tax has not been treated as secured debt. In para 18 of the Judgment, Adjudicating Authority has made following observation:
“18.It is further observed that the plan was approved by 68.18% voting which is by only 1 financial creditor i.e. Rajradhe Finance Limited the remaining COC has either dissented or abstained from the voting. On perusing form-H annexed to the application it is observed that the resolution plan has not appropriately apportioned the amount payable to the different creditors. Moreover, they have not treated State Tax department's dues qua CST as secured creditors. Hence, the plan is not fulfilling the required provisions of Section 30 (2) of the IBC.”
The question as to whether the dues of State Tax Department under the Central Sales Tax Act are secured debt or not has already been considered and answered by this Tribunal in CA (AT) (Ins.) No. 1804 of 2025. It is useful to refer to para 9,11 and 22 of the Judgment, where this Tribunal laid down following:
“9.There can be no quarrel to the proposition laid down by the Hon'ble Supreme Court in the above case. In the present cased also, the claim of the Appellant under GVAT Act has been accepted as secured creditor and with regard to which there is no dispute between the parties. The only issue which needs to be considered in the present case with regard to the dues of the Appellant under the CST Act as secured creditor. The Appellant has pleaded reliance on the judgment of the Hon'ble Supreme Court and on Section 9 sub-section (2) of the CST Act. Section 9 sub-section (2) of the CST Act provides as follows: "9(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess re-assess, collect and enforce payment of tax, including any [interest or penalty, payable by a dealer under this Act as if the tax or [interest or penalty) payable by such a dealer under this Act is a tax or [interest or penalty) payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matter specified in this sub-section."
11.Section 48 of the GVAT Act specifically provides that any amount payable by a dealer, the Government shall have the first charge on the property of such dealer. Section 9 sub-section (2) clearly applies to machinery provision for recovery and enforcement of payment of tax, but it does not create any first charge on the assets of the CD. We, thus, are in agreement with the submission of the learned Counsel for the Respondent that Section 9 sub-section (2) is a machinery provision and not a provision creating separate statutory charge unlike Section 48 of GVAT Act. The provision of Section 9 sub-section (2) expressly limited to procedural matters – assessment, returns, recovery steps, appeals, penalties etc. and does not import any substantive rights of the State, much less a statutory first charge as created under Section 48 of the GVAT Act.
22.Section 9 sub-section (2) of the CST Act, which is sheet anchor submission of the Appellant has been noticed above. We have observed that provisions of Section 9 sub-section (2) cannot be read to mean that by virtue of said provision any charge can be created on the assets of the CD by operation of law. Although Section 9 sub-section (2) refers to various provisions, which had been made applicable specially to recovery by CST Act as was applicable in the general sales tax laws, but the provision of creating first charge on the assets of the CD is absent in Section 9 sub-section (2), nor it can be impliedly imported with respect to dues under CST Act. We, thus, are of the view that Adjudicating Authority did not commit any error in not accepting the claim of the Appellant insofar as central dues of CST Act are concerned. We, thus, are not persuaded to accept the submission of the Appellant that dues under CST Act has to be treated as secured debt.
There is no dispute between the Ld. Counsel for the parties that the law has been declared by this Tribunal in the above case has clearly held that Central Sales Tax dues are not secured debt. In view of the aforesaid, the reason given by the Adjudicating Authority for rejecting the plan approval application is unsustainable. Similarly, the order of the Adjudicating Authority allowing the IA No. 1152 of 2025, holding that dues of Central Sales Tax are secured debt is also unsustainable. We are of the view that the impugned order dated 06.11.2025 passed in I.A. IA (Plan)/15 (AHM)/2025 as well as IA No. 1152 of 2025 can not be sustained. In result, all these Appeals are allowed, the order dated 06.11.2025 is set aside. The plan approval application 15 of 2025 is revived before the Adjudicating Authority for passing the consequential order within period of eight weeks from the date, copy of the order is produced.
All these Appels are disposed of accordingly.