Delhi High Court Quashes Customs Demand Against JAL After Unfiled Insolvency Claim Stood Extinguished

The Delhi High Court has held that a pre-insolvency customs claim against Jaiprakash Associates Limited stood extinguished after the Customs Department failed to submit it during the company's insolvency process and the resolution plan was approved.

The Division Bench of Justices Anil Kshetarpal and Shail Jain observed,

“The failure of the Respondents (Customs) to submit their claim cannot…operate to the prejudice of the Corporate Debtor or the Successful Resolution Applicant. The IBC does not contemplate that a creditor who fails to participate in the CIRP acquires a superior position after its conclusion.”

The Court made the observation while quashing a Customs order confirming a differential customs duty demand of ₹5.89 lakh against Petitioner-company, along with ₹4 lakh penalty.

The demand arose from an import made in September 2023, before the company's Corporate Insolvency Resolution Process (CIRP) commenced on June 3, 2024.

Customs did not submit its claim during the CIRP. The National Company Law Tribunal subsequently approved the company's resolution plan on March 17, 2026.

The Court held that the subsequent issuance of a show cause notice or adjudication could not convert the liability into a post-CIRP claim.

“A claim under Section 3(6) of the IBC is not rendered a post-CIRP claim merely because its quantification or adjudication takes place subsequently.”

It further held that while Customs authorities could determine liability during the CIRP, after approval of the resolution plan, a unfiled pre-CIRP claim could not be enforced in view of Sections 31(1) and 238 of the Insolvency and Bankruptcy Code.

Section 31(1) makes an approved resolution plan binding on the corporate debtor, creditors and government authorities.

Section 238 gives the IBC overriding effect over other laws in case of inconsistency.

“The conclusion is confined to the consequence which the IBC attaches to a claim arising prior to the Insolvency Commencement Date once the Resolution Plan has been approved. The Customs Act and the IBC operate in their respective fields, where the exercise of power under the Customs Act comes into conflict with the binding consequences of an approved Resolution Plan, Section 238 gives precedence to the IBC,” the Court said.

It also rejected reliance on a statement by the company's authorised representative during the personal hearing that the dues would be paid, observing that such an isolated statement could not revive a liability extinguished under the IBC.

As such, the Court quashed the Customs order confirming the differential duty. It, however, clarified that Customs shall have the power to assess transactions.

For Petitioner: Advocates Gauhar Mirza, Syamantak Sen, Kaveesh Nair, Jeetendra Vishwakarma & Tanay Khanna, 

For Respondents: Advocates Anushree Narain, SSC with Apurv Yadav and Naman Choula