Statutory Creditors Cannot Get Preferential Treatment Over Other Operational Creditors In Liquidation: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently observed that admitting a government department's claim three years after the deadline in a liquidation process would place it in a more favourable position than other operational creditors. These creditors had complied with the prescribed timelines.

“A statutory creditor stands in the same line as other operational creditors, and Section 53 of the Code does not put it ahead of the rest merely because it is the State. Letting it in three years late, on a liability that did not exist when the list was made, would treat it better than every creditor who obeyed the timelines,” the tribunal observed.

The Bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha made the observation while dismissing an appeal filed by the Deputy Commissioner of Commercial Taxes, Mangaluru, against the rejection of its ₹8.10 lakh GST claim during the liquidation of Doshion Private Limited.

The Corporate Debtor, engaged in water treatment and wastewater management services, was ordered into liquidation on 3 October 2023, following which a public announcement invited claims from stakeholders, fixing 8 November 2023 as the last date for submission of claims. The Commercial Taxes Department did not lodge any claim within this period.

Subsequently, during scrutiny of GST returns for April 2019 to March 2020, the tax department found that the Corporate Debtor had paid IGST on transactions. On this basis, adjudication proceedings under Section 74 of the GST enactments were initiated in September 2025.

After considering the responses of the liquidator, the tax authorities passed an adjudication order on 21 February 2026 determining tax liability of Rs 8.10 lakh. A rectification application filed by the Corporate Debtor was later rejected on 24 March 2026.

Following the assessment, the department submitted a proof of claim before the liquidator on 22 April 2026. The liquidator rejected the claim on 2 May 2026 on the ground that it had been filed long after the deadline prescribed under the liquidation regulations.

Challenging this decision, the department approached the NCLT seeking condonation of a delay of 896 days and directions for verification and admission of its claim. When the NCLT refused relief, the appeal was filed.

The Department argued that the tax liability crystallised only upon the issuance of the assessment order dated 21 February 2026 and that it had submitted its claim before the Liquidator within a reasonable time thereafter.

It contended that the delay was neither deliberate nor attributable to negligence, asserting that it had diligently pursued the adjudication proceedings and acted promptly once the liability was determined.

It was further contended that the timelines prescribed for submission of claims under the IBC should not be enforced mechanically where a claimant demonstrates bona fide and sufficient reasons for the delay. The Department clarified that it was not seeking any preferential treatment or priority over other creditors in the liquidation process but merely sought consideration of its claim in accordance with the statutory framework governing insolvency proceedings.

The NCLAT observed that the Code and the Liquidation Process Regulations require stakeholders to submit claims within the prescribed timelines and do not empower the liquidator to entertain claims filed beyond the last date.

The Tribunal noted that a “claim” under the IBC includes even disputed or unquantified rights to payment and Section 5(21) of the Code treats dues payable to a State Government under any law as operational debt. Thus, making it an Operational Creditor.

The NCLAT further observed that although Section 60(5) of the Code grants the NCLT broad jurisdiction over disputes arising from insolvency and liquidation proceedings, that power must be exercised within the framework of the Code. It emphasised that the provision cannot be invoked to extend the timelines prescribed under the IBC and the Regulations.

The Bench further observed,

“The amount is small, but the test is not the amount. If this claim is admitted, other late claimants will ask for the same. We feel that it is not the intention of the code. We find that no sufficient cause is shown for the delay of 896 days. We also find that admitting the claim would be against the time-bound working of the Code.”

The Tribunal noted that other stakeholders had filed and verified their claims based on the stakeholder list finalised after 8 November 2023. It held that government authorities enjoy no preferential position over other operational creditors merely because they represent the State.

Finding no sufficient cause to condone the delay, the NCLAT dismissed the appeal and affirmed the liquidator's rejection of the claim.

For Appellants: Advocates Janak Purohit & Sandeep Huilgol

For Respondents: Advocates Kunal Vaishnav & Yuvraj Thakore