'Enormous Delay': NCLT Bengaluru Refuses To Condone Delay In Punjab Tax Dept's Claim In Falcon Tyres Liquidation

The National Company Law Tribunal (NCLT) at Bengaluru recently refused to condone a 1,784-day delay and consequently declined to admit a belated ₹6.09 crore tax claim filed by the Punjab State Tax Department in the liquidation of Falcon Tyres Ltd.

A bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada dismissed applications filed by the Assistant Commissioner of State Taxes, Jalandhar, seeking condonation of delay and admission of the claim arising under the Punjab Value Added Tax Act and the Central Sales Tax Act.

“Administrative delays, departmental approvals, movement of files, bifurcation of districts and internal governmental procedures are routine administrative matters and cannot justify condonation of an enormous delay of nearly five years during which time the liquidation process has reached near culmination,” the tribunal observed.

Falcon Tyres was admitted into the corporate insolvency resolution process on May 1, 2018, and ordered into liquidation on December 30, 2019. The liquidator issued a public announcement inviting claims from all stakeholders, fixing January 29, 2020, as the deadline for submission.

The tax department claimed that it became aware of the liquidation proceedings only in October 2023 through the GST portal. It subsequently filed a claim of ₹6,09,87,791 before the liquidator in November 2024, which was rejected as time-barred.

Seeking condonation of delay, the department attributed the delay to administrative processes including district bifurcation, reallocation of files, internal approvals and other procedural constraints. It also argued that it had not been individually informed of the insolvency proceedings and that its dues constituted a statutory first charge, entitling it to be treated as a secured creditor.

The liquidator opposed the plea, arguing that the claim had been filed after a 1,784-day delay without sufficient cause. It contended that the public announcement constituted constructive notice to all stakeholders, including government departments, and that the liquidation process had already substantially progressed, with assets sold and sale proceeds distributed.

Rejecting the tax department's argument that the liquidator ought to have separately informed it, the tribunal held that the public announcement was sufficient notice to stakeholders.

“The Code does not mandate issuance of separate/ individual notices to each Government Department once public announcement is duly made. Therefore, the requirement of public announcement under the IBC sufficiently satisfies the obligation of notice to stakeholders,” it held.

The tribunal also rejected the department's contention that it should be treated as a secured creditor by virtue of the statutory first charge under the Punjab VAT Act.

Referring to the Supreme Court's ruling in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd., it held that statutory dues remain subject to the insolvency distribution mechanism and cannot override it.

The bench further noted that South Indian Bank had created a charge over Falcon Tyres' assets much earlier and that the liquidation proceeds were insufficient even to fully satisfy the financial creditor's dues.

Holding that the applicant had failed to establish sufficient cause for condonation of the extraordinary delay, the tribunal dismissed both applications.

For Applicant: Advocate Prajwal Tiwari