Delhi High Court – Orders
Lemon Electronics Private Limited vs Assistant Commissioner Of Income Tax & … on 4 March, 2025
Author: Yashwant Varma
Bench: Yashwant Varma
$~33 & 34
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 2666/2023
LEMON ELECTRONICS PRIVATE
LIMITED .....Petitioner
Through: Mr. Nikhil Gupta, Mr. Prince
Nagpal & Mr. Rochit Abhishek,
Advs.
Versus
ASSISTANT COMMISSIONER OF INCOME TAX & ORS.
.....Respondents
Through: Mr. Gaurav Gupta, Sr. SC with
Mr. Shivendra Singh and Mr.
Yojit Pareek, JSCs for R-1 & 3.
34
+ W.P.(C) 4935/2023
LEMON ELECTRONICS PRIVATE
LIMITED .....Petitioner
Through: Mr. Nikhil Gupta, Mr. Prince
Nagpal & Mr. Rochit Abhishek,
Advs.
Versus
UNION OF INDIA & ORS. .....Respondents
Through: Mr. Siddhartha Sinha, SSC with
Ms. Anuja Pethia and Mr.
Dacchita Sahi, JSCs with Mr.
Srikant Singh and Ms. Anu
Priya Minz, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
ORDER
% 04.03.2025
1. These two writ petitions impugn the reassessment action
initiated by the respondents under Section 148 of the Income Tax Act,
W.P.(C) 2666/2023 & 4935/2023 Page 1 of 6
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1961 [„Act‟] and pertaining to Assessment Year [“AY”] 2014-2015
[W.P.(C) 2666/2023] and AY 2019-2020 [W.P.(C) 4935/2023].
2. The principal ground of challenge to those proceedings is based
on Section 31(1) of Insolvency and Bankruptcy Code, 2016 [“IBC”]
with it being contended that once the Resolution Plan had come to be
approved by the National Company Law Tribunal [„NCLT‟], any
proceedings pertaining to a period prior to the approval so granted
would not sustain. The submission essentially proceeds on the basis of
the clean slate theory that courts have enunciated in the context of the
IBC.
3. We note that while dealing with an identical question, we had in
M Tech Developers Pvt. Ltd. vs. National Faceless Assessment
Centre, Delhi & Anr. [2024 SCC OnLine Del 2776] observed as
follows:
“6. The fact that a resolution plan once approved would bring the
curtains down on any claims pertaining to a period prior to the
approval of the resolution plan is no longer res integra.
7. We note that while dealing with an identical issue, we had in
Ireo Fiverriver Pvt. Ltd. v. Income Tax Department recognized the
legal position to be as under: –
“3. It is in the aforesaid backdrop that we take note of
the judgment rendered by the Supreme Court in
Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset
Reconstruction Co. Ltd. [Ghanashyam Mishra & Sons (P)
Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9
SCC 657 : (2021) 4 SCC (Civ) 638 : (2021) 91 GSTR 28 :
(2021) 227 Comp Cas 251] wherein the following
principles came to be laid down (227 Comp Cas p. 306):
(SCC pp. 714-715, paras 93 and 94)
„93. As discussed hereinabove, one of the principal
objects of the Insolvency and Bankruptcy Code is
providing for revival of the corporate debtor and to
make it a going concern. The Insolvency and
Bankruptcy Code is a complete code in itself. Upon
admission of petition under Section 7 there are variousW.P.(C) 2666/2023 & 4935/2023 Page 2 of 6
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important duties and functions entrusted to resolution
professional and committee of creditors. The resolution
professional is required to issue a publication inviting
claims from all the stakeholders. He is required to
collate the said information and submit necessary
details in the information memorandum. The resolution
applicants submit their plans on the basis of the details
provided in the information memorandum. The
resolution plans undergo deep scrutiny by resolution
professional as well as Committee of Creditors. In the
negotiations that may be held between committee of
creditors and the resolution applicant, various
modifications may be made so as to ensure that while
paying part of the dues of financial creditors as well as
operational creditors and other stakeholders, the
corporate debtor is revived and is made an on-going
concern. After committee of creditors approves the
plan, the adjudicating authority is required to arrive at a
subjective satisfaction that the plan conforms to the
requirements as are provided in sub-section (2) of
Section 30 of the Insolvency and Bankruptcy Code.
Only thereafter, the adjudicating authority can grant its
approval to the plan. It is at this stage that the plan
becomes binding on the corporate debtor, its
employees, members, creditors, guarantors and other
stakeholders involved in the resolution plan. The
legislative intent behind this is to freeze all the claims
so that the resolution applicant starts on a clean slate
and is not flung with any surprise claims. If that is
permitted, the very calculations on the basis of which
the resolution applicant submits its plans would go
haywire and the plan would be unworkable.
94. We have no hesitation to say that the words “other
stakeholders” would squarely cover the Central
Government, any State Government or any local
authorities. The legislature noticing that on account of
obvious omission certain tax authorities were not
abiding by the mandate of the Insolvency and
Bankruptcy Code and continuing with the proceedings,
has brought out the 2019 Amendment so as to cure the
said mischief. We therefore, hold that the 2019
Amendment is declaratory and clarificatory in nature
and therefore retrospective in operation.‟
4. We also take note of the identical position which was
expressed by the Supreme Court in Essar Steel (India) Ltd.
(CoC) v. Satish Kumar Gupta [Essar Steel (India) Ltd.
W.P.(C) 2666/2023 & 4935/2023 Page 3 of 6
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(CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2020)
219 Comp Cas 97] where the following pertinent
observations came to be made (219 Comp Cas p. 182):
(SCC pp. 615-616, paras 105, 106 and 107)
„105. Section 31(1) of the Code makes it clear that
once a resolution plan is approved by the Committee of
Creditors it shall be binding on all stakeholders,
including guarantors. This is for the reason that this
provision ensures that the successful resolution
applicant starts running the business of the corporate
debtor on a fresh slate as it were. In SBI v. V.
Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17
SCC 394 : (2019) 2 SCC (Civ) 458 : (2018) 210 Comp
Cas 364] , this Court relying upon Section 31 of the
Code has held (210 Comp Cas p. 380): (SCC p. 411,
para 25):
“25. Section 31 of the Act was also strongly relied
upon by the respondents. This section only states
that once a resolution plan, as approved by the
Committee of Creditors, takes effect, it shall be
binding on the corporate debtor as well as the
guarantor. This is for the reason that otherwise,
under Section 133 of the Contract Act, 1872, any
change made to the debt owed by the corporate
debtor, without the surety’s consent, would relieve
the guarantor from payment. Section 31(1), in fact,
makes it clear that the guarantor cannot escape
payment as the resolution plan, which has been
approved, may well include provisions as to
payments to be made by such guarantor. This is
perhaps the reason that Annexure VI(e) to Form 6
contained in the Rules and Regulation 36(2) referred
to above, require information as to personal
guarantees that have been given in relation to the
debts of the corporate debtor. Far from supporting
the stand of the respondents, it is clear that in point
of fact, Section 31 is one more factor in favour of a
personal guarantor having to pay for debts due
without any moratorium applying to save him.”
106. Following this judgment in SBI v. V.
Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17
SCC 394 : (2019) 2 SCC (Civ) 458 : (2018) 210 Comp
Cas 364] , it is difficult to accept Shri Rohatgi’s
argument that that part of the resolution plan which
states that the claims of the guarantor on account of
subrogation shall be extinguished, cannot be applied to
W.P.(C) 2666/2023 & 4935/2023 Page 4 of 6
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the guarantees furnished by the erstwhile directors of
the corporate debtor. So far as the present case is
concerned, we hasten to add that we are saying nothing
which may affect the pending litigation on account of
invocation of these guarantees. However, the National
Company Law Appellate Tribunal judgment being
contrary to Section 31(1) of the Code and this Court ‘s
judgment in SBI v. V. Ramakrishnan [SBI v. V.
Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC
(Civ) 458 : (2018) 210 Comp Cas 364] is set aside.
107. For the same reason, the impugned National
Company Law Appellate Tribunal judgment in
Standard Chartered Bank v. Satish Kumar Gupta
[Standard Chartered Bank v. Satish Kumar Gupta,
(2020) 219 Comp Cas 15 : 2019 SCC OnLine NCLAT
388] in holding that claims that may exist apart from
those decided on merits by the resolution professional
and by the adjudicating authority/Appellate Tribunal
can now be decided by an appropriate forum in terms
of Section 60(6) of the Code, also militates against the
rationale of Section 31 of the Code. A successful
resolution applicant cannot suddenly be faced with
“undecided” claims after the resolution plan submitted
by him has been accepted as this would amount to a
hydra head popping up which would throw into
uncertainty amounts payable by a prospective
resolution applicant who would successfully take over
the business of the corporate debtor. All claims must be
submitted to and decided by the resolution professional
so that a prospective resolution applicant knows
exactly what has to be paid in order that it may then
take over and run the business of the corporate debtor.
That the successful resolution applicant does on a fresh
slate, as has been pointed out by us hereinabove. For
these reasons, the National Company Law Appellate
Tribunal judgment must also be set aside on this
count.‟
5.In view of the aforesaid principles, the successful
resolution applicant cannot be foisted with any liabilities
other than those which are specified and factored in the
resolution plan and which may pertain to a period prior to
the resolution plan itself having been approved.”
4. Consequently, and in light of the above, we find ourselves
unable to sustain the impugned reassessment action.
W.P.(C) 2666/2023 & 4935/2023 Page 5 of 6
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5. We, accordingly, allow these two writ petitions and quash the
impugned notices referable to Section 148 of the Act dated 28 July
2022 [WP(C) 2666/2023] and 20 March 2023 [WP(C) 4935/2023].
YASHWANT VARMA, J
HARISH VAIDYANATHAN SHANKAR, J
MARCH 04, 2025/akc
W.P.(C) 2666/2023 & 4935/2023 Page 6 of 6
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