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ARTICLE · 15 NOVEMBER 2023

Government's Secured Claim Cannot Be Excluded From A Resolution Plan: Rainbow Papers View Unaddressed In Review

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The Department challenged the Plan which waived its claim citing that government dues could not be waived.

IndiaInsolvency/Bankruptcy/Re-Structuring
Thriyambak Kannan
Thriyambak Kannan
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On 31 October, 2023, in Sanjay Kumar Agarwal v State Tax Officer 1, 2023 SCC OnLine SC 1406, the Supreme Court of India (SC) in the exercise of its powers of review under Article 137 of the Constitution of India, (Rainbow Review) affirmed the view expressed by another bench of the SC in State Tax Officer (I) v. Rainbow Papers Limited 2022 SCC OnLine SC 1162 (Rainbow Judgment) that may have far reaching effects on the treatment of dues to the Government or governmental authorities in insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).

Background to the Rainbow Judgment

The State of Gujarat through the State Tax Officer (I) (Department) was assessing Rainbow Papers Limited (CD) under the Gujarat Value Added Tax Act, 2003 (GVAT). Pursuant to one such assessment, the CD was found to be in arrears to the tune of Rs. 53,71,65,489/- for the assessment year 2011 – 2012. For this shortfall, in October 2018, the Department proceeded to

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