The decision of the Hon'ble Supreme Court in the case of
STATE TAX OFFICER (1) v RAINBOW PAPERS LIMITED
rendered under the Insolvency and Bankruptcy Code (IBC) has ruled
on a significant aspect of priority of Government dues. The Court
has held that statutory dues under Gujarat VAT Act (GVAT Act) are
secured creditors and would require consideration as such in the
resolution plan. It was this held that Sec. 48 of the GVAT Act
which states that-
"any amount payable by a dealer or any other person on
account of tax, interest or penalty for which he is liable to pay
to the Government shall be a first charge on the property of such
dealer, or as the case maybe, such person"
is not contrary to or inconsistent with Sec. 53 or any other
provisions of the IBC. The Court further held that a resolution
plan which does not confirm to the provisions of Sec. 31(2) of the
IBC inter-alia prescribing payment of dues of operational
creditors, dissenting financial creditors,
