Commencement of Corporate Insolvency Resolution Process amidst Prosecution under Goods and Services Act 2017: A Need for Legislative Clarity

Rukmini Mukherjee
Independent Advocate practicing in New Delhi, India

Volume II – Issue II, 2020

The enactment of the Insolvency and Bankruptcy Code 2016 ( hereinafter referred to as “IBC”) and the Goods and Services Act 2017 ( hereinafter referred to as “GST”) were hailed as watershed moments in the legislative history of economic laws in India. The introduction of the said laws were welcomed as much needed reforms in the sectors of insolvency and the tax regimes of the country and were thought to increase the overall ease of doing business in India.  Leaving aside the debate on whether such laws have indeed reformed the economic laws, not much attention has been paid to the interplay between the IBC and the GST Act particularly when a corporate entity being prosecuted under GST Act is admitted into the corporate insolvency resolution process. This short Article aims to bring forth a legal grey area regarding the potential conflict that can arise between the GST department acting under the GST Act and a Resolution Professional acting under the IBC, with respect to the possession and custody of assets of a firm which is undergoing the Resolution Process , while the entity is also being prosecuted by the GST department. At first, this short Article will be looking at whether the moratorium laid down under Section 14 of the IBC would apply to proceedings instituted by the GST department. Thereafter it would highlight the difficulties that may arise when the GST department decides to prosecute a corporate debtor under the GST Act 2017, and during such prosecution, the corporate entity is admitted into corporate insolvency resolution process and the effectiveness of such procedure.


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