Authority: National Company Law Tribunal, Kolkata Bench

Order Date: 09.06.2026

Case Overview

The National Company Law Tribunal (NCLT) Kolkata Bench heard two applications filed by tax authorities seeking reclassification of their claims from operational creditors to secured creditors in the liquidation of Nicco Corporation Limited.

  • The first application (IA 1540/KB/2024) was filed by Deputy Commissioner of Commercial Taxes & GST, Mayurbhanj, Odisha, claiming outstanding dues of ₹5.68 crore under Central Sales Tax (Orissa) Rules and Orissa Entry Tax Act.
  • The second application (IA 1314/KB/2024) was filed by State Tax Officer-1, Unit-39, Vadodara, seeking similar secured creditor status for GST dues.
  • Both applications were filed significantly late in the liquidation process, with claims initially submitted in 2020 and 2022 respectively, long after the November 2017 deadline.
  • The Corporate Insolvency Resolution Process (CIRP) was initiated against Nicco Corporation on 18.01.2017, with liquidation ordered on 17.10.2017 and Shri Vinod Kothari appointed as Liquidator.
  • The tax authorities relied primarily on the Supreme Court's Rainbow Papers Ltd. judgment, arguing that statutory provisions in state tax laws created automatic charges on the company's assets, qualifying them as secured creditors.

Analysis and Findings

The Tribunal conducted a detailed analysis of the legal position:

  • Distinguished the Rainbow Papers precedent, noting it did not consider the waterfall mechanism under Section 53 of IBC and was subsequently clarified in Paschimanchal Vidyut Vitran Nigam Ltd. (PVVNL) v. Raman Ispat Private Limited.
  • Relied on the Supreme Court's ruling in PVVNL which held that dues payable to government treasuries (taxes, tariffs) constitute 'government dues' under Section 53(1)(f) of IBC and cannot be equated with secured creditor claims.
  • Referenced the recent Insolvency and Bankruptcy Code (Amendment) Bill, 2025 which explicitly states that security interest requires an agreement between parties and excludes charges created merely by operation of law.
  • Noted that the proposed amendment received presidential assent on 06.04.2026 and was published in the official gazette, reinforcing the legislative intent to exclude statutory tax charges from security interests.
  • Emphasized that Section 53 of IBC contains a non-obstante clause that overrides other statutes and establishes a clear hierarchy where government dues rank below secured creditors and even unsecured operational creditors.

Final Outcome

Both applications (IA 1540/KB/2024 and IA 1314/KB/2024) were dismissed. The Tribunal upheld the Liquidator's classification of the tax authorities' claims as government dues to be treated under the waterfall mechanism of Section 53(1)(f) of IBC, rather than as secured creditor claims. The liquidation process of Nicco Corporation Limited continues with the existing stakeholder classification.

Topics: Insolvency Law, Tax Claims, Creditor Hierarchy