Last Updated: October 2026 | Global Vision Law Firm | ~6 min read
In One Line
The NCLT Kochi Bench imposed a compensatory cost of ₹50,000 on the GST Department for conducting a search, seizing the corporate debtor’s documents, and issuing summons to the Resolution Professional — all during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016. If your company is facing similar coercive action during CIRP, consult the best NCLT lawyers in Delhi at Global Vision Law Firm — call +91 9599801188 for a free first consultation.
The Case: Kosamattam Finance Ltd. v. Mangomeadows Agriculture Pleasure Land Pvt. Ltd.
Forum: National Company Law Tribunal (NCLT), Kochi Bench Case No.: CP(IBC)/06/KOB/2022 and IA(IBC)141/KOB/2023 Bench: Shri P. Mohan Raj (Judicial Member) and Shri Satya Ranjan Prasad (Technical Member) Date: 26 July 2023
Background Facts
M/s Mangomeadows Agriculture Pleasure Land Private Limited — a company running amusement parks and registered under GST — was admitted into the Corporate Insolvency Resolution Process (CIRP) on 25 January 2023 on a petition filed by Kosamattam Finance Ltd. under Section 7 of the IBC. The moment CIRP was admitted, the moratorium under Section 14 of the IBC automatically came into force.
The GST Department was fully aware of the CIRP — it had already filed a claim of ₹36 lakhs with the Interim Resolution Professional (IRP), acknowledging that the IBC process was running and that its dues needed to be channelled through that process.
Despite this, on 10 March 2023 — well into the moratorium period — officers from the GST evasion wing arrived at the corporate debtor’s premises, conducted a search under Section 67 of the CGST Act 2017, and seized the corporate debtor’s account books and business documents. They then issued a summons dated 13 March 2023 to the Resolution Professional himself, directing him to appear before the GST authorities.
The Resolution Professional applied to the NCLT under Section 60(5) of the IBC for return of the seized documents and setting aside of the summons.
The GST Department’s Defence — And Why the Tribunal Rejected It
The GST Department argued that the search was not conducted to recover GST dues — it was merely to determine the tax liability. The argument: since Section 14 bars institution of suits and continuation of pending proceedings for recovery of property, a search under Section 67 of the CGST Act that is only investigative in nature does not fall within its prohibition.
The Tribunal was not persuaded.
The distinction between “assessment” and “enforcement” has been recognised by the Supreme Court — Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs (2022) established that tax authorities may assess or determine dues during the moratorium, but cannot take coercive steps to recover or enforce those dues. The line, however, is not always drawn at formal “recovery” action. A search that seizes the corporate debtor’s business records — the very records the Resolution Professional needs to run the CIRP — goes beyond mere assessment. It physically disrupts the resolution process.
More pointedly, the NCLT referred to Circular No. 134/04/2020-GST, issued by the Central Government under Section 168(1) of the CGST Act, which expressly directs GST officers not to take coercive recovery action against corporate debtors under CIRP. The Department had filed its own claim with the IRP — acknowledging the IBC process — and then proceeded to conduct a raid anyway. The Tribunal found this inconsistent and squarely in violation of the moratorium.
The seizure of the RP’s records and the summons to the RP did not merely touch the corporate debtor — they directly targeted the resolution professional’s ability to conduct the CIRP. Disrupting the RP’s access to the corporate debtor’s books is not a tax assessment — it is an interference with the resolution process itself.
The NCLT’s Complete Order
The NCLT Kochi Bench passed the following directions:
1. Return of seized documents: All records and documents seized from the corporate debtor’s premises during the 10 March 2023 search — as listed in the seizure mahazar (Annexure P4) — must be returned to the Resolution Professional forthwith.
2. Summons set aside: The summons dated 13 March 2023 (Annexure P5) issued to the Resolution Professional is set aside.
3. Compensatory cost of ₹50,000: The GST Department shall pay ₹50,000 as compensatory cost to the Resolution Professional, to be treated as part of the CIRP costs. The Department, after payment, is at liberty to recover this amount from the erring official(s) responsible for the action.
4. Section 74(2) — Liberty to approach IBBI: The applicant sought action against the GST officials under Section 74(2) of the IBC, which deals with contravention of the moratorium. The Tribunal noted that Section 74(2) is a criminal provision, that the Special Court under Section 236 has jurisdiction, and that cognizance under Section 236(2) can only be taken on a complaint filed by the IBBI or the Central Government. The applicant was accordingly granted liberty to approach the IBBI regarding the conduct of the officials.
The Legal Framework: What Section 14 Moratorium Actually Prohibits
Section 14(1) of the IBC provides that on the insolvency commencement date, the NCLT shall declare a moratorium that bars:
(a) Institution of suits or continuation of pending suits or proceedings against the corporate debtor — including execution of any judgment, decree, or order in any court, tribunal, arbitration panel, or other authority;
(b) Transferring, encumbering, alienating, or disposing of any assets of the corporate debtor or any legal right or beneficial interest therein;
(c) Any action to foreclose, recover, or enforce any security interest created by the corporate debtor, including any action under the SARFAESI Act 2002;
(d) Recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
The moratorium is not merely a pause button on formal recovery proceedings — it is a comprehensive freeze on any action that would disrupt the resolution process or reduce the value of the corporate debtor’s estate. Seizing business records and summoning the Resolution Professional fit squarely within what the moratorium prohibits — they impair the RP’s ability to run the CIRP, which is a time-bound statutory process.
The Assessment vs. Enforcement Distinction
The Supreme Court in Sundaresh Bhatt, Liquidator of ABG Shipyard v. CBIC (2022) drew a clear line: tax and customs authorities may assess the quantum of dues during the moratorium — determining what is owed — but cannot initiate recovery proceedings or take coercive steps to collect those dues. The rationale: assessment is merely quantification, it does not reduce the corporate debtor’s estate. Recovery does.
What this means for GST authorities during CIRP:
| Action | Permitted during moratorium? |
|---|---|
| Filing a proof of claim with the IRP/RP | ✅ Yes |
| Assessing and quantifying GST liability | ✅ Yes |
| Issuing a demand notice for recovery of GST dues | ❌ No |
| Conducting search and seizure of corporate debtor’s premises | ❌ No |
| Seizing business records of the corporate debtor | ❌ No |
| Issuing summons to the Resolution Professional | ❌ No |
| Attaching corporate debtor’s bank accounts for GST dues | ❌ No |
| Proceeding against personal guarantors separately | Subject to Section 14(3) exceptions |
The GST Circular That the Department Ignored
Circular No. 134/04/2020-GST, issued by the Central Board of Indirect Taxes and Customs on 23 March 2020, specifically addresses GST and CIRP. It directs GST officers that during the moratorium period, no coercive action — including attachment, recovery, or enforcement — should be taken against the corporate debtor’s assets. The Department in this case had filed its claim with the IRP (acknowledging the CIRP), but then conducted a raid in direct contravention of the circular it was bound by.
Why the Cost Was Imposed — And Why It Matters
Compensatory costs in NCLT proceedings are not merely symbolic. The ₹50,000 imposed here:
- Is to be paid from the GST Department’s own funds to the Resolution Professional, and treated as part of the CIRP costs — meaning it has priority in the IBC waterfall
- Comes with an express direction that the Department may recover it from the erring official(s) — creating personal accountability for the officers who authorised the search
- Establishes a clear signal: the NCLT will not treat violations of the moratorium as administrative infractions. They are violations of a statutory court order, and the tribunal has jurisdiction to impose costs immediately
The cost is modest in absolute terms. Its significance is institutional: a government department raided a company under court-supervised insolvency proceedings, seized its records, and summoned the court-appointed officer managing those proceedings. The Tribunal’s response — return everything, set aside the summons, pay costs, and consider personal liability for the officials — reflects the seriousness with which the NCLT treats interference with the resolution process.
What This Means for Resolution Professionals, Corporate Debtors and Creditors
For Resolution Professionals
The moment CIRP commences, the RP becomes the custodian of the corporate debtor’s assets and records. Any government authority — GST, Income Tax, Customs, Enforcement Directorate — that attempts to access, seize, or investigate those assets without NCLT permission is potentially violating Section 14. The RP has standing to apply under Section 60(5) for immediate relief, and courts have shown they will act swiftly. Engaging experienced NCLT lawyers in Delhi India at the earliest — ideally before the IA is filed — significantly improves the chances of a swift interim stay and full cost recovery.
If a government agency raids your CIRP company:
- File an IA under Section 60(5) of the IBC before the NCLT immediately
- Seek return of all seized documents
- Seek setting aside of any summons issued to you as RP
- Seek compensatory costs
- Preserve all evidence of the raid — the seizure mahazar, summons, and any communications with the agency
- Consider approaching the IBBI for action under Section 74(2) against the officials
For Corporate Debtors and Their Directors
Once CIRP is admitted, the company’s affairs are managed by the RP. Directors lose management control. But the moratorium protection runs in favour of the corporate debtor — it protects the company’s assets and ongoing operations from disruptive enforcement. GST dues that accrued before CIRP are pre-CIRP claims; they must be filed as claims with the RP and resolved through the resolution plan or the Section 53 waterfall in liquidation. They cannot be recovered by coercive action.
For GST and Tax Authorities
The IBC framework does not extinguish GST dues — it restructures how they are paid. The Department’s correct course of action is:
- File a proof of claim with the RP before the claims deadline
- Continue assessment proceedings if needed (quantification is allowed)
- Participate in the Committee of Creditors if eligible
- Accept payment through the resolution plan or the liquidation waterfall
What the Department cannot do — as this judgment makes clear — is conduct raids, seize records, issue summons to the RP, or take any coercive step outside the IBC framework. If it does, it risks cost orders, return of seized materials, and potential personal liability for the officials involved.
The Broader Context: IBC vs. Special Legislation
The tension between IBC’s moratorium and special legislation like the CGST Act, Customs Act, and Income Tax Act has generated significant litigation. The Supreme Court has consistently held that where there is a conflict between IBC and other legislation, IBC prevails — the IBC contains a non obstante clause and is a complete code for insolvency matters.
Key Supreme Court positions:
- Sundaresh Bhatt (2022): IBC prevails over Customs Act; Customs cannot recover dues once moratorium is imposed; assessment permitted, enforcement barred
- Monnet Ispat and Energy Ltd. (SC): Income tax appeal proceedings before ITAT stayed during Section 14 moratorium
- S.V. Kondaskar v. V.M. Deshpande (SC): Tax authorities may assess quantum of dues during moratorium but cannot initiate recovery or levy interest on tax due
- Associate Decor Ltd. v. Deputy Commissioner of Commercial Taxes (Karnataka HC, W.P. No. 17303/2021, 16.12.2021): Notice under Section 65 of State GST Act held to be hit by moratorium and kept in abeyance until it was lifted
The Mangomeadows judgment sits squarely within this stream — applying the now well-settled principle that government departments, including tax authorities, must respect the IBC moratorium and route their claims through the statutory process.
Practical Checklist: Protecting the Moratorium During CIRP
If you are a Resolution Professional or advising a company in CIRP, use this checklist when a government agency takes action against the corporate debtor:
✅ Note the exact date of CIRP admission and moratorium commencement
✅ Verify whether the government action (raid, summons, attachment, demand notice) occurred after the moratorium commencement date
✅ Preserve all documentary evidence — seizure lists, notices, summons, communication records
✅ File an IA under Section 60(5) immediately — do not wait
✅ Seek interim stay on the agency’s action while the IA is pending
✅ Seek return of any seized records or assets
✅ Seek compensatory costs from the erring agency
✅ Check whether the agency had already filed a claim with the RP — if yes, this strengthens the moratorium violation argument
✅ Consider whether Section 74(2) / IBBI complaint is appropriate for egregious cases
✅ Verify the agency’s specific action against the assessment vs. enforcement distinction — assessment may be permitted even under Sundaresh Bhatt
Frequently Asked Questions
Can the GST Department conduct a search of a corporate debtor’s premises during CIRP?
No. The NCLT Kochi in Kosamattam Finance / Mangomeadows (2023) held that a Section 67 CGST Act search conducted during the moratorium period violates Section 14 of the IBC. The seized records were ordered returned and compensatory costs of ₹50,000 were imposed on the Department.
Can the GST Department assess GST dues during the moratorium?
Yes — assessment (determining the quantum of liability) is permitted. The Supreme Court in Sundaresh Bhatt, Liquidator of ABG Shipyard v. CBIC (2022) drew a clear distinction: assessment is allowed, recovery enforcement is not. The Department must file its assessed claim with the Resolution Professional.
What should a Resolution Professional do if government authorities raid the corporate debtor during CIRP?
The RP should immediately file an Interlocutory Application under Section 60(5) of the IBC before the NCLT, seeking return of seized documents, setting aside of any summons, and compensatory costs. The NCLT has shown it will act promptly and firmly.
Does the IBC override the CGST Act?
To the extent of conflict, yes. The IBC contains a non obstante clause and has been consistently held by the Supreme Court to prevail over special legislation — including the Customs Act, Income Tax Act, and CGST Act — for matters touching the moratorium, recovery of dues, and the resolution process.
Can officials of the GST Department be personally held liable for violating the moratorium?
Section 74(2) of the IBC provides for criminal liability for moratorium violations. However, cognizance can only be taken by a Special Court on a complaint filed by the IBBI or the Central Government under Section 236. The NCLT’s direction to recover the ₹50,000 cost from the “erring official(s)” is a civil accountability measure — it creates a paper trail that can support an IBBI complaint.
What is the correct way for the GST Department to recover dues from a company under CIRP?
The Department must file a proof of claim with the Resolution Professional before the claims deadline. Its dues are classified as operational creditor claims or government dues (subject to the IBC’s priority waterfall). In liquidation, dues are paid under Section 53. Coercive recovery outside this process is barred by the moratorium.
Conclusion
The NCLT Kochi’s judgment in Kosamattam Finance v. Mangomeadows is a significant reminder — not just to the GST Department, but to all government agencies — that the IBC moratorium is not a procedural formality. It is a statutory court order that binds every authority, public and private alike.
When a government department files its claim with the Resolution Professional (acknowledging the IBC process) and then sends its officers to raid the same company and seize its records, the inconsistency is stark. The NCLT’s response — return the records, set aside the summons, pay costs, and face potential personal liability — reflects the seriousness with which Indian insolvency tribunals are now treating moratorium violations.
For businesses in CIRP, creditors, and Resolution Professionals navigating the intersection of IBC and GST law, this judgment reinforces a clear principle: all roads during the moratorium lead back to the NCLT and the RP. There are no shortcuts through parallel enforcement proceedings.
If you are a Resolution Professional, a company in CIRP, or a creditor facing government agency action during the moratorium period, Global Vision Law Firm — widely regarded as one of the best NCLT lawyers in Delhi — can advise and represent you before the NCLT and NCLAT. Our team of experienced insolvency lawyers in Delhi has deep expertise in IBC proceedings, CIRP disputes, Section 60(5) applications, and the intersection of insolvency law with GST and tax enforcement.
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