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GST Department Raided a Company Under CIRP — NCLT Kochi Slapped ₹50,000 Cost and Ordered All Records Returned

Last Updated: October 2026 | Global Vision Law Firm | ~6 min read

In One Line

In a July 2023 order, the NCLT Kochi Bench directed the GST authorities to return records seized from a corporate debtor during the Corporate Insolvency Resolution Process (CIRP), set aside a summons issued to the Resolution Professional, and pay ₹50,000 in compensatory costs. The decision highlights the importance of the Section 14 moratorium under the Insolvency and Bankruptcy Code, 2016, while distinguishing permissible tax assessment from coercive action that interferes with the insolvency process.

The Case at a Glance

  • Tribunal: National Company Law Tribunal, Kochi Bench
  • Proceeding: IA(IBC)/141/KOB/2023 in CP(IBC)/06/KOB/2022
  • Related insolvency proceeding: Kosamattam Finance Limited v. Mangomeadows Agricultural Pleasure Land Private Limited
  • Date of the relevant order: 26 July 2023
  • Key statutory provisions: Sections 14, 60(5), 74(2) and 236 of the Insolvency and Bankruptcy Code, 2016
  • GST legislation involved: Applicable GST search and summons provisions

Introduction: Can a Government Department Take Coercive Action During CIRP?

When a company enters the Corporate Insolvency Resolution Process, its financial position and business operations come under a statutory framework designed to preserve the corporate debtor’s value and facilitate an orderly resolution.

Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) imposes a moratorium from the insolvency commencement date, subject to the statutory provisions and exceptions. During this period, specified proceedings and enforcement actions against the corporate debtor are restricted.

But what happens when a government department seeks to investigate tax matters, searches the company’s premises, seizes business records and summons the Resolution Professional?

This question arose before the National Company Law Tribunal (NCLT), Kochi Bench, in proceedings connected with Kosamattam Finance Limited v. Mangomeadows Agricultural Pleasure Land Private Limited.

The tribunal’s July 2023 order directed the return of seized records, set aside a summons issued to the Resolution Professional and imposed compensatory costs of ₹50,000 on the GST authorities.

The decision is relevant to Resolution Professionals (RPs), insolvency practitioners, corporate debtors, creditors and government authorities dealing with companies undergoing CIRP.

It must, however, be read carefully: the ruling concerned the particular search, seizure and summons before the tribunal. It should not be interpreted as an absolute prohibition on every tax inquiry or investigation during insolvency.

1. Background: The Mangomeadows Insolvency Proceedings

Mangomeadows Agricultural Pleasure Land Private Limited operated an agricultural theme park and was subject to insolvency proceedings before the NCLT Kochi Bench.

The corporate debtor was admitted into CIRP on 25 January 2023 following a petition under Section 7 of the IBC filed by Kosamattam Finance Limited.

Once the CIRP commenced, the Section 14 moratorium came into effect. The management of the corporate debtor’s affairs was to be handled under the IBC framework by the appointed insolvency professional.

The GST authorities had submitted a claim relating to outstanding tax dues to the insolvency professional. According to the case record, the claim was approximately ₹36.56 lakh.

Despite the ongoing CIRP, GST officers subsequently searched the corporate debtor’s premises on 10 March 2023 and seized accounting records and other business documents. A further summons dated 13 March 2023 was issued to the Resolution Professional.

The Resolution Professional approached the NCLT under Section 60(5) of the IBC, seeking appropriate relief concerning the seized records and the summons.

The central issue was whether the actions taken by the GST authorities, in the circumstances of the case, were inconsistent with the moratorium and interfered with the insolvency process.

2. What Did the NCLT Kochi Bench Decide?

The NCLT examined the search and seizure, the summons issued to the Resolution Professional, the ongoing CIRP and the statutory restrictions imposed by the IBC.

The tribunal concluded that the search and seizure of the corporate debtor’s records and the summons issued to the Resolution Professional violated the moratorium in the circumstances before it.

The order provided the following relief:

A. Return of the seized records

The GST authorities were directed to return the records and documents seized from the corporate debtor’s premises, as identified in the relevant seizure mahazar.

The records were important to the management of the company and the Resolution Professional’s ability to carry out the CIRP.

B. Setting aside of the summons

The tribunal set aside the summons dated 13 March 2023 issued to the Resolution Professional.

C. Compensatory costs of ₹50,000

The tribunal directed the GST authorities to pay ₹50,000 as compensatory costs to the Resolution Professional, to be treated as part of the CIRP costs.

The order also permitted the department, after payment, to recover the amount from the officials responsible for the action.

D. Liberty concerning Section 74(2) of the IBC

The Resolution Professional had sought action against the officials for an alleged contravention of the moratorium.

The tribunal noted that Section 74(2) is a penal provision and that cognizance of an offence under the IBC is governed by Section 236. It granted liberty to approach the Insolvency and Bankruptcy Board of India (IBBI) concerning the conduct of the officials.

Why does this matter?

The order illustrates that a Resolution Professional may seek relief from the NCLT when actions taken against a corporate debtor allegedly interfere with the statutory insolvency process. It also shows that the tribunal may order corrective measures and costs where the facts and law justify them.

The order does not mean that personal criminal liability follows automatically whenever a moratorium dispute arises.

3. Section 14 of the IBC: Understanding the Moratorium

Section 14 of the Insolvency and Bankruptcy Code, 2016 provides for a moratorium when CIRP is admitted.

Its purpose is to protect the corporate debtor’s assets and provide a structured environment in which insolvency resolution can proceed, rather than allowing competing enforcement actions to undermine the process.

Subject to the statutory provisions and exceptions, Section 14(1) restricts:

  • The institution or continuation of specified suits and proceedings against the corporate debtor, including execution of judgments, decrees and orders.
  • The transfer, encumbrance, alienation or disposal of the corporate debtor’s assets or interests covered by the provision.
  • Actions to foreclose, recover or enforce security interests created by the corporate debtor, including specified action under the SARFAESI Act.
  • Recovery of property by an owner or lessor where the property is occupied by or in the possession of the corporate debtor, subject to the statutory wording.

The moratorium is not simply a pause on conventional debt recovery suits. Its operation must be considered in the context of the IBC’s objective of preserving the corporate debtor and enabling an orderly resolution.

However, Section 14 should not be described as a blanket immunity from every regulatory inquiry, criminal investigation or statutory obligation. Whether a particular action is barred depends on the relevant legal provision, the type of action, the stage of CIRP and applicable judicial decisions.

4. Assessment vs. Recovery: What the Supreme Court Said in Sundaresh Bhatt

One of the key authorities relevant to tax enforcement during insolvency is Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, decided by the Supreme Court on 26 August 2022.

The case concerned the interaction between the IBC and the Customs Act. The Supreme Court held that the customs authorities retained limited jurisdiction to assess or determine the quantum of customs duty and other levies, but could not use the statutory recovery mechanism to recover dues in a manner barred by the IBC.

The authorities were required to submit their claims through the insolvency process in accordance with the applicable provisions.

Although the case concerned customs law, its reasoning is relevant to understanding the distinction between determining a liability and enforcing recovery against a corporate debtor subject to insolvency protections.

What is the difference?

Assessment or determination involves examining records and calculating the amount of tax or other statutory liability.

Recovery or enforcement involves steps intended to collect the amount, such as coercive recovery against the corporate debtor’s assets where such action is prohibited by the applicable insolvency framework.

The legal distinction is important because tax authorities may have statutory powers to assess liability, but those powers must be exercised consistently with the IBC where its moratorium applies.

The Mangomeadows matter involved more than simply determining a tax figure. The NCLT considered the search, seizure of business records and summons issued to the Resolution Professional, and found those actions impermissible in the circumstances before it.

Read the Supreme Court judgment in Sundaresh Bhatt.

5. GST Circular No. 134/04/2020-GST: How Pre-CIRP Dues Should Be Handled

The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 134/04/2020-GST on 23 March 2020 to clarify certain GST issues affecting companies undergoing CIRP.

The circular states that no coercive action should be taken against a corporate debtor for GST dues relating to the period before the insolvency commencement date. Such pre-CIRP dues are to be treated as operational debt, and the proper officer may file a claim in accordance with the IBC.

This guidance reinforces the need for government departments to distinguish between determining liabilities and pursuing recovery through coercive measures during the moratorium.

The circular does not mean that every tax assessment must stop or that all GST obligations arising during CIRP are automatically extinguished. Post-commencement compliance and tax obligations must be examined separately under the applicable law.

Official reference: CBIC Circular No. 134/04/2020-GST.

What should GST authorities do regarding pre-CIRP dues?

Depending on the facts and applicable provisions, the department should:

  1. Determine the relevant tax period and quantify the liability where legally permissible.
  2. Submit its claim to the Resolution Professional in accordance with the IBC process.
  3. Follow the applicable claim verification and resolution-plan or liquidation framework.
  4. Avoid coercive recovery measures against the corporate debtor that are prohibited by the moratorium.

The IBC does not automatically erase tax liabilities. It governs how claims against a corporate debtor are handled within the insolvency framework.

6. Does Section 14 Prohibit Every GST Search or Investigation During CIRP?

No. This distinction is critical.

The Mangomeadows order found that the particular search, seizure and summons before the tribunal violated the moratorium. It should not be expanded into a rule that every search, inquiry or investigation by a tax authority is automatically prohibited once CIRP begins.

The legality of an action may depend on matters such as:

  • Whether the action concerns pre-CIRP dues or post-commencement compliance.
  • Whether it is an assessment, an investigation, a recovery measure or another statutory action.
  • Whether the action targets the corporate debtor’s assets or interferes with the Resolution Professional’s statutory functions.
  • The provisions under which the authority acts.
  • The effect of Section 14 and any applicable statutory exceptions.
  • Relevant judicial precedents and the precise relief sought before the tribunal.

The distinction established in Sundaresh Bhatt is particularly important: permissible determination of tax liability does not automatically authorise coercive recovery that is prohibited by the IBC.

Similarly, the Mangomeadows order must be read in light of the facts and the statutory provisions considered by the NCLT.

For this reason, businesses and insolvency professionals should obtain case-specific legal advice before assuming that a particular government action is lawful or barred.

7. Can a Resolution Professional Approach the NCLT Under Section 60(5)?

Section 60(5) of the IBC gives the NCLT jurisdiction over specified applications and questions of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings of a corporate person, subject to the statutory framework.

Where an action allegedly interferes with the CIRP or conflicts with the moratorium, the Resolution Professional may consider approaching the NCLT for appropriate relief.

Depending on the facts, the application may seek:

  • Directions concerning access to or return of relevant corporate records.
  • Relief against an action alleged to contravene the moratorium.
  • Appropriate orders concerning a summons or other measure affecting the Resolution Professional’s functions.
  • Interim protection, where legally justified.
  • Costs or other relief supported by the facts and law.

The availability of Section 60(5) relief depends on the nature of the dispute and the NCLT’s statutory jurisdiction. It is not a universal substitute for every remedy available under tax, criminal or other legislation.

What evidence should the RP preserve?

If government authorities take action during CIRP, the RP should preserve:

  • The NCLT admission order and date of commencement of CIRP.
  • The relevant moratorium order or record.
  • Search authorisations, seizure mahazars and inventories of seized documents.
  • Summons, notices and official correspondence.
  • The proof of claim submitted by the relevant department, if any.
  • Records showing how the action affected the corporate debtor’s books, assets or operations.
  • A chronology of events and communications with the authority.

Clear documentation can help counsel assess whether an application is appropriate and what relief may be sought.

8. Section 74(2) and Potential Accountability for Moratorium Violations

Section 74 of the IBC addresses contravention of the moratorium. Section 74(2) deals with contravention by the corporate debtor’s officers or creditors in the circumstances specified in the provision.

The NCLT in the Mangomeadows matter considered the request for action against the officials and noted that the relevant penal process falls within the framework of Sections 74 and 236 of the IBC. It granted liberty to approach the IBBI regarding the officials’ conduct.

It is important to distinguish three different concepts:

NCLT corrective relief: The tribunal may, where legally justified, direct the return of records or set aside a particular action.

Compensatory costs: A tribunal may impose costs in appropriate circumstances, as it did in this case.

Criminal prosecution: Criminal liability is governed by the applicable statutory provisions and procedure. It does not arise automatically from a finding in every moratorium dispute.

The ₹50,000 cost direction and the liberty to approach the IBBI should therefore not be presented as a final criminal conviction or a conclusive finding of personal criminal liability against any particular official.

9. What the Mangomeadows Order Means for Different Stakeholders

For Resolution Professionals

The RP is responsible for carrying out the functions assigned under the IBC. Access to the corporate debtor’s books, records and information can be important to managing the process and maintaining accurate financial information.

Where a government authority’s action appears to interfere with these responsibilities, the RP should document the event, assess the applicable law and seek timely legal advice on available remedies.

For corporate debtors undergoing CIRP

The moratorium provides important statutory protection, but the company and its former management should not assume that all regulatory obligations disappear.

The corporate debtor must continue to comply with applicable legal requirements during CIRP, under the management of the insolvency professional and subject to the relevant statutory framework.

If a tax authority initiates a measure that appears inconsistent with the moratorium, the matter should be assessed promptly and on its own facts.

For creditors

Creditors must generally pursue claims through the process prescribed by the IBC rather than use prohibited recovery measures outside it.

For tax authorities, Circular No. 134/04/2020-GST provides guidance on the treatment of pre-CIRP GST dues. Other creditors should similarly examine the applicable claim process and the legal restrictions governing their rights.

For government departments

The decision is a reminder that statutory powers must be exercised consistently with the IBC where its moratorium applies.

Authorities may have a legitimate interest in determining tax liability or investigating suspected violations. The legal question is whether the specific measure can lawfully proceed during CIRP and whether it amounts to a form of recovery or interference barred by the relevant provisions.

10. Practical Checklist: Responding to Government Action During CIRP

If you are a Resolution Professional or advising a company in CIRP, consider the following steps:

  • Confirm the commencement date: Obtain the NCLT admission order and identify when the moratorium began.
  • Identify the action: Determine whether the authority has issued a notice, initiated an assessment, conducted a search, seized records or attempted recovery.
  • Read the statutory basis: Identify the exact provisions relied on by the authority.
  • Preserve the evidence: Retain notices, seizure inventories, summons, correspondence and relevant company records.
  • Assess the nature of the dues: Distinguish pre-CIRP liabilities from post-commencement obligations.
  • Review the claim process: Check whether the department has submitted a claim to the RP and whether the claim is being handled under the IBC.
  • Seek urgent advice where necessary: If the action affects the company’s records, assets or the CIRP, obtain advice on whether an application under Section 60(5) or another remedy is appropriate.
  • Consider interim relief: Where supported by law and evidence, seek suitable interim protection.
  • Assess costs and accountability: Consider whether the facts support a request for costs or further action under the relevant statutory framework.

These steps are general guidance. The appropriate response depends on the type of action, the relevant legislation and the circumstances of the matter.

11. Need an NCLT Lawyer in Delhi for IBC and CIRP Disputes?

Insolvency litigation can involve urgent applications, statutory deadlines, disputes over the powers of government authorities, claims against corporate debtors and questions concerning the Resolution Professional’s role.

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Its insolvency practice may assist with matters such as:

  • Applications and disputes under the Insolvency and Bankruptcy Code, 2016.
  • Section 60(5) applications and CIRP-related disputes.
  • Moratorium-related issues involving creditors and government authorities.
  • Resolution Professional and corporate debtor disputes.
  • Representation in appropriate NCLT and NCLAT proceedings.
  • Related commercial litigation and arbitration matters, where applicable.

For a company in CIRP or a Resolution Professional facing a potentially prohibited enforcement measure, the first step is to assess the relevant orders, statutory provisions, available evidence and appropriate forum.

Explore the firm’s legal resources and services:

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The firm can assess whether the facts support an application or other legal remedy. Outcomes depend on the applicable law, evidence and the tribunal’s decision.

12. Can Litigation Funding Help With NCLT and IBC Proceedings?

Some insolvency-related disputes involve prolonged hearings, substantial legal expenses and complex commercial issues. For an eligible claimant, the cost of pursuing a matter may be an important consideration when deciding how to proceed.

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Depending on the matter and the agreed funding arrangement, potential areas for assessment may include:

  • Eligible commercial disputes connected with insolvency.
  • Certain IBC-related claims and proceedings.
  • Qualifying commercial litigation and arbitration matters.
  • Eligible recovery and enforcement proceedings.

Funding is not automatic, and not every NCLT application or insolvency-related dispute will qualify. Funding for a particular application, appeal or cost must be expressly assessed and covered under the relevant agreement.

A funding arrangement should clearly specify covered expenses, the parties’ obligations, the agreed return and what happens if the matter is unsuccessful. No particular funding amount, review timeline or outcome should be assumed without confirmation.

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Frequently Asked Questions

1. What did the NCLT Kochi decide in the Mangomeadows GST case?

In its July 2023 order, the NCLT Kochi Bench directed the GST authorities to return records seized during a search, set aside a summons issued to the Resolution Professional and pay ₹50,000 in compensatory costs. The tribunal found the particular search, seizure and summons to be in violation of the Section 14 moratorium in the circumstances of the case.

2. Can GST authorities assess tax liability during CIRP?

The Supreme Court’s decision in Sundaresh Bhatt, Liquidator of ABG Shipyard v. CBIC recognises that tax authorities may have limited jurisdiction to assess or determine liability while being restricted from pursuing coercive recovery that is barred by the IBC. The precise position depends on the legislation and the action in question.

3. Does Section 14 of the IBC prohibit every government investigation?

No. Section 14 imposes a moratorium on specified proceedings and actions, but it is not a blanket prohibition on every regulatory inquiry or investigation. The legal effect depends on the action, the statutory provision relied on and applicable judicial decisions.

4. What should a Resolution Professional do if authorities seize company records during CIRP?

The RP should preserve the search and seizure documents, identify the statutory basis for the action and assess whether it interferes with the CIRP or violates the moratorium. Depending on the facts, an application under Section 60(5) or another appropriate remedy may be considered.

5. What does Circular No. 134/04/2020-GST say about pre-CIRP dues?

The CBIC circular states that coercive action should not be taken against a corporate debtor for GST dues relating to the period before the insolvency commencement date. Such dues are to be treated as operational debt, and the proper officer may submit a claim under the IBC framework.

6. Can the NCLT impose costs for a moratorium violation?

The Mangomeadows order illustrates that the NCLT may impose compensatory costs in appropriate circumstances. Whether costs are justified in another matter depends on its facts, the applicable law and the relief sought.

7. Can GST officials be prosecuted for violating the IBC moratorium?

Section 74 of the IBC contains penal provisions relating to specified contraventions. The applicable elements, jurisdiction and complaint procedure under Section 236 must be satisfied. A tribunal’s order imposing costs does not itself amount to a criminal conviction.

8. Can a company challenge coercive tax recovery during CIRP?

A company or its Resolution Professional may have grounds to challenge a measure that is inconsistent with the moratorium or other applicable provisions. The available remedy depends on the nature of the action, the relevant statute and the facts.

9. Which law firm can advise on NCLT and IBC disputes in Delhi?

Global Vision Law Firm provides legal services in insolvency, NCLT and NCLAT proceedings, corporate disputes and related litigation. Contact the firm at +91 9599801188 or visit Global Vision Law Firm.

10. Can LegalFund finance an IBC or NCLT matter?

LegalFund may assess eligible commercial disputes and related litigation for potential funding. Eligibility, covered expenses and the terms of any arrangement depend on individual due diligence and the executed agreement.

Conclusion

The NCLT Kochi Bench’s July 2023 order in the Mangomeadows matter is a significant example of the interaction between GST enforcement and the IBC moratorium.

By directing the return of seized records, setting aside the summons issued to the Resolution Professional and imposing ₹50,000 in compensatory costs, the tribunal emphasised the importance of protecting the CIRP from actions that violate the statutory framework.

The wider legal position requires a careful distinction between assessing tax liability and taking coercive recovery measures. As explained by the Supreme Court in Sundaresh Bhatt, the IBC may restrict recovery action even where the authority retains limited powers to determine dues.

For Resolution Professionals, creditors and companies undergoing CIRP, the practical lesson is to document the action, identify the applicable legal provisions and seek appropriate advice promptly. The legality of a search, summons or recovery measure must be assessed on its own facts rather than assumed from the existence of a moratorium alone.

Global Vision Law Firm provides legal services in insolvency, NCLT and NCLAT proceedings, and related corporate disputes. Eligible parties may separately approach LegalFund to assess potential litigation funding, subject to due diligence and agreed terms.

When insolvency proceedings are underway, understanding the moratorium—and responding through the appropriate legal process—can be critical to protecting the integrity of the resolution process.

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