NCLAT Slams IT Dept for ‘Frivolous Litigation’, Dismisses Appeal Against Solar Voltaic Power LLP Resolution Plan

March 13, 2026 : The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by the Income Tax Department challenging the approval of the resolution plan of Solar Voltaic Power LLP, strongly criticising the Department for pursuing what it termed as “frivolous litigation” and wasting valuable public resources.

The appellate tribunal, comprising Justice N. Seshasayee (Judicial Member), Arun Baroka (Technical Member), and Indevar Pandey (Technical Member), upheld the order of the National Company Law Tribunal (NCLT), Jaipur Bench dated 11 December 2024, which had approved the resolution plan.

The appeal was filed by the Income Tax Officer, Ward 1(3), Jaipur, contending that tax dues amounting to ₹3.11 crore were not properly considered, and only ₹1.5 lakh had been allocated under the resolution plan. The Department argued that it had submitted its claim along with supporting documents multiple times, but the Resolution Professional failed to take them into account.

However, the Tribunal found that although the Corporate Insolvency Resolution Process (CIRP) commenced on 19 September 2023 and claims were invited shortly thereafter, the Income Tax Department failed to furnish enforceable assessment orders in time. The crucial assessment order was submitted only on 30 May 2024 after the Committee of Creditors (CoC) had already approved the resolution plan and the application for approval had been filed before the adjudicating authority.

Rejecting the Department’s argument that a key email from the Resolution Professional had gone to the spam folder, the Tribunal noted that all prior communications were conducted through the same email address and had been duly responded to. It held that the delay was attributable to the Department’s own inaction and not to any lapse on the part of the Resolution Professional.

On the issue of financial prejudice, the Tribunal examined the distribution mechanism under the resolution plan. As reflected in the distribution table on page 15 of the judgment, the total plan value was ₹20 lakh, of which ₹13.5 lakh was allocated towards CIRP costs, leaving only ₹6.5 lakh for distribution among creditors. Government dues, categorized as operational debt, were allocated ₹3 lakh against admitted claims exceeding ₹1092.61 lakh.

The Tribunal emphasized that under the waterfall mechanism in Section 53 of the Insolvency and Bankruptcy Code, government dues rank lower in priority. It observed that even if the Income Tax Department’s full claim had been admitted, it would have received only about ₹75,000 proportionately. In contrast, the resolution plan allocated ₹1.5 lakh to the Department double the amount it would otherwise have received.

Holding that no injustice had been caused, the Tribunal concluded that there was no infirmity in the approved resolution plan. It made strong observations that the case exemplified wastage of public resources, noting that government authorities are well aware of their position in the statutory hierarchy and should avoid litigation that yields no meaningful outcome.

The NCLAT further directed that the matter be brought to the attention of the Chairperson of the Central Board of Direct Taxes (CBDT) for appropriate policy intervention to curb such unnecessary litigation. The appeal was accordingly dismissed, and all pending applications were closed without any order as to costs.

Case Title: Income Tax Officer vs M/s Solar Voltaic Power LLP & Anr.
Case Number: Company Appeal (AT) (Insolvency) No. 286 of 2025