When the Delhi High Court reaffirmed that government bodies cannot revive legacy tax dues once an Insolvency and Bankruptcy Code (IBC) resolution plan receives judicial sanction, it echoed well-settled Supreme Court precedent in Ghanashyam Mishra v. Edelweiss. Section 31(1) binds the Central Government, State Governments and local authorities to an approved plan, and Essar Steel disposed of the hydra-headed claim years ago.
This article examines whether this doctrine adequately and reliably covers a foreign acquirer’s actual exposure.
The largest risk is not a claim, but the plan itself
On 2 May 2025, in Kalyani Transco v. Bhushan Power & Steel, the Supreme Court set aside JSW Steel’s INR 19,700 crore resolution plan for BPSL, ordered liquidation under Section 33(1) using its Article 142 powers, and directed creditors to return sums already disbursed. The acquisition had closed four years earlier and the company was operating.
On 31 July 2025 the Court recalled that judgment, holding that it had not correctly applied the legal position established in a line of authority including Kalpraj Dharamshi and Ghanashyam Mishra itself, and on rehearing it upheld the plan and held that the erstwhile promoters lacked Locus Standi.
Effectively, for three months a successful resolution applicant operating a business with 25,000 employees was subject to a Supreme Court liquidation order, with a direction to unwind consideration already paid.
Jet Airways also belongs to this category, and it did not recover. The Jalan-Kalrock plan was approved, contested for years, and ultimately displaced by a liquidation order.
These are not instances of administrative friction but the plan itself being unwound after closing. Therefore, no amount of clean slate protection addresses them. For a cross-border acquirer, this is the first exposure to price that should make the diligence conversation.
The second risk is the border
India has not enacted the UNCITRAL Model Law on Cross-Border Insolvency. Draft Part Z remains a draft.
An NCLT plan approval binds Indian stakeholders. It does not automatically bar a foreign creditor from enforcing against the corporate debtor’s overseas assets or offshore subsidiaries in London, Singapore or New York, unless recognition is separately obtained under the relevant foreign framework, such as Chapter 15 in the United States.
So a clean slate obtained in India stops at the border, and the assets most likely to sit outside it are the ones a foreign acquirer bought the target for.
The third risk is scope
Within India, the doctrine covers what could have been brought in the process. It does not extend to everything a buyer would like it to.
Liabilities incurred during the CIRP period, or indirect taxes collected from customers and not remitted, do not attract clean slate immunity. Section 32A insulates the new owner from the criminal liability of prior management, but civil and regulatory penalties that are not debts sit outside that protection and remain enforceable.
The practical diligence question therefore has less to do with the strength of the doctrine and more to do with the completeness of the claims process that preceded it, including:
- Who was notified
- What was submitted
- What was rejected; and
- On what basis; and
- Which categories were never in scope at all.
Reading that record tells an acquirer more about post-closing exposure than any statement of the law does.
And then the friction
Only after all of that does the familiar problem arise: tax authorities issuing demands for periods covered by an approved plan.
This part genuinely is administrative rather than legal. Assessment portals run on financial years and generate notices under Section 148 of the Income Tax Act or Section 73 of the CGST Act with no integration to NCLT records. Tata Steel had to go to court to quash post-resolution GST assessments on Bhushan Steel for pre-resolution periods, and the pattern has repeated since.
This predictable irritant is, in fact, the smallest of the four exposures. It is also the only one that is purely domestic work, which is worth noting for any international practice reading this as an opportunity.
What this means for how the risk is priced
The reliance a foreign buyer places on the clean slate is usually proportionate to how clearly the doctrine is stated. The doctrine is now stated very clearly. That does not make it fully reliable.
The doctrine is strong within its scope, and its scope is pre-CIRP claims against the Indian entity in Indian proceedings. Outside that scope sit three things that are each larger:
- An appellate risk to the plan that survives implementation;
- A border beyond which the protection does not travel; and
- A category boundary between debts and everything else.
An acquirer that understands that will structure differently, and will spend its diligence budget on the claims register, the appeal position and the offshore group rather than on confirming a proposition the Supreme Court of India settled in 2021.
Lawfinity Solutions advises international law firms on cross-border legal market positioning. If the India corridor is a live question for your firm, we would be interested in a conversation. Lawfinity works with one firm per jurisdiction. Engagements begin with a single conversation about your firm’s current position and where the corridor question is live for you. Write to Prachi Shrivastava
