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M/s. Shekhar Resorts Limited (Unit Hotel Orient Taj) vs Union of India & Ors.

Civil Appeal · 2023 INSC 15Decided 5 Jan 2023
Civil Appeal No. 8957 of 2022
M.R. Shah · B.V. Nagarathna · C.T. Ravikumar

Background

A hotel company facing service-tax demands was pushed into insolvency proceedings in September 2018, which placed it under a legal "moratorium" (a statutory freeze on payments and proceedings) under the Insolvency and Bankruptcy Code. While the moratorium was in force, the Government launched the Sabka Vishwas scheme, a one-time settlement window for old indirect-tax disputes; the company's resolution professional applied in time, and the Designated Committee fixed the settlement amount at Rs. 1,24,28,500, payable by 30 June 2020 (the COVID-extended deadline). The insolvency resolution plan was approved by the NCLT only on 24 July 2020, so the moratorium lifted after the payment deadline had passed. When the company then offered to pay, the tax department refused as the scheme had closed, and the Allahabad High Court dismissed the company's writ petition.

Decision Breakdown

The Supreme Court allowed the appeal. It found it undisputed that the company was otherwise fully eligible: it had applied in time and the settlement figure had been fixed within the scheme's validity; the only reason it did not pay by 30 June 2020 was that the IBC moratorium legally barred it from making any payment, and paying would itself have breached the IBC. Relying on the principle that "no law would compel a person to do the impossible" and that no party should be left remediless, the Court held the company could not be punished for failing to do something that was legally impossible for it. It clarified that although a High Court cannot extend a statutory scheme under Article 226, this was not an extension but a remedial measure for a genuine legal impediment; and the argument that the Designated Committees no longer existed was answered by the CBIC's own instructions allowing manual processing after court orders. The Court directed that the Rs. 1,24,28,500 already deposited be treated as settlement under the scheme and that a discharge certificate be issued.

Lesson Learnt

When a statutory deadline is missed solely because the law itself prevented compliance (here, an insolvency moratorium), courts can grant relief: a person cannot be penalised for failing to do the impossible. Timely action on everything within one's control, as this company did, is what makes such relief possible.

Official source (sci.gov.in)View Judgment (PDF)

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