Sanjay Kumar Agarwal vs. State Tax Officer (1) & Anr.
Background
In 2022, the Supreme Court (in the "Rainbow Papers" judgment) had held that a State's tax dues under the Gujarat VAT Act rank as a "secured creditor" claim under Section 53 of the Insolvency and Bankruptcy Code (IBC), effectively giving government tax dues priority over other creditors in a company's insolvency resolution. This batch of five Review Petitions was filed by liquidators, a resolution professional, and banks (State Bank of India, Indian Overseas Bank) who were affected by or not party to that ruling, seeking to have it reviewed, partly relying on later observations by another Supreme Court bench doubting the correctness of the Rainbow Papers reasoning.
Decision Breakdown
The Court explained that its review jurisdiction under Order XLVII is extremely narrow: limited to an error apparent on the face of the record, not a fresh rehearing of the case or an opportunity to reargue points already decided. It held that a co-ordinate Bench of equal strength cannot overrule or cast doubt on another Bench's decision merely through passing observations in a later case; only a larger Bench can authoritatively resolve such a conflict. Examining the original Rainbow Papers judgment, the Court found it had, in fact, considered the IBC's waterfall mechanism under Section 53 and other relevant provisions, so there was no error apparent on the record. All five review petitions were accordingly dismissed, leaving the original ruling on government tax priority intact.
Lesson Learnt
A Supreme Court review petition is not a second chance to reargue a lost case. It succeeds only where there is a glaring, self-evident error on the face of the original judgment, and a later bench's passing disagreement with a precedent does not by itself justify overturning it; only a larger bench can settle such a conflict.