Court Rules Statutory Dues Must Be Settled Through IBC Mechanism, Not By Auction Buyers
In a landmark decision, the Bombay High Court has ruled in favor of My Ideal Transport and another, auction purchasers who faced demands for Motor Vehicle Tax (MVT) from Regional Transport Offices in Maharashtra. The court, comprising Justices Manish Pitale and Shreeram V. Shirsat, delivered the judgment on April 22, 2026, emphasizing that statutory dues or penalties associated with assets sold in liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be enforced against successful auction purchasers.
The case arose when the petitioners acquired vehicles from a corporate debtor undergoing insolvency proceedings under the IBC. Despite purchasing the vehicles through public auction, the petitioners encountered resistance from regional transport authorities, who demanded settlement of MVT dues before transferring ownership.
Advocates representing the petitioners argued that such demands were unsustainable, as the vehicles were acquired through a lawful auction process under the IBC. They cited precedents from the Gujarat High Court and previous Bombay High Court decisions to support their case.
The court ruled that the demands raised by the Regional Transport Offices are unsustainable against the auction purchasers. Authorities must lodge their claims with the liquidator as operational creditors, to be satisfied through the waterfall mechanism outlined in Section 53 of the IBC. This mechanism prioritizes claims in liquidation proceedings, ensuring operational creditors receive dues in a structured manner.
The court's decision aligns with previous judgments, including the Bombay High Court's ruling in Raman Roadways Private Limited v. State of Maharashtra and others, which held that statutory dues cannot be claimed from auction purchasers but must be pursued through liquidation proceedings.
The ruling provides clarity and relief to auction purchasers, ensuring they are not burdened with pre-liquidation statutory dues that should be addressed within the framework of the IBC. This decision reinforces the legal protections afforded to auction purchasers and streamlines the process for settling statutory claims in liquidation cases.
The judgment has significant implications for the administration of insolvency proceedings, reaffirming the IBC's role in resolving claims through its structured mechanisms rather than imposing liabilities on third-party purchasers. Legal experts view this decision as a step forward in safeguarding the rights of auction purchasers and enhancing the efficiency of insolvency resolutions.
Bottom line:-
Statutory dues or penalties in respect of assets sold in liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be recovered from successful auction purchasers. Such claims must be raised before the liquidator as operational creditors and satisfied through the waterfall mechanism under Section 53 of the IBC.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 53
My Ideal Transport v. Transport Commissioner Maharashtra, (Bombay)(DB) : Law Finder Doc id # 2892930
