KMC Is Secured Creditor U/S 232 Of Kolkata Municipal Corporation Act: NCLAT New Delhi

Background of the Case

An asset of the corporate debtor was assessed for property tax by the Kolkata Municipal Corporation. However, part of the payment was due, which led to the issuance of the warrant of distress. Further, the CIRP of the corporate debtor was initiated, and the appellant issued the demand notice for the property tax dues.

Failure of CIRP led to the passing of the liquidation order of the corporate debtor. The appellant sealed the property, which was later de-sealed following the direction of the adjudicating authority. The appellant then filed its claim before the liquidator, which was rejected and categorized as the unsecured operational creditor. The adjudicating authority partly allowed the appeal by directing the liquidator to admit the dues of Rs. 34,23,403 and ruled that the Kolkata Municipal Corporation is not a secured creditor. It relied on the ruling of Kolkata Municipal Corporation & Anr. vs. Union of India & Ors., (2021) SCC OnLine CAL 145.

Contention of the Parties

The appellant contended that by virtue of section 232 of the Kolkata Municipal Corporation Act, 1980, the dues are the statutory charge, and the appellant is a secured creditor of the corporate debtor. It relied on the ruling of 'State Tax Officer' vs. 'Rainbow Papers Ltd.' reported in (2023) 9 SCC 545. It also submitted that the appellant dues are operational debt u/s 5(21) of the IBC.

Per contra, the respondent relied upon the ruling of Pashchimanchal Vidyut Vitran Nigam Ltd., 2019 SCC OnLine NCLAT 883, and contended that the ruling of 'Rainbow Papers Ltd.' (supra) is not applicable to the present facts, as it considered Section 48 of the Gujarat Value Added Tax Act, 2023, which contained a non-obstante clause, whereas Section 232 of the Kolkata Municipal Corporation Act does not contain any non-obstante clause.

Observations of the NCLAT

The bench discussed the ruling of Pashchimanchal Vidyut Vitran Nigam Ltd. (Supra), where it was observed that the dues payable for statutory corporations do not fall within the amount due to the Central or State Government.

The bench considered the ruling of Kolkata Municipal Corporation & Anr. (Supra) and observed that the said judgment cannot be relied upon, as there was no discussion on the point of the secured creditor.

Furthermore, they referred to the rulings of 'Pashchimanchal Vidyut Vitran Nigam' (supra), 'State Tax Officer' (supra), and 'Greater Noida Industrial Development Authority' (supra), and observed, “The appellant has a statutory charge by virtue of Section 2(32) of the Kolkata Municipal Corporation Act, and the appellant is a secured creditor.”

With the above observations, the bench modified the order of the adjudicating authority and declared the 'Kolkata Municipal Corporation' a secured creditor.

Case Name: Kolkata Municipal Corporation v. Gajesh Labhchand Jain (Liquidator)

Case No.: Company Appeal (AT) (Insolvency) No. 1833 of 2024

Coram: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical),

Appearance For Appellant: Ms. Anju Thomas, Ms. Pratibha Yadav, Ms. Astha Sharma, Ms. Kritika Sethia, Mr. Piyush Agarwal, Advocates. 

Appearance For Respondents: Mr. Mohit Rohatgi, Mr. Ashwini Kumar Tak, Ms. Aditi Nemakal, Mr. Karan Trehan, Advocates. 

Judgment Date: 26/09/2025