In a significant judgment, the Delhi High Court has pronounced its decision on the acceptance of a resolution plan in the case involving the respondent and petitioner. The court’s ruling sheds light on the implications of unresolved claims post-acceptance of the plan and the maintenance of petitions in insolvency proceedings. Stay tuned to learn more about the details of the court’s decision.
Facts
- Under Section 18 of IBC, IRP must receive and collate all claims submitted by creditors.
- Amount claimed in Arbitral proceedings, including part of Arbitral Award, is considered a ‘claim’ to be submitted to IRP or RP.
- The Resolution Plan must provide for payment of debts based on Information Memorandum under Section 29 of IBC.
- RP must maintain an updated list of Claims to reflect the financial position of Corporate Debtor in the Information Memorandum.
- Petitioner is entitled to dues only as per the Resolution Plan after approval by NCLT.
- RP examines each Resolution Plan to ensure compliance with IBC provisions and requirements.
Issue
- The question before the Court is whether the present petition can be continued after the acceptance of the Resolution Plan.
- The Resolution Plan has already been accepted.
- The key issue is regarding the continuation of the petition post acceptance of the Plan.
Arguments
- Applicant relies on Essar Steel India Ltd. Committee of Creditors vs Satish Kumar Gupta & Ghanashyam Mishra and Sons Private Limited vs Edelweiss Asset Reconstruction Company Limited cases.
- Claims in the Resolution Plan approved by the Adjudicating Authority are frozen and binding on the Corporate Debtor and stakeholders.
- Claims not included in the Resolution Plan are extinguished and cannot be pursued further.
- Petition under Section 34 of the Act is non-maintainable and should be dismissed.
- The petitioner denied all the averments made in the Application, including the Annexation of Notices in the present petition.
- Both the petitioner and the respondent filed objections under Section 34 of the Act regarding their dissatisfaction with the Award.
- The petitioner highlighted that despite the Insolvency Petition being filed in 2019, they were not informed about the NCLT proceedings against the respondent.
- The petitioner is a Micro, Small and Medium Enterprise (MSME) registered under the Enterprises Development Act, 2006.
- Notices published by the IRP were not known to the petitioner, who was unaware of the NCLT proceedings.
- The NCLT petition is still pending and has not been disposed of.
- The petitioner argues that the present application is not maintainable and should be rejected.
Analysis
- The NCLAT judgment must be set aside as any claims after the acceptance of the Resolution Plan would derail the plan submitted by the Successful Resolution Applicant.
- The petitioner, a resident of Village Banoi, never received notices about the proceedings, leading to lack of awareness since 2019.
- Operational Creditors submit claims based on public notices, which form the basis of the Resolution Applicant’s plan.
- Award holders must submit claims to the Interim Resolution Professional for inclusion in the Information Memorandum.
- Amounts determined under the Arbitral Award and challenged under Section 34 qualify as ‘claims’ under IBC.
- Insolvency proceedings initiated against M/S Indira Priyadarshini Hydro Power Pvt. Ltd. resulted in a Resolution Plan accepted by M/S Manikaran Power Private Limited.
- Notices at various stages are required during the insolvency process, and undecided claims post-acceptance of a resolution plan would pose uncertainties for the resolution applicant.
- Resolution Applicants must start running the business of the Corporate Debtor on a clean slate, free from unresolved claims.
- All claims should be submitted and decided by the resolution professional before a prospective resolution applicant takes over the business of the corporate debtor.
- The Award holder had no need to approach the Insolvency Resolution Professional while Section 34 petitions were pending.
- The NCLAT decision allowed certain additional and belated claims of operational creditors to be decided by an appropriate forum under Section 60(6) of IBC.
- The NCLAT judgment in Standard Chartered Bank V. Satish Kumar Gupta allows claims apart from those decided by the resolution professional and Adjudicating Authority to be decided by an appropriate forum under Section 60(6) of the Code, conflicting with Section 31 of the Code.
- Similar observations were made by Calcutta High Court in Sirpur Paper Mills Limited v. I.K. Merchants Pvt. Ltd. A.P. 550 of 2008.
- The Supreme Court in Ghanashyam Mishra and Sons Private Limited case held that once a Resolution Plan is approved, it is binding on the Corporate Debtor and its stakeholders, extinguishing claims not part of the approved Plan.
- The 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory, effective from the date the Code came into effect.
- All dues, including statutory dues, not part of the Resolution Plan are extinguished upon approval of the Plan by the Adjudicating Authority.
- Successful Resolution Plan applicants should not face surprise claims outside of the approved Plan.
- Only debts included in the Resolution Plan are taken up by the Successful Resolution Applicant.
- The question arises whether a petition under Section 34 challenging the Award would now be not maintainable.
- Petitioner failed to lodge any claim in CIRP.
- Resolution Plan accepted by CoC and NCLT Tribunal.
- RP issued Public Announcement in two newspapers.
- RP initiated insolvency proceedings against the respondent.
- Resolution Applicant receives the company with liabilities as per Resolution Plan.
Decision
- The present petition is dismissed and is not maintainable.
- Pre-existing or undecided claims not included in the collation of claims and Resolution Plan are extinguished.
Case Title: M/S AKASH CONSTRUCTION Vs. M/S INDRIA PRIYADHARSHINI HYDRO POWER PRIVATE LIMITED (2024:DHC:3976)
Case Number: O.M.P. (COMM)-283/2017
