The Hon'ble Supreme Court in the recent case of M/s Ruchi Soya Industries Ltd. v. Union of India1 has reiterated that a claim which was not lodged with the resolution professional upon issuance of public notice under the Insolvency and Bankruptcy Code, 2016 (IBC) before the approval of the resolution plan would not survive. It was held that once the resolution plan was approved, all claims stood frozen and a claim which did not form a part of the final resolution plan would not be legally actionable.
Brief Facts
Ruchi Soya Industries Ltd. (Appellant) in the present matter had filed appeals challenging the judgment and order dated 29 January 2012 passed by the division bench of the High Court of Karnataka thereby dismissing the writ petitions filed by the Appellant. The writ petitions of the Appellant prayed for issuance of a mandamus that certain notice issued by the Department of Revenue, Ministry of Finance were not applicable to crude palmolein imported by the Appellant. The Appellant, by way of an application, pointed at certain subsequent developments and prayed for disposal of the appeals in such terms.
In the application, the Appellant submitted that during the pendency of the instant proceedings, Standard Chartered Bank had initiated proceedings before the National Company Law Tribunal, Mumbai (NCLT, Mumbai) in respect of the Appellant under the provisions of the IBC. The application of Standard Chartered Bank under Section 7 of the IBC for the initiation of Corporate Insolvency Resolution Process (CIRP) came to be admitted by NCLT, Mumbai on 15 December 2017. After the insolvency proceedings began and procedures under various provisions of IBC were completed, an application under Section 30(6) of the IBC came to be filed by the Resolution Professional (RP) for grant of approval of the resolution plan of the successful resolution applicant. By way of an order dated 24 July 2019 read with the order dated 04 September 2019, the application of the RP for the grant of the approval of resolution plan came to be allowed. Thereafter, the management of the Appellant was vested in the successful resolution applicant.
The moot point involved in the matter was whether the claim of the Department of Revenue (Respondent) in the instant matter, which was admittedly not lodged before the RP after the issuance of public notices under Section13 and 15 of the IBC, could be considered at a belated stage.
The Appellant submitted that the present matter was squarely covered by the law laid by the Hon'ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd2. It was submitted by the Appellant that with respect to the demand which was subject matter of the proceedings, no claim was lodged with the RP. Accordingly, the Appellant submitted that in view of the law laid in Ghanashyam Mishra (supra) the respondents were now not entitled to claim any amount, which was not a part of the resolution plan.
Findings of the Hon'ble Supreme Court
The Hon'ble Supreme Court held that the present appeals were squarely covered by the law laid down in Ghanashyam Mishra (supra) and referred to para 102 of the said judgment which is produced below:
"102. In the result, we answer the questions framed by us as under:
102.1. That once a resolution plan is duly approved by the adjudicating authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.
102.3. Consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued."
The Hon'ble Supreme Court noted that admittedly, the claim in respect of the demand which was the subject matter of the instant proceedings was not lodged by the Respondent after public announcements were issued under Section 13 and 15 of the IBC. As such, on the date on which the resolution plan was approved by the NCLT, Mumbai, all claims stood frozen, and no claim, which is not a part of the resolution plan, would survive.
Accordingly, the present appeals were allowed only on this ground. It was held that the claim of the Respondent, which is not part of the resolution plan, would not survive. The amount deposited by the Appellant at the time of admission of the appeals along with interest accrued thereon was directed to be refunded to the Appellant. The appeals were allowed accordingly.
Comments
It is a settled law in Ghanashyam Mishra (supra) that the resolution plan approved by the adjudicating authority under the IBC shall bind the corporate debtor, its employees, members, creditors, guarantors and other stakeholders including the Central Government, State Government or any local authority to whom a debt is owed. Accordingly, once a resolution plan is approved, any claim not contained in the resolution plan would be a dead claim.
Footnotes
1. M/s Ruchi Soya Industries Ltd. v. Union of India, Civil Appeal Nos. 447 448 of 2013
2. Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd., 2021 9 SCC 657.
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