2021 (3) TMI 685 - AT - Insolvency and Bankruptcy

Seeking Release of of salaries and amount due and payable to RP by the corporate debtor - Whether the Adjudicating Authority can issue the directions to erstwhile Resolution Professional once the Resolution Plan under Section 31 of the I B Code 2016 has been approved, and the Resolution Professional has been discharged of his duties? HELD THAT - It is essential to mention that the claim of Respondent No. 1 is highly belated. The ultimate result of the impugned Order is effectively considering the claim filed by Respondent No. 1 during the CIR process period. Although CIRP process period claims have been considered and decided upon by the Resolution Professional, further such determination has been upheld by the Adjudicating Authority. It has been over two years since the Corporate Debtor's CIR process concluded by approving the Resolution Plan of Respondent No.2, which has subsequently been given full effect by Respondent No. 2 - The timelines prescribed under the Code aim at speedy and time-bound resolution. Thus, the impugned Order of the present nature, which allows a highly belated claim, mainly when the Claimant displays an overtly callous attitude, should be nibbed in the bud. Adjudicating such delayed claims could defeat the Code's purpose and cause unnecessary hurdle in the effective implementation of any Resolution Plan. Respondent No. 1 contended that erstwhile Directors are willing to cooperate with the Petitioner to sign the annual accounts if the Petitioner is ready to pay the legitimate claims of Respondent No. 1, such as salary dues to be paid to him and also to be other incidental expenses such as transport charges etc., as per law. Respondent No. 1 is not in Corporate Debtor's management. Only the Resolution Professional is competent to take any steps per law and cannot blame the erstwhile Directors for not signing the annual accounts. The erstwhile Directors, including Respondent No. 1, are not in the Corporate Debtor company's management since the financial statements are in the Resolution Professional's custody. The Respondent claims erstwhile directors cannot be blamed for not signing the annual accounts - It is further stated that Respondent No. 1 is not the company's executive director as on date and not legally fit to sign the annual accounts as an Executive Director under the Companies Act 2013. If the Hon'ble Tribunal found that the Respondent No.1 is legally fit to sign the annual accounts the Respondent No.1 is ready to sign the financial statements provided his outstanding salary with full and final account and necessary incidental expenses to be paid to him to attend the meeting to sign the annual accounts and related reports. The Adjudicating Authority has erred in issuing directions to the erstwhile Resolution Professional to make payment of the salary to the Appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Whether the Adjudicating Authority can issue directions to the erstwhile Resolution Professional once the Resolution Plan under Section 31 of the I&B Code 2016 has been approved and the Resolution Professional has been discharged of his duties.

Issue-wise Detailed Analysis:

1. Directions to Erstwhile Resolution Professional Post-Resolution Plan Approval:

The appeal emanates from an order directing the Resolution Professional (RP) to make payment of salary to the Respondent No.1 as per the amount acknowledged by the RP, in accordance with the I&B Code 2016 and its regulations. The core issue is whether such directions can be issued post-approval of the Resolution Plan under Section 31 of the I&B Code 2016.

The Adjudicating Authority had previously dismissed Respondent No.1's application for salary dues beyond the admitted amount, emphasizing that claims arising after the commencement of the Corporate Insolvency Resolution Process (CIRP) are not covered by forms B, C, and D, and should be claimed at an appropriate time and forum.

The appellant contended that the claim was settled by the order dated 19 July 2018, which was never challenged and had attained finality. The appellant also argued that the Adjudicating Authority erred in entertaining a subsequent application by Respondent No.1, which effectively sought to re-litigate the same settled claim.

The tribunal noted that the Supreme Court in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta held that all claims must be submitted to and decided by the RP, and post-approval of the Resolution Plan, no undecided claims should burden the successful resolution applicant. This principle was reiterated in Standard Chartered Bank v. Satish Kumar Gupta, where it was held that claims decided on merits by the Adjudicating Authority or Appellate Tribunal are final and binding.

The tribunal found that the claim of Respondent No.1 had been settled by the order dated 19 July 2018, which upheld the rejection of part of the claim and admitted only a portion. The tribunal emphasized that the approved Resolution Plan is binding on all stakeholders, including employees, and extinguishes all prior claims not expressly provided for in the plan.

The tribunal concluded that the Adjudicating Authority erred in issuing directions to the erstwhile RP to make payment of the salary to Respondent No.1, as the claim had been settled and the Resolution Plan, which extinguished such claims, had been approved and implemented.

Order:

The appeal was allowed, and the impugned order was set aside. The tribunal held that no costs were to be imposed.