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2024 (12) TMI 956 - HC - IBCValidity and enforceability of the Resolution Plan approved by the NCLT under the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The order passed by NCLT on 08.04.2021 in I.A.No.981 of 2020, in response to the application filed by the Resolution Professional approving the Resolution Plan by the Committee of Creditor under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 is an appealable order under Section 61 of the Insolvency and Bankruptcy Code, 2016 and ought to have been appealed before the NCLAT. Section 61 of the Insolvency and Bankruptcy Code, 2016 contemplates a limitation of 30 days 15 days to file such an appeal before the NCLAT. The law on the subject of limitation is clear. The Hon'ble Supreme Court in Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited and others 2021 (4) TMI 613 - SUPREME COURT has clearly held in several cases where specific period of limitation is prescribed for condoning the delay. Section 5 of the Limitation Act cannot be invoked to entertain such an application or an appeal. Therefore, although the respondents may have a case for setting aside the aforesaid order of the NCLT, in absence of a valid challenge to the same in time before NCLAT, the respondents/Commercial Tax Department cannot take a stand contrary to the order passed by the NCLT on 08.04.2021 in I.A.No.981 of 2020. The Court is of the view this Writ Petition deserves to be allowed. Accordingly, it is allowed.
Issues Involved:
1. Validity and enforceability of the Resolution Plan approved by the NCLT under the Insolvency and Bankruptcy Code, 2016. 2. The claim of the Commercial Tax Department and its subsequent actions post-approval of the Resolution Plan. 3. Applicability and interpretation of legal precedents and amendments in the context of insolvency proceedings. 4. Jurisdiction and procedural aspects regarding appeals against NCLT orders. Issue-wise Detailed Analysis: 1. Validity and Enforceability of the Resolution Plan: The core issue revolves around the approval of a Resolution Plan by the NCLT, Hyderabad, which allowed the petitioner to take over Sujana Metal Products Limited. The plan was sanctioned under the Insolvency and Bankruptcy Code, 2016, and included the settlement of claims from various creditors, including the Commercial Tax Department. The petitioner argued that once the Resolution Plan is approved, all previous claims against the corporate debtor are extinguished, as per the legislative intent to provide a "clean slate" for the resolution applicant. This position is supported by the Supreme Court's interpretation in Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited, which emphasized that the I&B Code prevails over other laws in case of inconsistencies, thereby extinguishing claims not included in the approved plan. 2. Claim of the Commercial Tax Department: The Commercial Tax Department had initially filed a claim with the Resolution Professional, which was admitted for a substantial amount but settled for a minimal percentage as per the approved Resolution Plan. Despite this, the Department intended to challenge the NCLT's order by filing a writ petition, arguing that their claims should not be extinguished. However, the court noted that the Department's failure to appeal the NCLT's order within the prescribed limitation period rendered their challenge ineffective. The judgment highlighted that the Department's claims, not being part of the approved Resolution Plan, were extinguished, aligning with the legislative amendments aimed at preventing such post-resolution claims. 3. Applicability and Interpretation of Legal Precedents: The judgment extensively referenced the Supreme Court's decision in Ghanashyam Mishra, which clarified the retrospective nature of the 2019 amendment to the I&B Code. This amendment aimed to resolve ambiguities regarding the extinguishment of government dues post-approval of a resolution plan. The court reiterated that the legislative intent was to ensure that all claims against the corporate debtor are frozen upon plan approval, preventing any surprise claims that could disrupt the resolution process. The judgment also addressed the respondents' reliance on a different Supreme Court ruling in State Tax Officer vs. Rainbow Papers Limited, which dealt with the rights of secured creditors, but found it inapplicable to the present case due to the procedural lapses by the Department. 4. Jurisdiction and Procedural Aspects: The court emphasized the procedural aspects, particularly the jurisdiction of the NCLAT to hear appeals against NCLT orders. The Commercial Tax Department's failure to appeal within the stipulated timeframe under Section 61 of the I&B Code was a critical factor. The court highlighted that the limitation period for filing such appeals is strict, and the delay cannot be condoned beyond the prescribed period, as per established legal principles. Consequently, the Department's attempt to challenge the NCLT's order was deemed procedurally barred, reinforcing the finality of the Resolution Plan approval. In conclusion, the court allowed the writ petition, directing the removal of any encumbrances against the properties taken over by the petitioner, thereby upholding the sanctity and enforceability of the Resolution Plan as approved by the NCLT. The judgment underscores the comprehensive nature of the I&B Code in facilitating corporate resolution while balancing the interests of various stakeholders within the legal framework.
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