2025 (1) TMI 743 - AT - IBC

Maintainability of the counter claim in the proceedings of the CIRP - where the controversy pertains to raising of a counter claim by the Appellant, against the Corporate Debtor, whether the relief would at all be tenable to be pressed in before the Tribunal and that too, by invoking the provisions contained under Section 60(5) of the I B Code, 2016, which being a residuary clause, is to be used for the aspects and fields not covered by I B Code, 2016? - HELD THAT - Within the time bound process, all such proceedings lying outside the purview of Resolution Plan, may not be permitted to be agitated by invoking Sub Section (5) of Section 60 of the I B Code, 2016, so as to delay the proceedings, and to widen the scope of Section 60(5) to its disproportionate implication and application, so as to distort the application and object of I B Code, 2016. The learned Adjudicating Authority, while considering the claim as it was raised by the Appellant, in the Application preferred being IA No. 545 / 2024, has also considered the Judgment rendered by the Hon ble Apex Court in the matters of Adani Power Limited V. Shapoorji Pallonji Co. Pvt. Ltd. Ors. 2023 (3) TMI 1555 - SC ORDER wherein, the Hon ble Apex Court has observed that in the statute or the precedence of the Hon ble Apex Court or the NCLAT, there is no ambiguity as such, which reflects that once the plan is approved it is binding and it cannot be made a subject matter to be considered, analysed or interpreted before the Arbitration or for that matter before any proceedings and thus, it has opined that the claim even if allowed in favour of Shapoorji Pallonji Co. Pvt. Ltd., will have no bearing on the right and obligations of the Appellant, as against the Corporate Debtor, who would be bound by its own terms of contract with the Corporate Debtor, owing to the fact that the Appellant cannot be saddled with a new liability except which is mentioned in the Resolution Plan. In the absence of there being any challenge given with regards to the effect of non-admission of the claim of the present Appellant by the Resolution Professional, the reliefs was sought for in IA No. 545 / 2024 in the shape of seeking a necessary directions to clarify that the Appellant s claim not be extinguished upon the approval of Resolution Plan, would be barred by the Judgment of Adani Power Limited 2023 (3) TMI 1555 - SC ORDER as relied by the learned Adjudicating Authority, because the same cannot be permitted to be widen the scope of the claim by consideration of the counter claim particularly, when the denial of acceptance of the claim on 11.03.2024, has attained finality, having not been questioned, before any Appropriate Forum. The Application thus preferred does not meet out the objective of the I B Code, 2016, where finalization of the claims against the Corporate Debtor are required to be done in a Time-bound manner in order to take steps, for restructuring of the Corporate Debtor. Since, the same was being infringed by the nature of the relief sought for, the same would not be sustainable and the restrictions which was imposed by the Judgment of Adani Power Ltd. V. Shapoorji Pallonji Co. Pvt. Ltd. Ors, would be attracted, to make the Interlocutory Application preferred by the Appellant as to be not maintainable. Conclusion - i) Claims not included in the Resolution Plan are extinguished. ii) The counterclaim is not maintainable within CIRP. iii) Section 60(5) cannot be used to challenge the extinguishment of claims post-approval of the Resolution Plan. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following legal issues:

• The maintainability of a counterclaim in the proceedings of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (I&B Code).
• The applicability of Section 60(5) of the I&B Code concerning the counterclaim and whether such claims can be entertained under the approved Resolution Plan.
• The implications of the approved Resolution Plan on claims not included within it, specifically in the context of the 'clean slate' principle.
• The jurisdiction of the Adjudicating Authority to entertain claims that are subject to arbitration proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of Counterclaim in CIRP Proceedings

• Relevant Legal Framework and Precedents: The I&B Code, 2016, particularly Section 60(5), was analyzed alongside precedents such as the Jharkand Bijli Vitran Nigam Ltd. v. IVRCL Ltd. and Fourth Dimensions Solutions Ltd. v. Ricoh India Pvt. Ltd. These cases discussed the admissibility of counterclaims in insolvency proceedings.
• Court's Interpretation and Reasoning: The Tribunal noted that the counterclaim could be considered if it is intertwined with the principal claim, as per the precedent set in Jharkand Bijli Vitran Nigam Ltd. v. IVRCL Ltd.
• Key Evidence and Findings: The Appellant's claim of Rs.78.16 Crores was disputed by the Corporate Debtor, who raised a counterclaim of Rs.160.46 Crores.
• Application of Law to Facts: The Tribunal determined that the counterclaim should be adjudicated in arbitration proceedings, not within the CIRP, especially since the Resolution Plan was already approved.
• Treatment of Competing Arguments: The Appellant argued for the counterclaim's consideration under Section 60(5), but the Tribunal held that the matter should be resolved through arbitration.
• Conclusions: The Tribunal concluded that the counterclaim is not maintainable within the CIRP proceedings and should be addressed in arbitration.

Issue 2: Applicability of Section 60(5) of the I&B Code

• Relevant Legal Framework and Precedents: Section 60(5) of the I&B Code allows for the adjudication of disputes not covered by the Code. The Tribunal referred to the Adani Power Limited case to interpret this provision.
• Court's Interpretation and Reasoning: The Tribunal interpreted that Section 60(5) cannot be used to expand the scope of claims beyond what is included in the Resolution Plan.
• Key Evidence and Findings: The Tribunal found that the Appellant's claim was not admitted by the Resolution Professional due to a pre-existing dispute.
• Application of Law to Facts: The Tribunal applied the 'clean slate' principle, emphasizing that claims not included in the Resolution Plan are extinguished.
• Treatment of Competing Arguments: The Appellant's argument for using Section 60(5) was dismissed as it would contravene the I&B Code's objective.
• Conclusions: The Tribunal concluded that Section 60(5) does not apply to claims outside the Resolution Plan.

Issue 3: Implications of the Approved Resolution Plan

• Relevant Legal Framework and Precedents: The Tribunal referred to the Ghanshyam Mishra & Sons Pvt. Ltd. case to discuss the implications of an approved Resolution Plan.
• Court's Interpretation and Reasoning: The Tribunal emphasized that the Resolution Plan binds all stakeholders and extinguishes any claims not included.
• Key Evidence and Findings: The Appellant's claim was not part of the Resolution Plan, and thus considered extinguished.
• Application of Law to Facts: The Tribunal applied the principle that claims outside the Resolution Plan cannot be pursued post-approval.
• Treatment of Competing Arguments: The Appellant's request to preserve their claim was rejected based on the 'clean slate' principle.
• Conclusions: The Tribunal concluded that claims not included in the Resolution Plan are extinguished and cannot be revived through Section 60(5).

Issue 4: Jurisdiction of the Adjudicating Authority

• Relevant Legal Framework and Precedents: The Tribunal referred to the Adani Power Limited case to discuss the jurisdictional limits of the Adjudicating Authority.
• Court's Interpretation and Reasoning: The Tribunal held that disputes subject to arbitration fall outside its jurisdiction.
• Key Evidence and Findings: The existence of an arbitration clause in the contract between the Appellant and Corporate Debtor was pivotal.
• Application of Law to Facts: The Tribunal determined that the dispute should be resolved in arbitration, not within the CIRP.
• Treatment of Competing Arguments: The Appellant's argument for adjudication within the CIRP was dismissed.
• Conclusions: The Tribunal concluded that the Adjudicating Authority lacks jurisdiction over the arbitration-bound dispute.

3. SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: The Tribunal reiterated, "once a resolution plan is duly approved...all such claims, which are not a part of resolution plan, shall stand extinguished."
• Core Principles Established: The 'clean slate' principle was reaffirmed, emphasizing that claims not included in the Resolution Plan are extinguished. The jurisdiction of the Adjudicating Authority does not extend to arbitration-bound disputes.
• Final Determinations on Each Issue: The Tribunal dismissed the Appellant's claims, emphasizing that the counterclaim is not maintainable within the CIRP and should be resolved through arbitration. The application of Section 60(5) was limited to matters not covered by the Resolution Plan.