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2020 (11) TMI 727 - Tri - Insolvency and BankruptcyEntertainment of claims made by creditors after approval of Resolution Plan - whether after approval of Resolution Plan by the Adjudicating Authority, the claims made by the creditors can be entertained? - HELD THAT - Once the Resolution Plan is finalized and approved, it shall be binding upon all the stakeholders and nobody shall have the power to change it. Even the Adjudicating Authority will not have a binding say on the approval of the Resolution Plan or on the commercial wisdom of the COC. The dues and liability as mentioned in the Resolution Plan as on the commencement of the Corporate Insolvency Resolution Process (CIRP), which is the day on which the Plan is approved by the Adjudicating Authority, shall be binding on every stakeholder and the Resolution Applicant shall be bound to pay only those which are mentioned in the Resolution Plan. The reason for invitation of the claims as on the date of commencement of CIRP is that the claims of any of the creditors are not left out while making of the Resolution Plan and hence claiming of the money after the passing of the Resolution Plan seems unjustifiable and unreasonable as sufficient opportunity has already been provided to submit the claims earlier, after admission of the application and ordered Corporate Insolvency Resolution Process - This was done to ensure that no further such of this kind of dispute would arise in the future. Hence, in a situation where the claims submitted by the creditors, inclusive of the operational creditors, have been duly met by the applicant, no question of reclaiming the full amount or a part of it or some different amount arises which pertains to a period prior to commencement of CIRP. A Successful Resolution Applicant is not to be burdened with undecided claims at the stage of implementation of the Resolution Plan. The Successful Resolution Applicant is to be provided with a company free from past liabilities. It has been rightly understood that a Successful Resolution Applicant cannot be saddled with past liabilities indefinitely. Such an act will make it impossible for the Successful Resolution Applicant to run the business of the Corporate Debtor effectively. In fact, saddling a Resolution Applicant with past claims will defeat the entire purpose and mechanism set out under the I B Code, mainly when all claims have been appropriately dealt under the Resolution Plan itself - Further, Section 32A of the Code grants immunity to a Corporate Debtor from the liabilities arising out of the acts committed prior to the CIRP once the Resolution Plan is approved. Hence, drawing an analogy, one can very well presume that the restructured company will not be forced or liable for paying out the dues of the period prior to CIRP which have already been taken care of in the Resolution Plan. This will make the revamped company do its business effectively and efficiently and will achieve the objective for which the Code was enacted. From a plain reading of Sub-Section (21) of Section 5, this Tribunal finds that there is no ambiguity in the said provision and the legislature has not used the word and but chose the word or between goods or services including employment and before a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, and State Government or any local authority . Operational Debt in normal course means a debt arising during the operation of the Company ( Corporate Debtor ). The goods and services including employment are required to keep the Company ( Corporate Debtor ) operational as a going concern. If the Company ( Corporate Debtor ) is operational and remains a going concern, only in a such case, the statutory liability, such as payment of Income Tax, Land Tax etc., will arise. As the Income Tax , Value Added Tax and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. All statutory dues including Water Charge , Electricity Charge , Commercial Taxes , Land Revenue etc. come within the meaning of Operational Debt . The other contention raised by the respondents is that the impugned order dated 23.01.2019 protects the interest of these respondents, as the relevant demands raised by Merchem against these respondents were not accepted, for the reason that they were not provided any individual notice of the insolvency proceedings commenced against the Corporate Debtor by the RP, and therefore, the statutory liabilities are bound to be paid - it is evident that the Resolution Plan as approved by the Committee of Creditors is by and large sanctioned by the Order dated 23.01.2019. It has been held that the Adjudicating Authority is not required to go into the merits or reasoning of the decision taken by the COC for approval or rejection of a Resolution Plan. The only benchmark which is set up to be determined by the Adjudicating Authority is to see whether the plan has been approved by 75% voting of the COC or not? Therefore, it is clear that the commercial wisdom of CoC is not allowed to be interfered with. The Central Government , State Government and local authority , who are entitled for dues arising out of the existing law are Operational Creditor within the meaning of Section 5(20) of the I B Code . As the statutory dues are operational debts, and once a Resolution Plan has been approved by the Adjudicating Authority, the treatment of all stakeholders, including Operational Creditors, is to be determined as per the terms of the CoC approved Resolution Plan. A stakeholder cannot afford to sleep over his claims and fail to submit it on time and come forward after the approval of Resolution Plan by the Adjudicating Authority. The approved Resolution Plan approved vide order dated 23rd January, 2019 by the NCLT, Chennai Bench is binding on the stakeholders including the statutory authorities who failed to file claims before the said approval - The amounts shown in the books of the respective Respondents, antecedent to the date of approval of Resolution Plan, still being shown as on date as due and payable by the Respondents in their books of account, stands discharged in full and consequently be reversed or written off in the books of the respective Respondents in accordance with the approved Resolution Plan. Application rejected.
Issues Involved:
1. Binding nature of the approved Resolution Plan on stakeholders. 2. Discharge of antecedent operational debts. 3. Refusal of statutory authorities to comply with the approved Resolution Plan. 4. Validity of claims not submitted within the stipulated time during CIRP. 5. Liquidation of the Corporate Debtor. Issue-wise Detailed Analysis: 1. Binding Nature of the Approved Resolution Plan on Stakeholders: The Tribunal emphasized that once a Resolution Plan is approved under Section 31(1) of the Insolvency & Bankruptcy Code (IBC), it becomes binding on all stakeholders, including statutory creditors. The provision explicitly includes the Central Government, State Governments, and local authorities. This ensures that no claims can arise post-approval, providing certainty to the Resolution Applicant. 2. Discharge of Antecedent Operational Debts: The Tribunal declared that the approved Resolution Plan discharges all antecedent operational debts. The Respondents were directed to reverse or write off such debts in their books. The Tribunal cited the Supreme Court's judgment in Essar Steel, which held that a successful Resolution Applicant cannot face undecided claims post-approval, as it would disrupt the certainty required for the business's revival. 3. Refusal of Statutory Authorities to Comply with the Approved Resolution Plan: Statutory authorities from Kerala and Gujarat continued to claim dues despite the approved Resolution Plan. The Tribunal noted that such actions violate Section 31(1) of the IBC, which mandates that an approved Resolution Plan is binding on all stakeholders. The Tribunal reiterated that statutory dues are considered operational debts and must be treated as per the approved Resolution Plan. 4. Validity of Claims Not Submitted Within the Stipulated Time During CIRP: The Tribunal found that claims not submitted within the stipulated time during the Corporate Insolvency Resolution Process (CIRP) are deemed extinguished. The Tribunal referenced the Essar Steel judgment, which clarified that all claims must be submitted and decided during the CIRP to provide certainty to the Resolution Applicant. The Tribunal dismissed the argument that statutory creditors are exempt from this requirement, emphasizing that the IBC's overriding effect under Section 238 applies. 5. Liquidation of the Corporate Debtor: Several statutory authorities filed applications seeking the liquidation of the Corporate Debtor, arguing that the Committee of Creditors (CoC) and the Resolution Professional had become functus officio. The Tribunal rejected these applications, stating that the approved Resolution Plan is binding and cannot be challenged through such applications. The Tribunal noted that the proper recourse for aggrieved parties is to appeal under Sections 61 or 62 of the IBC. Conclusion: The Tribunal allowed the application by the Corporate Debtor, declaring that the approved Resolution Plan is binding on all stakeholders, including statutory authorities. The Tribunal directed the Respondents to reverse or write off antecedent operational debts in their books. Applications seeking the liquidation of the Corporate Debtor were rejected, affirming the finality and binding nature of the approved Resolution Plan.
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