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TMI Blog2021 (1) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment and local authority under section 31 of the IBC. We are of the opinion that once a resolution plan has been approved it becomes binding on all creditors including the government and local authorities including the respondent under section 31(1) of the IBC. It is no longer open to the respondent to issue a show cause notice or adjudicate and pass an order of penalty upon the appellant. Consequently, the impugned order cannot be sustained and is quashed. The appeal is accordingly allowed with no order as to costs. - Appeal No. 238 of 2020 - - - Dated:- 29-10-2020 - Tarun Agarwala, Presiding Officer, Dr. C.K.G. Nair, Member And M.T. Joshi, Judicial Member For the Appellant : Tarun Gulati, Sr. Adv., Kumar Sambhav, Shubhabrata Chakraborti and Ms. Madhura Kulkarni, Advs. For the Respondent : Mustafa Doctor, Sr. Adv., Mihir Mody and Shehaab Roshan, Advs. ORDER JUSTICE TARUN AGARWALA, PRESIDING OFFICER . 1. The present appeal has been filed against the order of the Adjudicating Officer dated 26th June, 2020 imposing a penalty of ₹ 6,00,000 for violating Regulations 52(4) and 54(2) of Securities and Exchange Board of India (Listing Obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue by holding that it is beyond her ambit to comment as to whether such proceedings could be initiated against the new management or the erstwhile management and that her role under the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as 'Adjudication Rules, 1995') is to adjudge the alleged violation by the appellant. For facility, the extract of the findings of the adjudicating officer on this aspect is extracted hereunder: As regards, the various contentions of the Noticee that the instant or such proceedings need to be initiated against erstwhile management and not the current/new management/Noticee, it is beyond my ambit to comment on the same. My role within contours of Adjudication Rules, 1995, is to adjudge the alleged violation by the Noticee which is mentioned in the AO communique shared with the Noticee 6. The adjudicating officer thereafter proceeded and found that since necessary disclosures under regulations 52(4) and 54(2) of the LODR Regulations were not made, the adjudicating officer imposed a penalty of ₹ 6,00,000. The appellant being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;A successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove.' 11. The aforesaid decision makes it clear that the terms of an approved resolution plan are imperative and are binding on all creditors including government and local authorities. In this regard, it would be appropriate to peruse the relevant portion of the resolution plan approved by the NCLT which is extracted hereunder: (a) Paragraph 1(d)(v) of Part I of the Resolution Plan: All financial liabilities (including without limitation, for any penalty, interest, fines or fees) and other liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Promoters or any existing or former members of the management of the Company including pursuant to any investigation, inquiry or show-cause, whether civil or criminal, against the Existing Promoters or any existing or former members of the management of the Company. It is further clarified that the Consortium and the members of the Board of Directors and management of the Company who are appointed on or after the Acquisition shall not be liable, in any manner whatsoever, for any criminal action or liability in relation to any inquiries, investigations, notices, causes of action, suits, claims, disputes, litigations or other judicial, regulatory or administrative proceedings against, or in relation to, or in connection with the Company or the affairs of the Company in relation to any period prior to the Acquisition or arising on account of the Acquisition. (Emphasis Supplied) (b) Paragraph 1e(iv) of Part I of the Resolution Plan Other than the proceedings set out in Part B of Annexure 4 all inquiries, investigations, notices, causes of action, suits, claims, disputes, litigations, arbitration, or other judicial, regulatory or administrative proceedings against, or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 097, the Rajasthan High Court referred to a speech of the Hon'ble Finance Minister in the Parliament clarifying the legislative intent of the amendment under section 31(1) of IBC in the following terms: IBC has actually an overriding effect. For instance, you asked whether IBC will override SEBI Section 238 provides that IBC will prevail in case of inconsistency between two laws. Actually, Indian courts will have to decide, in specific cases, depending upon the material before them, but, largely, yes, it is IBC. There is also this question about indemnity for successful resolution applicant. The amendment now is clearly making it binding on the Government. It is one of the ways in which we are providing that. The Government will not raise any further claim after resolution plan is approved. So, that is going to be a major, major sense of assurance for the people who are using the resolution plan. 15. In view of the aforesaid, it is clear that once the resolution plan is approved by the appropriate authority the same is binding on all concerned including the respondent. 16. The Rajasthan High Court in Ultra Tech Nathdwara Cement Ltd. (supra) held as under:- 66. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity under the SEBI Act, the Rules and the Regulations. The adjudicating officer is required to adjudicate under the Adjudication Rules, 1995. One of the foremost duties is to find out as to whether the charge levelled against the appellant could be fastened upon it. Once a contention has been raised that no proceedings can be initiated or penalty could be imposed upon the appellant after the passing of the resolution plan, the adjudicating officer was required to deal with the matter and could not skirt this issue by holding that it was beyond her ambit to deal with such condition or comment on the same. Such observation made by the adjudicating officer is indicative of the lack of clarity, quasi-judicial thought in legally deciding the matter. We will not say anything further and leave it to the Chairman of the SEBI to consider and issue appropriate direction on the administrative side to the adjudicating officer in question. 20. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. In these circumstances, this order will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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