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TMI Blog2024 (8) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... rom taking up the counter claim as well. There was no adjudication, nor was any issue raised in respect of the effect of approval of a Resolution Plan on the counter claim. The subsequent approval of the Resolution Plan, which extinguished the rights of the creditors, altered the scenarioaltogether, furnishing a fresh cause of action for the interim award. Hence, there cannot arise any question of the previous rejection of the Section 16 application operating as a bar to the learned Arbitrator deciding independently on the application for interim award - this issue is decided in the negative, holding that the earlier order of rejection of the claimant s application under Section 16 of the 1996 Act did not operate as res judicata or prevent the impugned award from being passed. Whether the alleged future losses covered by the counter claim could be dismissed at the outset on the ground of approval of the Resolution Plan in respect of the claimant/company? - HELD THAT:- It has been repeatedly held, time and again, by different authorities including the Supreme Court that all claims, even if pending on the date of the Resolution Plan stand extinguished upon its approval. The convolute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floated an e-tender in the month of February, 2017 for the job of design and engineering, manufacture/procurement, testing, supply, installation and commissioning of grid connected rooftop solar PV power plant in the township of the petitioner, West Bengal Power Development Corporation Limited (WBPDCL), including five years comprehensive maintenance on turnkey basis at various locations in West Bengal. 4. The claimant/respondent participated in the tender and came out successful. A Letter of Award (LoA) was issued on May 12, 2017, to which there were two subsequent amendments, both dated June 27, 2018. The original work was to be completed by February 7, 2018 but was ultimately completed on February 15, 2019. The claimant/ present respondent subsequently invoked the arbitration clause in the agreement between the parties and made several claims, including outstanding dues, interest, loss and damages for illegal termination, damages for reputation and goodwill and other ancillary reliefs. The Statement of Claim was filed on January 17, 2023. 5. The present petitioner filed a Statement of Defence as well as a counter claim on May 13, 2023, making claims under several heads. 6. Prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity and is shocking to the conscience, affording grounds under Section 34 of the 1996 Act. 11. Learned counsel cites Karsandas H. Thacker Vs. M/s. The Saran Engineering Co. Ltd., reported at AIR 1965 SC 1981, where it was held that on breach of contract by the respondent, the appellant was entitled under Section 73 of the Contract Act to receive compensation for any loss by the damage caused to him which naturally arose in the usual course of business from such breach. 12. In Kailash Nath Associates Vs. Delhi Development Authority and Another, reported at (2015) 4 SCC 136 , it was stated that if damage or loss is not suffered, the law does not provide for a windfall. The said judgment, it is argued by the petitioner, was rendered in a case where the difference between Sections 73 and 74 of the Contract Act was being considered and whether loss would be required to be suffered for a claimant to obtain damages, even if pre-estimate is mentioned in the contract, under Section 74 of the Contract Act. 13. By relying on the said judgments, learned counsel argues that the present case concerns a claim for future loss and the right to claim the same had not arisen on the CIRP commencement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exact assessment qua the counter claims cannot be done at present and cannot be done before evidence or trial. 20. Even if the future claims are to survive, the statement of counter claims cannot be rejected in part. For the last proposition, learned counsel cites Madhav Prasad Agarwal Vs. Axis Bank Limited, reported at (2019) 7 SCC 158 and Sejal Glass Limited Vs. Navilan Merchants Pvt. Ltd., reported at (2018) 11 SCC 780. 21. It is next contended that any observation contained in the Resolution Plan with regard to the counter claims of the petitioner would be void. Citing a judgment of this Court in Orissa Metaliks Private Limited Vs. Union of India and others, in WPA No. 10441 of 2024, it is argued that if a Resolution Plan purports to create new rights not referable to the IBC and de hors the ambit of the IBC itself, the said rights cannot be deemed to have been created. In the present case, it is submitted that new rights such as the right of extinguishment of claims born after the CIRP commencement date cannot be dealt with by the Resolution Plan, as it would be void. 22. Thus, it is contended by the petitioner that the award is opposed to the fundamental policy of Indian Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan stand extinguished and no person will be entitled to initiate or continue any proceedings in respect of a claim which is not part of a Resolution Plan. The Division Bench judgment in the same matter, in MAT 646 of 2022 and CAN 1 of 2022 , is also referred to in the said context. 26. Learned senior counsel for the claimant/respondent next cites Jaypee Kensington Boulevard Apartments Welfare Association and others Vs. NBCC (India) Ltd. and others, reported at (2021) 1 SCC 401, where it was reiterated that a resolution applicant cannot be made to suddenly encounter undecided claims after acceptance of the Resolution Plan. Citing Indian Oil Corporation Limited Vs. Arcelor Mittal Nippon Steel India Limited, reported at 2023 SC OnLine Del 6318, it is argued that even an application under Section 11 of the 1996 Act will be dismissed if the claim arose before approval of the Resolution Plan. 27. Furthermore, in the present case, the Resolution Plan clearly includes a clause that it extinguished all pending counter claims in arbitration. 28. Learned senior counsel appearing for the claimant argues that Section 31 of the IBC clearly envisages that the approval of the Resolution Plan i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd is not in contravention with the fundamental policy of Indian law or in conflict with the basic notions of morality or justice. In such context, learned senior counsel cites Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Limited, reported at (2022) 1 SCC 131 . 34. Relying on Gayatri Balasami Vs. ISG Novasoft Technologies Limited, an unreported judgment in SLP(C) Nos. 15336-15337/2021, it is argued that the question whether the court can modify an award under Section 34 of the 1996 Act is now referred to a Larger Bench of the Supreme Court. 35. Thus, it is argued that the present challenge ought to be dismissed. 36. Upon hearing learned counsel for the parties, it is clear that two important questions fall for consideration in the present case: (i) Whether the rejection of the respondent/petitioner s application under Section 16 of the 1996 Act operates as res judicata in respect of the impugned interim award. (ii) Whether the alleged future losses covered by the counter claim could be dismissed at the outset on the ground of approval of the Resolution Plan in respect of the claimant/company. 37. On the first issue, an evident distinction between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), as discussed above, imparts a binding colour to the approved Resolution Plan, thus extinguishing all claims of creditors in respect of the Corporate Debtor. 41. Section 21 of the IBC provides that the Committee of Creditors (CoC) shall comprise of all financial creditors of the Corporate Debtor, thus, bringing within its fold the present petitioner as well insofar as the claimant-company is concerned, which was the Corporate Debtor. 42. Hence, not only did the petitioner have the right to make claims before the resolution professional, the petitioner was statutorily a component of the CoC, which approved the Resolution Plan at the first instance. Only after passing through the screen of the CoC did the Resolution Plan reach the table of the Adjudicating Authority, that is, the NCLT, which finally approved the plan, making it binding on the petitioner under Section 31 of the IBC. 43. Hence, there is no scope of the petitioner arguing that it did not have an opportunity to make the self-same claims, which were made before the learned Arbitrator by way of counter claims prior to the approval of the Resolution Plan, before the Resolution Professional in the CIRP. The CIRP commenced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the petitioner and the petitioner cannot resile from the same, which would automatically entail the extinction of the petitioner s claims and consequential dismissal of the counter claims of the petitioner at the outset. 47. However, a further argument, which is quite attractive at the first blush, has been advanced by the respondent/petitioner. It is contended that at least a part of the counter claims would arise after the initiation of the CIRP and, thus, would fall beyond the pale of the authority of the Resolution Professional and, thus, by necessary implication, outside the Resolution Plan contemplated in the IBC. 48. There are two cardinal fallacies in such logic. 49. The first fallacy is that the claims that can come within the ambit of the Resolution Plan do not stop on the date of initiation of the CIRP but continue up to the approval of the Resolution Plan by the Adjudicating Authority. The language of Section 31 (1) of the IBC is that once the Resolution Plan is approved, it shall be binding, inter alia, on the creditors. Nothing in the IBC provides that claims arising between the initiation of the CIRP proceedings and the approval of the Resolution Plan cannot also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of action for the same had already arisen. 54. In fact, the counter claim was made on May 12, 2023 and the filing of the counter claim itself is sufficient proof of the fact that even as per the perception of the present petitioner, the cause of action for the said counter claims had ripened before that date, although they might have yielded fruit later, on the passing of the award, that too if granted. Hence, as on the date of the filing of the counter claim, that is, May 12, 2023, the claims had arisen within the contemplation of Section 3 (6) of the IBC. 55. The mere fact that the same would extend beyond the domain of the CIRP if finally granted is immaterial, since it is not the fruition of the claim which is contemplated to give a terminus to the same but the initial right to make the claim. Even if the claim pertains to a post-CIRP period, the claim itself arose before the filing of the counter claim and, thus, stood extinguished at the bud the moment the Resolution Plan was finally approved. Even prospective or future losses contemplated in the claim would automatically stand extinguished with the approval of the Resolution Plan, since the date of reference for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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