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TMI Blog2024 (10) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... cover the period up to 22.06.2018 stand automatically extinguished in terms of the Resolution Plan. The observations made above in the case of the Appeal filed by the present successful Resolution Applicant in the case of Ghanashyam Mishra Sons [ 2021 (4) TMI 613 - SUPREME COURT ] provide the answer to the submission of the learned Counsel for the State that the dues arising out of the judgment of the Hon ble Supreme Court in case of Common Cause were not specifically dealt with in the ARP - the Resolution Applicant should start with fresh slate on the basis of the Resolution Plan approved. In other-words, upon approval of the Resolution Plan, the Company-OMML no more stands as the Corporate-Debtor and it is only under the legal obligation as being in the management of the Company (OMML) strictly in terms of the Resolution Plan. In terms of section 31 of the I B Code, the above ARP is binding on all creditors including Central Government and State Government. All those impugned demands raised against the Petitioner-Company pertaining to the period prior to the Plan Effective Date, i.e. 22.06.2018 stand automatically extinguished in terms of Approved Resolution Plan (ARP). In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the demands, which have been impugned in these writ petitions are in clear violation of the provisions contained in I B Code and the Rules as well as the Regulations made thereunder. BACKGROUND FACTS:- 3. The State Bank of India (hereinafter referred to as the SBI ), being the Financial Creditor, filed an application under Section 7 of I B Code read with Rule 4 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against the Corporate Debtor (Orissa Manganese and Minerals Limited-OMML). The said application numbered as CP(IB) No. 371/KB/2017, being filed before the Adjudicating Authority, i.e., the National Company Law Tribunal (NCLT), Kolkata Bench, Kolkata, was admitted by order dated 03.08.2017 initiating the Corporate Insolvency Resolution Process (in short, hereinafter referred to as the CIRP ) in declaring a moratorium and public announcement as stated in section 14 of the I B Code. That date when the NCLT passed the order is the Insolvency Commencement date. Mr. Sumit Binani was appointed as the Interim Resolution Professional (IRP) for ascertaining the particulars of the Creditors and convening a Committee of Creditors (CoC) for evolving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Plan of the GMSPL was considered by the CoC for its approval. Finally in the 12th Meeting held on 31.04.2018, the CoC unanimously took a decision to convene a meeting of the CoC on 25.04.2018 at 6 p.m. for voting on the Resolution Plan so proposed by the GMSPL. As the CoC found that the Resolution Plan submitted by the GMSPL meets all the requirements as contained in sub-section-2 of section 30 of the I B Code, the same was placed for voting before the Members of the CoC. The Resolution Plan came to be approved on 25.04.2018 by more than 89.23% voting share of Financial Creditors of the Corporate Debtor (OMML). 3.1 In view of the developments as above, a Company Application bearing No. 3-A (ID No.402-KB-2018) came to be filed by the RP before the NCLT for approval of the Resolution Plan submitted by the GMSPL, which had been approved by the CoC by more than 89.23% of the voting share of the Financial Creditor of the Corporate Debtor (OMML) as noted above. 3.2. When that matter was thus placed before the NCLT for consideration for approval, the EARC filed two applications; the first one (CA(IB) NO. 398/KB/2018) for rejection of the Resolution Plan approved by the CoC in seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Base. 3.5. On that very date, i.e. 22.06.2018, the application numbered as CA(IB) No. 471/KB/2018 filed by the Workers Union of the Patmunda Manganese Mines of the Corporate Debtor-OMMPL for realization of wages and for issuing certain directions to the RP was also dismissed. 3.6. Another application under sub section 5 of section 60 of the I B Code numbered as CA(IB) No. 391/KB/2018 filed by SREI Equipment Finance Limited, one of the Financial Creditors of the Corporate Debtor-OMMPL challenging the distribution of upfront payment payable under the Resolution Plan to the Financial Creditors of the Corporate Debtor too was dismissed on 22.06.2018. 3.7. The EARC, being aggrieved by the order dated 22.06.2018 passed by the NCLT, carried Company Appeal (AT) (Insolvency) Nos. 437/2018 and 444/2018 before the National Company Law Appellate Tribunal, New Delhi (hereinafter referred to as NCLAT ). The Company Appeal (AT) (Insolvency) No.437/2018 was against the rejection of claims of EARC as Financial Creditor and thereby its non-inclusion in CoC whereas the Company Appeal (AT) (Insolvency) No. 444/2018 related to the grievance against the RP and CoC that they had erroneously held the plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Plan, being the paramount, the interference is only warranted within limited parameters of judicial review as are available under the statute. It was next contended that once the Adjudicating Authority (NCLT) approves the Resolution Plan, it shall be binding on everyone including Corporate Debtor and its employees, members, creditors including the Central Government, any State Government or any Local Authority, to whom a debt is owed in respect of the payment of dues arising under any law for the time being in force, as also the guarantors and other stake-holders, involved in the Resolution Plan. Therefore, once a Resolution Plan is accepted, if any additional liability is placed on the shoulder of the successful Resolution applicant, the entire Plan would become unworkable, resulting in frustration of the very purpose of the enactment in serving its avowed objective as to the revival of the Corporate Debtor and the total Resolution Plan, in view of the additional liability, being unworkable. Reliance therein was placed on the following judgments of the Hon ble Supreme Court:- (a). K. Sashidhar -V- Indian Overseas Bank; (2019) 12 SCC 150; (b). Essar Steel (India) Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Koira Division in respect of Pattamunda mines demanding payment of differential stamp duty and registration fee relating to the document executed on 29.05.2015 amounting to Rs. 34,54,363.50 (Rupees Thirty Four Lakh Fifty Four Thousand Three Hundred Sixty Three and Fifty Paise) and Rs. 13,81,745.40 (Rupees Thirteen Lakh Eighty One Thousand Seven Hundred Forty Five and Forty Paise) respectively. It is further prayed that the letter dated 19.12.2023 issued by the Sub-Registrar, Bonai demanding payment of the differential stamp duty and registration fee amounting to Rs. 2,18,60,269/- (Rupees Two Crore Eighteen Lakh Sixty Thousand Two Hundred Sixty Nine) in relation to a document executed by 29.05.2015 in respect of Pattamunda mines; letter dated 19.12.2023 issued by the Sub-Registrar, Bonai seeking recovery of Rs. 84,03,780/- (Rupees Eighty Four Lakh Three Thousand Seven Hundred Eighty) in relation to the document executed on 29.05.2015 in respect of Orahuri/Nuagaon mines and letter dated 29.12.2023 issued by the Sub-Registrar, Bonai seeking recovery of Rs. 43,44,848/- (Rupees Forty Three Lakh Forty Four Lakh Eight Hundred Forty Eight) towards deficit stamp duty and registration free i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, guarantors and other stake-holders, involved in the Resolution Plan. He further submitted that once the Resolution Plan is finally accepted, if any additional liability is thrust upon the Resolution Plan and the successful Resolution Applicant is asked to bear the said liability, the entire plan would become unworkable, resulting in the frustration of the very purpose of the enactment i.e. revival of the Corporate Debtor and that would defeat the objective sought to be achieved under the I B Code. He next submitted that the Resolution Plan, in the present case, as submitted by the GMSPL, having been approved by the CoC, then by the NCLT and had been confirmed by the NCLAT. And certain observations of the NCLAT while disposing the Appeals as regards realization of few items of debts through other modes, have also been quashed by the Hon ble Supreme Court, by its judgment dated 13.04.2021 passed in the Appeal filed by the very successful Resolution Applicant, i.e., in case of Ghanashyam Mishra Sons Private Limited through the Authorized Signature-V-Edelweiss Asset Reconstruction Company Limited through the Director and Others; (2021) 9 SCC 567. He, therefore, submitted that if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Authorities do not proceed to recover the dues as directed by the Hon ble Supreme Court therein, they would be acting contrary to the decision of the Hon ble Supreme Court and as such liable for the legal consequence. He further placed reliance upon the decision of the Hon ble Supreme Court in case of Lalit Kumar Jain -V- Union of India and Others; T.C. (Civil) No. 245 of 2020 disposed of on 21.05.2021 . It was submitted that the demands, as advanced vide letters, which have been challenged in all these writ petitions, are all on the basis of that decision in case of Common Cause (Supra) towards compensation under section 21 (5) of the MMDR Act and other incidental and ancillary demands flowing therefrom. Therefore, according to him, neither the RP nor the CoC nor the NCLT and NCLAT had the authority or competency to hold the demand of the above amount raised by the State Authorities in compliance of the directive of the Hon ble Supreme Court in saying that the same are not enforceable in view of the approval of the Resolution Plan. He, therefore, contended that the impugned demands can never be said to have been extinguished even by the approval of the Resolution Plan attain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of minerals extracted in violation of the provisions of MMDR Act read with MC Rules and as approved by the IBM for the purpose for which compensation under section 21 (5) has been demanded. The dead rent and surface rent are based on the area over which illegal extraction is said to have been done by the Corporate Debtor, which area was beyond the leased area. Thus, all these demands spring from the directions given in case of Common Cause (Supra). 10. At this juncture, it would be pertinent to refer to the relevant Regulations of The Insolvency and Bankruptcy Board of India Insolvency Resolution Process for Corporate Persons for better appreciation. Regulations 6, 7, 10, 12 and 13 of Insolvency Regulations governing and regulating the Insolvency Resolution Process for Corporate Persons, which bear importance for addressing the issue and those read as under: 6. Public announcement (1) An insolvency professional shall make a public announcement immediately on his appointment as an interim resolution professional. Explanation : Immediately' means not later than three days from the date of his appointment . (2) The public announcement in sub-regulation (1) shall: (a) be in Form A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The interim resolution professional or the resolution professional, as the case may be, may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim. xxx xxx xxx xxx 12. Submission of proof of claims.- (1) Subject to sub-regulation (2), a creditor shall submit claim with proof on or before the last date mentioned in the public announcement. (2) A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit the claim with proof to the interim resolution professional or the resolution professional, as the case may be, on or before the ninetieth day of the insolvency commencement date. (3) Where the creditor in sub-regulation (2) is a financial creditor under Regulation 8, it shall be included in the committee from the date of admission of such claim: Provided that such inclusion shall not affect the validity of any decision taken by the committee prior to such inclusion. 12-A. Updation of claim :-A creditor shall update its claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date. 13. Verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Insolvency Resolution Process Regulations. 12. In the case at hand, the RP, having followed these Regulations having placed the received EOI from the players coming to take over the management and charge of the Corporate Debtor (OMML); the CoC has finally approved that Resolution Plan of the GMSPL. As regards the demand for the period prior to the Plan Effective Date, we find the Approve Resolution Plan (ARP), in the given case, talks about the Statutory as well as the Government dues, which fall within the definition of Operational Debt as indicated in sub-section 21 of section 5 of I B Code. First of all, it is seen that the basis of the Resolution Plan indicated are the followings:- *Payment of Insolvency Resolution Process cost in priority to the payment of other debts of the Corporate Debtor; * Repayment/treatment of debts of Operational Creditors (not less than the amount to be paid to the Operational Creditors in the event of liquidation of Corporate Debtor as per provisions of I B Code; * Management of affairs of Corporate Debtor after approval of Resolution Plan; and * Implementaiton and supervision of the Resolution Plan. The above basis are on the review of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er approval of the Resolution Plan: The IBC and the CIRP Regulations entitle all creditors of a corporate debtor to submit their claims to the IP on or prior to the date on which the Resolution Plan gets approved by the CoC. As a result, in the event any creditors of OMML, who does not submit its claims to the IP prior to the date on which this resolution plan is approved by the CoC, then in such case, the said creditor will not be entitled to receive any payments under this resolution plan. The unclaimed amounts shall stand extinguished and become NIL. The Resolution Plan of the successful Resolution Applicant (GMSPL) containing all these above has been approved by the NCLT as regards that section when all the Resolution Plan, the NCLT has clearly noted that the reorganization of business dealt with the Resolution Plan under section-c do not violated any of the provision of the I B code or the Regulation 37 of the Insolvency Regulation Process Resolution and the Corporate Debtor s business is to be as a going concern and that the Corporate Debtor and Special Purpose Vehicle (SPV) shall continue as an on going concern basis and operations of the Company will be continued in the nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Committee of Creditors of Esser Steel (Supra). The Hon ble Supreme Court, considering all the earlier decisions including Maharasthra Seamless Ltd., Vrs. Padmanavan Venketesh Others (2020) 11 SCC 467 and Innovative Industries Vrs. ICICI Bank, (2018) 1 SCC 407 and again referring to the earlier decision in the case of K. Sashidhar Vrs. Indian Overseas Bank (2019) 12 SCC 150 and discussing all those judgments, has held as under:- 57. It could thus be seen, that the legislature has given paramount importance to the commercial wisdom of CoC and the scope of judicial review by Adjudicating Authority is limited to the extent provided under Section 31 of I B Code and of the Appellate Authority is limited to the extent provided under sub-section (3) of Section 61 of the I B Code, is no more res integra. 58. Bare reading of Section 31 of the I B Code would also make it abundantly clear, that once the resolution plan is approved by the Adjudicating Authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the Corporate Debtor and its employees, members, creditors, guaranto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated by Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the Corporate Debtor towards them are required to be contained in the information memorandum. 61. All these details are required to be contained in the information memorandum so that the resolution applicant is aware, as to what are the liabilities, that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the Corporate Debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stake-holders after it gets the seal of approval from the Adjudicating Authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is, that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is, that he should start with fresh slate on the basis of the resolution plan approved. 17. Reliance was placed on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of Section 30 of I B Code also casts a duty on RP to examine, that the resolution plan does not contravene any of the provisions of the law for the time being in force. 67. Perusal of Section 29 of the I B Code read with Regulation 36 of the Regulations would reveal, that it requires RP to prepare an information memorandum containing various details of the Corporate Debtor so that the resolution applicant submitting a plan is aware of assets and liabilities of the Corporate Debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the Corporate Debtor towards them are required to be contained in the information memorandum. 68. All these details are required to be contained in the information memorandum so that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible in law. 71. As held by this Court in the case of Pr. Commissioner of Income Tax vs. Monnet Ispat and Energy Ltd., in view of provisions of Section 238 of I B Code, the provisions thereof will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being in force or any instrument having effect by virtue of any such law. As such, the observations made by NCLAT to the aforesaid effect, if permitted to remain, would frustrate the very purpose for which the I B Code is enacted. 72. However, in Civil Appeal arising out of Spec ial Leave Petition (Civil) No. 11232 of 2020, Writ Petition (Civil) No. 1177 of 2020 and Civil Appeals arising out of Special Leave Petition (Civil) Nos. 71477150 of 2020 , the issue with regard to the statutory claims of the State Government and the Central Government in respect of the period prior to the approval of resolution plan by NCLT, will have to be considered. 73. Vide Section 7 of Act No. 26 of 2019 (vide S.O. 2953(E), dated 16.8.2019 w.e.f. 16.8.2019), the following words have been inserted in Section 31 of the I B Code. including the Central Government, any State Government or any local auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the speech the Hon'ble Finance Minister has categorically stated, that Section 238 provides that I B Code will prevail in case of inconsistency between two laws. She also stated, that there was question about indemnity for successful resolution applicant and that the amendment was clearly making it binding on the Government. She stated, that the Government will not make any further claim after resolution plan is approved. So, that is going to be a major sense of assurance for the people who are using the resolution plan. She has categorically stated, that she would want all the Hon'ble Members to recognize this message and 73 communicate further that I B Code gives that comfort to all new bidders. They need not be scared that the taxman will come after them for the faults of the earlier promoters. She further states, that once the resolution plan is accepted, the earlier promoters will be dealt with as individuals for their criminality but not the new bidder who is trying to restore the company. 84. It is clear, that the mischief, which was noticed prior to amendment of Section 31 of I B Code was, that though the legislative intent was to extinguish all such debts owe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, would go haywire and the plan would be unworkable. 94. We have no hesitation to say, that the word other stakeholders would squarely cover the Central Government, any State Government or any local authorities. The legislature, noticing that on account of obvious omission, certain tax authorities were not abiding by the mandate of I B Code and continuing with the proceedings, has brought out amendment so as to cure the said mischief. We therefore hold, that the 2019 amendment is declaratory and clarificatory in nature and therefore retrospective in operation. 102. In the result, we answer the questions framed by us as under: 102.1 That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any-OMML no more stands as the Corporate-Debtor and it is only under the legal obligation as being in the management of the Company (OMML) strictly in terms of the Resolution Plan. 20. The decision in the case of Lalit Kumar Jain (Supra), was obviously in the peculiar facts and circumstances of the case. A careful reading being given to the said judgment, it reveals that the subject matter therein was the challenge to the vires and validity of a notification dated 15.11.2019 issued by the Central Government along with some reliefs touching the validity of the Insolvency Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 issued on 15.11.2019 likewise validity of the Regulations made by the Insolvency Bankruptcy Board of India on 20.11.2019 were also the subject matter of the challenge. However, in course of submission, the learned counsel for the parties therein, confined their challenge to the notification dated 15.11.2019 issued by the Central Government. It was contended that the notification issued by the Central Government was in exercise of excess delegation, having no authority legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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