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TMI Blog2025 (4) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... r directing the judgment debtor (appellant) to comply with the award dated 06.07.2018 passed by the West Bengal Micro, Small and Medium Facilitation Council, Kolkata within fifteen days of the order. 3. Relevant facts may be briefly noted. 4. On 02.12.2014 and 20.12.2014, respondent filed claim petitions before the West Bengal Micro, Small and Medium Facilitation Council (briefly 'the Facilitation Council' hereinafter) for a total principal outstanding amount of Rs. 1,59,09,214.00 which were registered as Case No. 330/2014 and Case No. 331/2014. In Case No. 330/2014, the claim amount was Rs. 1,36,69,981.33, whereas in Case No. 331/2014 the claim amount was Rs. 22,39,233.00, thus the total amount being Rs. 1,59,09,214.00. The claims were made under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as 'the MSME Act'). 5. As per the requirement of the MSME Act, conciliation proceedings were initiated but attempt for conciliation failed. Thereafter, the arbitration proceedings were commenced on 07.06.2017. 6. On 27.06.2017, the financial creditors of the appellant invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award dated 06.07.2018 under Section 34 of the Arbitration and Conciliation Act, 1996 (briefly 'the 1996 Act' hereinafter). 16. Respondent instituted execution proceeding which was initially registered as Execution Case No.77 of 2018 and thereafter as Commercial Execution Case No.21 of 2022 before the Executing Court. At the stage of execution of the award, appellant filed a petition dated 14.05.2019 contending that the arbitral award was a nullity and hence not executable as the claim of the respondent was already settled at nil as per the resolution plan and, therefore, nothing was payable to the respondent. 17. Executing Court by the order dated 03.03.2023 dismissed the petition of the appellant and directed it to comply with the award dated 06.07.2018 within fifteen days. 18. As noted above, this came to be challenged by the appellant before the High Court by filing a petition under Article 227 of the Constitution of India. High Court framed the following questions for consideration: a. The arbitral award having not been challenged under Section 34 of the Act of 1996, whether the objection to execution of the arbitral award referrable to Section 47 of the Civil Procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t submits that the High Court had erroneously held that the resolution plan did not determine the claim of the respondent at nil and, therefore, the Facilitation Council had the jurisdiction to decide on the claim of the respondent. 22.1. He submits that the High Court had misread and misinterpreted the resolution plan which would be evident from a perusal of the relevant paragraphs of the resolution plan. Respondent had submitted its claim as an operational creditor to the resolution professional. Such claim was the same claim which formed the subject matter of the proceedings before the Facilitation Council. Resolution applicant had submitted a resolution plan in respect of the appellant (corporate debtor) in accordance with the provisions of Section 30 of the IBC to enable the appellant to continue as a going concern. A reading of the relevant paragraphs of the resolution plan i.e. paragraphs 3.2(v), 3.4(ii) and 3.8(i) would indicate that the claims of the operational creditors including the debt of the respondent were settled at nil and, therefore, they were not entitled to any payment. 22.2. On 17.04.2018, NCLT approved the resolution plan under Section 31 of the IBC. Paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657 (iii) Ruchi Soya Industries Ltd. Vs. Union of India (2022) 6 SCC 343 (iv) RPS Infrastructure Ltd. Vs. Mukul Kumar (2023) 10 SCC 718 22.6. On the basis of the above decisions, learned senior counsel submits that it would lead to an absurd situation if the respondent and other operational creditors are permitted to pursue their individual claims even after the corporate debtor goes through a successful corporate insolvency resolution process (CIRP) where the claims of the operational creditors were settled at nil in the resolution plan which was approved by the committee of creditors and finally by the adjudicating authority (NCLT). In such a case, the corporate debtor would once again have to struggle to sustain itself as a going concern to satisfy such claims. Thus, the object or the purport of IBC would be defeated. 22.7. Adverting to a decision of this Court in Adani Power Ltd. Vs. Shapoorji Pallonji & Co. Pvt. Ltd. Civil Appeal No. 1741 of 2023, learned senior counsel submits that this Court has held that the resolution plan, as approved, is binding on all and cannot be made subject matter of arbitration or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was well within its right to object to execution of the award by contending that the award itself is a nullity since the Facilitation Council inherently lacked jurisdiction to arbitrate on the claim of the respondent post approval of the resolution plan. 22.12. In view of the above, learned senior counsel for the appellant submits that the execution petition filed by the respondent for execution of the award ought to have been dismissed by the Executing Court. High Court committed a manifest error in declining to entertain the objections filed by the appellant to execution of the award. That being the position, impugned order of the High Court is liable to be set aside, so also the execution proceedings. 23. Learned senior counsel for the respondent on the other hand supports the impugned order passed by the High Court. 23.1. He submits that the corporate debtor (appellant) which was being managed by the resolution professional, had knowledge of the arbitral award. As a matter of fact, appellant had taken shelter of the arbitral award to get the revision petition filed by the respondent before the Calcutta High Court disposed of. The revision petition was filed against an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat imposition of moratorium and consequential approval of resolution plan does not terminate or put an end to pending proceedings but those were merely stayed. Legislature has not provided that upon approval of a resolution plan, all pending proceedings would get extinguished. Therefore, post expiry of the moratorium period, pending proceedings such as arbitral proceedings would stand revived and taken to their logical conclusion. 23.7. Learned senior counsel submits that in the present case, respondent had lodged its claim before the interim resolution professional and had also informed about the pendency of proceedings before the Facilitation Council. Interim resolution professional had published an information memorandum on 20.10.2017 mentioning therein a list of claimants which did not include operational creditors whose claims were sub-judiced before different judicial fora. Validity of such claims would be decided after the judicial proceedings were complete. He submits that after lifting of moratorium, notices were duly issued to the appellant by the Facilitation Council but the appellant decided not to appear and contest the proceedings. After the award was passed, appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The resolution applicant may also attend such meeting of the committee of creditors though it shall not have the right to vote unless it is also a financial creditor (sub-section (5)). Once the resolution plan is approved by the committee of creditors, the resolution professional shall submit the same to the adjudicating authority in terms of sub-section (6). 26. Section 31 deals with approval of resolution plan. As per sub-section (1), if the adjudicating authority is satisfied that the resolution plan as approved by the committee of creditors meets the requirement of sub-section (2) of Section 30, it shall by order approve the resolution plan. Once the resolution plan is approved by the adjudicating authority, it shall be binding on the corporate debtor and its employees, members, creditors including the central government, any state government or any local authority to whom a debt including statutory dues are owed, guarantors and other stakeholders involved in the resolution plan. However, before passing an order of approval, the adjudicating authority has to satisfy itself that the resolution plan has provisions for its effective implementation. Under sub-section (2), if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the committee of creditors. After an elaborate and exhaustive analysis of various provisions of the IBC, the Bench concluded that a successful resolution applicant cannot suddenly be faced with 'undecided' claims after the resolution plan submitted by him has been accepted. This would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant. 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 corporate debtor. Paragraph 107 of the said decision reads as under: 107. For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued. Paragraph 102 of the aforesaid decision reads thus: 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 the resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. * * * * * * * 102.3. Consequently all the dues including the statutory dues owed to the central government, any state government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents nonetheless the Bench reiterated the proposition laid down in Ghanshyam Mishra (supra) clarifying that even if any stakeholder is not a party to the proceedings before the NCLT and if such stakeholder does not raise its claim before the interim resolution professional/resolution professional, the resolution plan as approved by the NCLT would still be binding on him. 34. Having noticed the relevant provisions of IBC and the judgments of this Court, let us now deal with the challenge made in this appeal. 35. Respondent had supplied telescopic and type mounted cranes, 75 ton crawler cranes, hydra and trailors on hiring basis to the appellant pursuant to two purchase orders dated 02.06.2011 and 06.06.2011. Case No. 330 of 2014 pertains to 138 numbers of bills under eight work orders in which the disputed amount was Rs. 1,36,69,981.33; on the other hand Case No. 331 of 2014 pertains to 158 numbers of bills under nine work orders where the disputed amount was Rs. 22,39,233.00. Thus, the total disputed amount was Rs. 1,59,09,214.33. Buyer (appellant) did not make any payment so the entire amount was claimed as outstanding and due. Initially conciliation proceedings were initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil value at par with operational creditors. 38. Clause 3.4 provides for a proposal for operational creditors (excluding employees and workmen). Sub-clause (ii) says that since the liquidation value is not sufficient to cover the debts of the financial creditors in full, therefore, the liquidation value of the operational creditors or the other creditors etc. was taken as nil. Thus nil payment was proposed under the resolution plan towards claims of operational creditors whether filed or not, whether admitted or not and whether or not set out in the provisional balance sheet or the list of creditors etc. Thus, no source was identified for such payment under the resolution plan. 39. Heading of Clause 3.8 is treatment of amounts claimed under ongoing litigations. Clause 3.8(i) states that all claims arising out of enquiries, investigations, notices, causes of action, suits, litigations, arbitrations, claims of the top 30 operational creditors against the corporate debtor in relation to any period prior to the effective date etc. shall be settled at nil. 40. The resolution plan as submitted by Vedanta Ltd. was examined by NCLT and by order dated 17.04.2018 approved the same. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings on the ground that the award passed by the Facilitation Council was illegal and non est in the eye of law. Since the appellant did not file any application under Section 34 of the 1996 Act, the Executing Court dismissed the application of the appellant dated 14.05.2019 observing that the appellant was trying to deprive the decree holder of the fruits of the award by unnecessarily delaying the execution. 44. This order came to be challenged by the appellant before the High Court in a proceeding under Article 227 of the Constitution of India. We have already noted the three issues framed by the High Court for consideration. In so far the first issue is concerned, High Court is of the view that an award can be challenged in a proceeding under Section 47 CPC on the very limited ground of the award being a nullity or void ab intio or suffering from inherent lack of jurisdiction. However, the High Court opined that if an aggrieved party does not challenge an award under Section 34 of the 1996 Act, it cannot be permitted to object to its execution by alleging it to be a nullity though such a plea of nullity can be entertained if it is of such a grave nature that it is not even ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orced in accordance with the provisions of CPC in the same manner as if it were a decree of a civil court. 48.1. Section 47 CPC deals with questions to be determined by the court executing decree. As per subsection (1), all questions arising between the parties to the suit in which the decree was passed and relating to the execution, discharge or satisfaction of the decree shall be determined by the court executing the decree and not by a separate suit. Execution of decrees and orders is provided for in Order XXI CPC. The law is well settled that at the stage of execution, an objection as to executability of the decree can be raised but such objection is limited to the ground of jurisdictional infirmity or voidness. The law laid down by this Court in Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul Rehman (1970) 1 SCC 670 is that only a decree which is a nullity can be the subject matter of objection under Section 47 CPC and not one which is erroneous either in law or on facts. The aforesaid proposition of law continues to hold the field. 49. Objection to execution of an award under Section 47 CPC is not dependent or contingent upon filing a petition under Section 34 of the 1996 Act. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd concluded without further complications. View taken by the High Court cannot be accepted in the light of the clear cut provisions of the IBC as well as the law laid down by this Court. In view of the resolution plan, as approved, the claim of the respondent stood extinguished. Therefore, the Facilitation Council did not have the jurisdiction to arbitrate on the said claim. Since the award was passed without jurisdiction, the same could be assailed in a proceeding under Section 47 CPC. View taken by the High Court that because the appellant did not challenge the award under Section 34 of the 1996 Act, therefore, it was precluded from objecting to execution of the award at the stage of Section 47 of CPC is wholly unsustainable. 51. Consequently, the view taken by the High Court that notwithstanding approval of the resolution plan by the NCLT, the Facilitation Council did not lose jurisdiction to proceed and pronounce the arbitral award, is erroneous and contrary to the law laid down by this Court. 52. In that view of the matter, we have no hesitation to hold that upon approval of the resolution plan by the NCLT, the claim of the respondent being outside the purview of the resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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