Sanghvi Forging And Engineering Limited Vs DCIT (Gujarat High Court)
Summary: The Gujarat High Court allowed the writ petition filed by Sanghvi Forging And Engineering Limited against DCIT and quashed the impugned notices following approval of the company’s resolution plan. Counsel for the petitioner produced an order dated 26.04.2021 passed by the National Company Law Tribunal, Ahmedabad Bench, in I.A. No.130 of 2021 and I.A. No.143 of 2021 in C.P. (IB) No.197 of 2018. That order approved the resolution plan under Sections 30(6) and 31 of the Insolvency and Bankruptcy Code, 2016. In view of this development, the High Court recorded that the status of the present writ petitioner no longer survived. The Revenue’s Senior Standing Counsel was unable to dispute the position. The Court applied the Supreme Court’s decision in Ghanashyam Mishra and Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., [2021] 126 taxmann.com 132 / 166 SCL 237 (SC). Under that ruling, approval of a resolution plan under Section 31(1) freezes the claims provided in the plan and makes them binding on the corporate debtor, employees, members, creditors, government authorities, guarantors and other stakeholders. Claims that do not form part of the approved plan stand extinguished on the date of approval, and proceedings concerning those excluded claims cannot be initiated or continued. On the undisputed facts and this settled legal position, the High Court allowed the petition and set aside the notices.
Cases Discussed
- Ghanashyam Mishra and Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., [2021] 126 taxmann.com 132 / 166 SCL 237 (Supreme Court) — Relied upon for the binding effect of an approved resolution plan and the extinguishment of claims outside that plan, in respect of which proceedings cannot be initiated or continued.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Learned advocate Mr. B.S. Soparkar, appearing for the petitioner has tendered a copy of the order dated 26.04.2021 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in I.A. No.130 of 2021 and I.A. No.143 of 2021 in C.P. (IB) No.197 of 2018, whereby the resolution plan in respect of the present petitioner has been approved under Sections 30(6) and 31 of the Insolvency and Bankruptcy Code, 2016. In view thereof, the status of the present writ petitioner no longer survives.
2. Learned Senior Standing Counsel Mr. Karan G. Sanghani is unable to dispute the aforesaid position.
3. Thus, in view of the decision of the Supreme Court in the case of Ghanashyam Mishra and Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., [2021] 126 taxmann.com 132 / 166 SCL 237 (SC), wherein the Supreme Court has held that once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, the claims as provided in the resolution plan shall stand frozen and shall 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. The Supreme Court has further held that, on the date of approval of the resolution plan by the Adjudicating Authority, all such claims which are not a part of the resolution plan shall stand extinguished and no person shall be entitled to initiate or continue any proceedings in respect of a claim which is not part of the resolution plan.
4. Accordingly, the present writ petition stands allowed in view of the undisputed fact and proposition of law. The impugned notices are hereby quashed and set aside.
