Orissa Manganese & Minerals Limited Vs State of Odisha (Orissa High Court)
Conclusion: Claims before approval of resolution plan were extinguished on approval of plan under section 31 of the Insolvency and Bankruptcy Code ( IBC ), 2016. The court held that the resolution plan was approved on June 22, 2018 extinguished all liabilities predating the date of approval of resolution plan therefore the claims of the state with respect to the period prior to the approval date could not be entertained.
Held: Three writ petitions were filed against demand letters issued by the state (opposite parties) demanding statutory dues. The State Bank of India , financial creditor filed an application under section 7 of the Insolvency and Bankruptcy Code (IBC) against Orissa Manganese and Minerals Ltd.-OMML , corporate debtor for initiating Corporate Insolvency Resolution Process (CIRP). The application was admitted by the NCLT. The NCLT approved a resolution plan submitted by a successful resolution applicant on June 22, 2018. This plan was approved by the Committee of Creditor (CoC) with 89.23% voting shares. Assessee-company contended that once a resolution plan was approved, it was binding on all parties including government authorities. New liabilities could not be imposed as it would defeat the purpose of the IBC that was to revive the corporate debtor. Per contra, the state submitted that statutory liabilities were not negated especially arising from the Supreme Court judgement in Common Cause v. Union of India (2017) in which the court awarded the compensation under section 21 of the MMDR Act. It was further argued that these dues directed by the court to be recovered could not be effaced after the approval of resolution plan. It was submitted that no authority whether NCLT or CoC or NCLAT could have refused to enforce the statutory demands by approving the resolution plan. It was held that once the Resolution Plan was approved by the NCLT, which attained finality as per the order of the Hon’ble Supreme Court, it was no more open for the Opposite Parties to again raise the demands for the very period covered by the Resolution Plan, which in other words to say that no claim for the period prior to 22.06.2018, the date of approval of the Resolution Plan by the NCLT, i.e., the Plan Effective Date, could have been raised by the Opposite Parties and such demands to the extent as they cover the period up to 22.06.2018 stood automatically extinguished in terms of the Resolution Plan. As pointed out in Ghanashyam Mishra & Sons Private Limited, the approval of the Resolution Plan, no surprise claim should be flung on the Resolution Plan as the Resolution Plan provided the Corporate Debtor’s business on a clean state to the successful Resolution Applicant. Further, the Resolution Applicant “should start with fresh slate on the basis of the Resolution Plan approved shunning its prior status as ‘Corporate Debtor’. Thus, in terms of section 31 of the I & B Code, the above ARP was binding on all creditors including Central Government and State Government. All those impugned demands raised against assessee-Company pertaining to the period prior to the Plan Effective Date, i.e. 22.06.2018 stood automatically extinguished in terms of Approved Resolution Plan (ARP). In other words, the demands to the extent, which cover the period up to 22.06.2018 were thus unsustainable in law. The Court directed the Opposite Parties to revise the demands by limiting it to the period from 22.06.2018 onwards and raise the same afresh as against assessee-company in accordance with law so as to be satisfactorily discharged.
