The Hon’ble Supreme Court of India in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited & Ors. [Civil Appeal No. 8129 of 2019 with WP (Civil) No. 1177 of 2020 and Civil Appeals No. 1550-1554 of 2021] held that, once resolution plan under the Insolvency & Bankruptcy Code, 2016 (IBC) is duly approved by adjudicating authority, no person is entitled to initiate or continue any proceedings in respect to claim which is not part of resolution plan and shall stand extinguished.
In this set of appeals filed by Ghanashyam Mishra & Sons Private Limited, Ultratech Nathdwara Cement Limited, M/S Monnet ISPAT & Energy Limited, and Electrosteel Steels Limited (“the Appellants” or “Resolution Applicants”) wherein, in each of Appellant’s matters, the concerned successful resolution plan under the IBC had stipulated that the claims including statutory liabilities and contingent liabilities, to the extent not satisfied or received under the resolution plan will be extinguished.
The Adjudicating Authority in each Appellant’s cases had approved the resolution plans exercising jurisdiction under Section 31 of the IBC. Further, the approval of these resolution plans was upheld by the NCLAT/ High Court.
However, the creditors started filing claims/suits/recovery actions against the corporate debtor under a new management. The Statutory Authorities continued to press their demands for outstanding dues.
Being aggrieved, the successful Resolution Applicants has filed these appeals.
The Hon’ble Supreme Court of India in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited & Ors. [Civil Appeal No. 8129 of 2019 with WP (Civil) No. 1177 of 2020 and Civil Appeals No. 1550-1554 of 2021] held as under:
(i) Once a resolution plan is duly approved by the Adjudicating Authority under Section 31(1) of the IBC, 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 entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
(ii) Amendment to Section 31 of the IBC is clarificatory and declaratory in nature and therefore will be effective from the date on which IBC has come into effect.
(iii) 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 for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 of the IBC could be continued.
Section 31 of the IBC:
“Approval of resolution plan-
Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.
(2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.
(3) After the order of approval under sub-section (1),-
(a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and
(b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.
(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.”
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