Case Law Details
Union Of India & Anr Vs Ramswarup Lohh Udyog & Ors (Calcutta High Court)
After Approval of Resolution Plan Corporate Entity Starts Fresh & All Claim gets Extinguished
In the case of Union Of India & Anr vs. Ramswarup Lohh Udyog & Ors before the Calcutta High Court, the central issue revolved around the aftermath of a corporate insolvency resolution process (CIRP) and the subsequent approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC).
Defendant No. 1 had merged with Defendant No. 5 in 2008 as per a previous order of the Calcutta High Court. After this merger, Defendant No. 5 ceased operations for over fourteen years. Subsequently, the company faced insolvency proceedings under the IBC, culminating in the approval of a resolution plan on March 16, 2019, by the Committee of Creditors (CoC). The National Company Law Tribunal (NCLT), Kolkata Branch, affirmed this plan through an order dated September 4, 2019. By an order dated April 6, 2022, the NCLT directed the parties to implement the resolution plan within thirty days.
In the present proceedings, GA 2 of 2024, the authorized representative of Defendant No. 5 contended that post-insolvency and approval of the resolution plan, the corporate entity starts afresh, with all previous claims extinguished. This position was supported by legal precedent, particularly citing the case of Ghanashyam Mishra & Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], which established that companies undergoing revival through a resolution plan under the IBC begin anew without liabilities from the past.
Mr. Bose, counsel for the petitioner (presumably Union of India), acknowledged the legal standing regarding Defendant No. 5 but sought instructions from the client regarding the continuation of the suit against Defendants No. 2, 3, and 4.
The Court upheld the established legal principle that after the conclusion of insolvency proceedings and the approval of a resolution plan, the corporate entity emerges with a clean slate. This principle was underscored by various statutory provisions and upheld in significant judicial decisions such as Sirpur Paper Mills Limited Vs. I.K. Merchants Pvt. Ltd. [(2021) SCC OnLine Cal 1601], CoC of Essar Steel India Limited Through Authorised Signatory Vs. Satish Kumar Gupta & Ors. [(2019) SCC OnLine SC 1478], India Resurgence ARC Pvt. Ltd. Vs. Amit Metaliks Ltd. & Anr. [(2021) SCC OnLine SC 409], and Innovative Industries Limited Vs. ICICI Bank & Anr. [(2018) 1 SCC 407].
Based on this legal foundation, the Court determined that the claims of Union of India against Defendant No. 5 were no longer valid and should be considered relinquished. Consequently, the Court ordered the removal of Defendant No. 1 and Defendant No. 5 from the list of parties in the case, directing the Department to amend the cause title accordingly.
In conclusion, GA 2 of 2024 was disposed of with the decision to strike off the names of Defendant No. 1 and Defendant No. 5 from the array of parties. The suit was scheduled to appear next on July 10, 2024, signaling the resolution of the immediate legal issues concerning the post-insolvency status of Defendant No. 5 under the IBC framework.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court: GA 2 of 2024 is filed by the authorised representative of Defendant No. 5. It is contended that the Defendant No. 1 merged with the Defendant No. 5 in the year 2008 in terms of Order dated 30th June, 2008 passed by this Court. Therefore, the Defendant No. 1 ceased to being exist. Subsequently, the Defendant No. 5’s operation was shut down for more than fourteen years and Corporate Insolvency Resolution Process was initiated National Company Law Tribunal, Kolkata Branch under Insolvency and Bankruptcy Code, 2016. The resolution plan was subsequently approved in the meeting of Committee of Creditors on March 16, 2019 which was approved more or less by the NCLT, Kolkata Branch in terms of Order dated 04/09/2019. In terms of Order dated 06/04/2022, the NCLT directed the parties to implement the approved resolution plan within thirty days.
Mr. Bose, the Learned Counsel for the Petitioner submitted that it is no longer res integra that after insolvency proceeding is over and the resolution plan is duly approved, the corporate entity starts with a clean slate on rejuvenation. Mr. Bose referred to Ghanashyam Mishra & Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], to submit that the company, after revival, in terms of resolution plan comes with a clean slate. Therefore, claim against the Defendant No. 5 stands extinguished.
The Learned Counsel for the Plaintiff submitted that they are not in a position of contradict the position of law as against the Defendant No. 5. However, she will take instruction from her client as to whether the suit shall be proceeded against the Defendant No. 2, 3 and 4.
It is no longer res integra that once the insolvency proceeding is over and corporate plan is approved the companies starts with a clean slate. This is established in the statutory provisions as well as in Ghanashyam Mishra & Sons (P.) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], Sirpur Paper Mills Limited Vs. I.K. Merchants Pvt. Ltd. [(2021) SCC OnLine Cal 1601], CoC of Essar Steel India Limited. Through Authorised Signatory Vs. Satish Kumar Gupta & Ors. [(2019) SCC OnLine SC 1478], India Resurgence ARC Pvt. Ltd. Vs. Amit Metaliks Ltd. & Anr. [(2021) SCC OnLine SC 409] and Innovative Industries Limited Vs. ICICI Bank & Anr. [(2018) 1 SCC 407]. In view of that the claim of Union of India against the Defendant No. 5 no longer subsist and is deemed to be relinquished. Accordingly, it is a fit case where name of the Defendant No. 1 should be struck off as being merged with Defendant No. 5; and the name of Defendant No. 5 also should be struck off from the array of the parties, as the claim against the Defendant No. 5 remains non‑existant.
Hence, it is ordered that the name of the Defendant No. 1 and 5 be struck off from array of parties. Department is directed to amend the cause title accordingly.
GA 2 of 2024 stands disposed of. The suit will appear in the list on 10th July, 2024.
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