2021 Supreme(SC) 273

SUPREME COURT OF INDIA
R.F. Nariman, B.R. Gavai, Hrishikesh Roy, JJ.
GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY - Appellant
VERSUS
EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR AND OTHERS — Respondent
Civil Appeal No. 8129 of 2019 with Civil Appeal No. 1554 of 2021 [Arising out of SLP No. 11232 of 2020]; Writ Petition (Civil) No. 1177 of 2020 and Civil Appeal Nos. 1550-1553 of 2021 [Arising out of SLP Nos. 7147-7150 of 2020]
Decided on : 13-04-2021

IMPORTANT POINTS
(1) Insolvency Resolution Plan – Once resolution plan is approved by Adjudicating Authority, after it is satisfied, that resolution plan as approved by Committee of Creditors (CoC) meets requirements as referred to in sub-section (2) of Section 30 of IBC, it shall be binding on Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders.
(2) Once a resolution plan is approved by Adjudicating Authority, all such claims/dues owed to State/Central Government or any local authority including tax authorities, which were not part of resolution plan shall stand extinguished and no proceedings in respect of such dues for the period prior to date on which Adjudicating Authority grants its approval under Section 31 of IBC could be continued.
(3) Resolution plan is in respect of Corporate Debtor and successful resolution applicant only takes over management of Corporate Debtor in accordance with resolution plan. Resolution applicant steps into shoes of Corporate Debtor.
(4) Non-exercise of jurisdiction under Article 226 of Constitution is a rule of self-restraint. A party cannot be made to run from one forum to another forum in respect of proceedings and claims which are not permissible in law.
(5) Presumption against retrospective operation is not applicable to declaratory statutes.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Sections 31(1) and 238 – Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 – Regulations 13 and 14 – Insolvency Resolution Plan – Once resolution plan is approved by Adjudicating Authority, after it is satisfied, that resolution plan as approved by Committee of Creditors (CoC) meets requirements as referred to in sub-section (2) of Section 30, it shall be binding on Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders – Such a provision is necessitated since one of dominant purposes of I&B Code is, revival of Corporate Debtor and to make it a running concern – Resolution plan is also required to provide for management of affairs of Corporate Debtor after approval of resolution plan and also implementation and supervision of resolution plan – Legislative intent of making resolution plan binding on all stakeholders after it gets seal of approval from Adjudicating Authority upon its satisfaction, that resolution plan approved by CoC meets requirement as referred to in sub-section (2) of Section 30 is, that after approval of resolution plan, no surprise claims should be flung on successful resolution applicant – Dominant purpose is, that he should start with fresh slate on the basis of resolution plan approved – In view of provisions of Section 238 of I&B Code, provisions thereof will have an overriding effect, if there is any inconsistency with any of provisions of law for the time being in force or any instrument having effect by virtue of any such law. (Paras 58, 59, 64, and 130)

(B) Insolvency and Bankruptcy Code, 2016 – Section 31[As amended by Section 7 of Act 26 of 2019] – Nature of amendment – 2019 amendment is declaratory and clarificatory in nature and retrospective in operation – Word “other stakeholders” would squarely cover Central Government, any State Government or any local authorities – Legislative intent in amending sub-section (1) of Section 31 of I&B Code was to clarify that resolution plan approved by Adjudicating Authority shall also be binding on Central Government, any State Government or any local authority to whom a debt is owed in respect of payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, including tax authorities – Once such a resolution plan was approved by Adjudicating Authority, all such claims/dues owed to State/Central Government or any local authority including tax authorities, which were not part of resolution plan shall stand extinguished and no proceedings in respect of such dues for the period prior to date on which Adjudicating Authority grants its approval under Section 31 could be continued – Respondents are not entitled to recover any claims or claim any debts owed to them from Corporate Debtor accruing prior to transfer date – Impugned judgment and order of Jharkhand High Court dated 1.5.2020 is quashed and set aside. (Paras 71, 78, 87, 94, 95, 148 and 149)

(C) Interpretation of Statute – Rule against Retrospectivity – Presumption against retrospective operation is not applicable to declaratory statutes – What is material is, to ascertain legislative intent – If legislature by an amendment supplies an obvious omission in a former statute or explains a former statute, subsequent statute has a relation back to the time when prior Act was passed. (Paras 81 and 82)

(D) Insolvency and Bankruptcy Code, 2016 – Sections 3(10) and 5(20) & (21) – Operational debt – Ambit of – Even a claim in respect of dues arising under any law for the time being in force and payable to Central Government, any State Government or any local authority would come within ambit of ‘operational debt’ – Central Government, any State Government or any local authority to whom an operational debt is owed would come within ambit of ‘operational creditor’ as defined under sub-section (20) of Section 5 of I&B Code – Consequently, a person to whom a debt is owed would be covered by definition of ‘creditor’ as defined under sub-section (10) of Section 3 of I&B Code – As such, even without 2019 amendment, Central Government, any State Government or any local authority to whom a debt is owed, including statutory dues, would be covered by term ‘creditor’ and in any case, by term ‘other stakeholders’ as provided in sub-section (1) of Section 31 of I&B Code. (Para 91)

(E) Constitution of India – Article 226 – Writ Jurisdiction – Alternative remedy – Non-exercise of jurisdiction under Article 226 is a rule of self-restraint – Alternate remedy would not operate as a bar in at least three contingencies, namely, (1) where writ petition has been filed for enforcement of any of Fundamental Rights; (2) where there has been a violation of principle of natural justice; and (3) where order or proceedings are wholly without jurisdiction or vires of an Act is challenged – Relegating appellant to alternative remedy would serve no purpose – A party cannot be made to run from one forum to another forum in respect of proceedings and claims which are not permissible in law – Resolution plan is in respect of Corporate Debtor and successful resolution applicant only takes over management of Corporate Debtor in accordance with resolution plan – Resolution applicant steps into shoes of Corporate Debtor – High Court has erred in holding, that Appellant-Company does not have locus to file writ petitions. (Paras 129, 131 and 145)

Facts of the case:

Important questions, that arise for consideration in this batch of matters, are:(i) As to whether any creditor including Central Government, State Government or any local authority is bound by

Resolution Plan once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016?

(ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature?

(iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the Corporate Debtor, which are not a part of Resolution Plan approved by adjudicating authority?

Findings of Court:

Finding of the High Court, that the dues owed to the State Government and Central Government would not come within the definition of ‘operational debt’, is incorrect in law in the light of the view that is taken by us. So also finding, that since the order of NCLT is prior to the date on which Section 31(1) of I&B Code was amended, provisions of Section 31 would not be applicable, also cannot stand.

Result : Appeals allowed.