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B. R. GAVAI, AUGUSTINE GEORGE MASIH
JSW Steel Limited – Appellant
Versus
Pratishtha Thakur Haritwal – Respondent
What are the rights of creditors, including government authorities, regarding claims not included in a Resolution Plan under the Insolvency and Bankruptcy Code? What is the legal consequence for stakeholders who initiate recovery proceedings for dues extinguished by an approved Resolution Plan? How to determine if the continuation of recovery proceedings by government authorities constitutes contempt of court after a judgment clarifies the binding nature of a Resolution Plan?
Key Points: - Once a Resolution Plan is approved by the Adjudicating Authority under Section 31(1) of the Code, all claims not included in the plan stand extinguished and are frozen, binding on all stakeholders including government authorities (!) (!) (!) . - No person is entitled to initiate or continue any proceedings in respect of claims that are not part of the Resolution Plan once it is approved (!) (!) . - The court held that demands raised for periods prior to the approval of the Resolution Plan, which were not part of the plan, are illegal and the proceedings thereon must be quashed (!) (!) . - The court found the actions of the respondents in continuing recovery proceedings despite the clear judgment to be contemptuous in nature (!) (!) . - However, the court chose not to impose penalties on the contemnors due to the benefit of doubt and their unconditional apology (!) (!) (!) . - The judgment reaffirms that the 2019 amendment to Section 31 of the Code is clarificatory and declaratory in nature (!) (!) . - Government authorities are required to file claims before the Resolution Professional during the public announcement period; failure to do so results in the claim being extinguished upon plan approval (!) (!) . - The court distinguished the present case from Rainbow Papers Limited because the State Tax Officer did not raise their claim before the Committee of Creditors in the present matter (!) (!) . - The successful resolution applicant takes over the business of the corporate debtor on a "clean slate" without facing undecided claims after the plan approval (!) (!) . - The specific case of the petitioner was considered and addressed in the batch of cases decided in Ghanshyam Mishra, confirming the respondents were not entitled to recover claims accruing prior to the transfer date (!) (!) .
JUDGMENT :
B.R. GAVAI, J.
1. For the reasons stated, I.A. No. 21914 of 2024 for amendment of cause title is allowed. Cause Title is amended accordingly.
2. This Contempt Petition is filed by the Petitioner Company M/s JSW Ispat Special Products Limited (now M/s JSW Steel Limited) under Article 129 read with Article 142 of the Constitution of India and Section 2(b) of the Contempt of Courts Act, 1971 alleging willful disobedience of the judgment dated 13th April 2021 passed by this court in Civil Appeal No. 8129 of 2019 and other connected matters titled as “Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited and others” by the alleged Contemnors/Respondents.
3. Shorn of unnecessary details, the facts which led to the filing of the present Contempt Petition are:
3.1. Insolvency proceedings were initiated against the erstwhile Company- M/s Monnet Ispat and Energy Ltd. 1[“erstwhile Company” for short] as per the Insolvency and Bankruptcy Code, 20162[“the Code” for short]. After the Insolvency process was initiated, the Interim Resolution Professional3[“IRP” for short] was appointed as per the Code, and it was determined that the total debt upon the e
Claims not included in a Resolution Plan under the Insolvency and Bankruptcy Code are extinguished and cannot be pursued post-approval.
Approved resolution plans under the Insolvency and Bankruptcy Code extinguish all pre-CIRP claims not included, including statutory dues from tax authorities.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities, ensuring a fresh start for the corporate debtor.
The approved Resolution Plan under the Insolvency and Bankruptcy Code binds all creditors, extinguishing claims not included, ensuring no surprise liabilities arise post-approval.
Point of Law - NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be d....
Once a resolution plan is approved under the Insolvency and Bankruptcy Code, all claims for periods prior to its implementation are extinguished and cannot be enforced against the corporate debtor.
The approval of a resolution plan under the Insolvency and Bankruptcy Code extinguishes all prior tax liabilities of a corporate debtor, affirming the legal cleansing effect of the IBC.
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