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SUPREME COURT OF INDIA
B.R. GAVAI, AUGUSTINE GEORGE MASIH, JJ.
M/s JSW Steel Limited – Appellants
Versus
Pratishtha Thakur Haritwal & Ors. – Respondent
Contempt Petition (Civil) No. 629 of 2023 In Writ Petition (Civil) No.1177 of 2020
Decided on : 27-03-2025
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 erstwhile Company was much more than its liquidation value. As per the regulations, an advertisement inviting claims against the erstwhile Company, which were to be submitted to the IRP was issued on 27th July 2017 and the last date for submission of the claim was 7th August 2017. After the claims process was over, the announcement for submission of Resolution Plans by companies was issued. The Petitioner Company was declared as the Successful Resolution Applicant4[“SRA” for short] after voting by the Committee of Creditors5[“CoC” for short], and the Resolution Plan was submitted on 12th December 2017. The National Company Law Tribunal, Mumbai Bench6[“NCLT” or “Adjudicating Authority” for short], approved the Resolution Plan vide order dated 24th July 2018 and pursuant to the same, the management of the erstwhile Company was taken over by the Petitioner Company.
3.2. Thereafter, various demand notices were raised upon the Petitioner Company by the Odisha Mining Corporation Ltd. for recovery of Sales Tax against iron ore purchased by the erstwhile Company. Aggrieved by the demand notices, claiming that the dues were extinguished as per the Code because they were raised for a period before the management of the erstwhile Company was taken over by the Petitioner Company, a Writ Petition (Civil) No. 1177 of 2020 was filed before this Court.
3.3. Various similar matters were tagged together by this Court, including the aforesaid Writ Petition. Vide a common judgment in the case of Ghanshyam Mishra (supra), it was held that any and all creditors, including the Central Government, State Government or any local authority are bound by the Resolution Plan as approved by the Adjudicating Authority and all claims which are not a part of the Resolution Plan stand extinguished.
3.4. It appears that thereafter the alleged Contemnor No. 3- Assistant Commissioner, Commercial Taxes, Division-II, Raipur, Chhattisgarh issued a notice dated 15th September 2021. It was stated that the Petitioner Company being a nationalized dealer had not submitted the return or statement for the period from 1st April 2017 to 30th June 2017 and the Petitioner Company was directed to appear in person or through an authorized representative for assessment proceedings before the office of the Divisional Deputy Commissioner, Commercial Taxes, Division-II and to furnish the books of accounts and documents relating to the above period and to show cause as to why the Petitioner Company should not be assessed with a penalty. The Petitioner Company sent a reply dated 8th October 2021 to the alleged Contemnor No. 3 stating that the erstwhile Company has undergone a Corporate Insolvency Resolution Process7[“CIRP” for short] and in light of the judgment of this Court in the case of Ghanshyam Mishra (supr
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.
Approved resolution plan under IBC Section 31(1) extinguishes all pre-CIRP unsubmitted statutory dues; tax reassessment proceedings post-approval are barred by Section 238's overriding effect and cle....
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....
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