2025 (7) TMI 802 - AT - IBC

Seeking recall of order - approval of Resolution Plan - Section 30(2) of the IBC - waterfall mechanism - section 53 of IBC - Recovery of statutory tax dues - HELD THAT - Though substantial time had elapsed the Appellant had clearly failed to exercise requisite diligence in filing their alleged additional claims within the stipulated time-frame. The Appellant had clearly dropped their guard in filing their additional claims within time. When by their own conduct or inaction the Appellant had not filed their claim they cannot be allowed to assert their remedy afterwards on grounds of equity. The Appellant cannot be seen to take advantage of their own inaction and laxity of not filing their claims in a timely manner. It has been rightly held by the Adjudicating Authority that if any such benefit is given to the Appellant it would in turn derail the insolvency resolution process and cause prejudice to the interest of the other creditors/stakeholders beside jeopardizing the commercial and financial viability of the plan. Neither the statutory provisions nor the judicial precedents have dispensed with the filing of such claims on time. If belated claims are allowed for any specific party there is all likelihood from others to also seek reopening of the claim window. It is well settled law as laid down by the Hon ble Supreme Court in Committee of Creditors of Essar Steel vs. Satish Kumar Gupta Ors. 2019 (11) TMI 731 - SUPREME COURT and in RP Infrastructure Limited vs. Mukul Kumar Anr. (2023) 10 SCC 718 wherein the Hon ble Supreme Court held that belated claims should not be entertained as they could lead to indefinite delays in the CIRP process thereby affecting the certainty and effectiveness of resolution. Keeping in view the fact that the objective and intent of the IBC is time-bound resolution of the Corporate Debtor if new and additional claims are allowed to pop up every now and then and such claims are entertained even after the CoC has approved the resolution plan the CIRP would be put to jeopardy and the intent of IBC would stand frustrated. The Adjudicating Authority has also considered the fact that the RP had submitted that the total liquidation value of the Corporate Debtor is Rs. 42, 13, 68, 412/- and that there was no disagreement that the amount proposed to the Appellant in the Plan exceeds the entitlement of the Appellant being the Operational Creditor specified under Section 53 of the IBC. That being so the Appellant cannot complain about the treatment meted out to them in the resolution plan since they had received more than the minimum entitlement in terms of liquidation value. Therefore there is no valid ground for complaint and no interference is called for in the approved resolution plan. In the present case when the resolution plan had been approved by the CoC with 70.02% voting the Adjudicating Authority had no option to traverse beyond the commercial wisdom of the CoC. Having noticed the statutory framework and the purpose and objective of the IBC we are of the considered view that the approval of a resolution plan is statutorily recognized as a closure to all claims that persons or entities may have against a corporate Debtor. There is a concomitant need to impart finality to the resolution process by protecting a successful resolution applicant from unnecessary litigation arising out of undecided claims. In the facts of the present case if the order is allowed to be recalled and belated claims of the Appellant is allowed it would amount to re-opening of the resolution plan which would not only be wholly impermissible but would also amount to overriding the pronouncements of the Hon ble Apex Court in a catena of judgements. Hence rejection of the additional claim by the RP and its affirmation by the Adjudicating Authority was a measure well within the legal framework of the IBC. The resolution plan already stands implemented and therefore cannot be reversed when the Appellant has failed to make out any ground as to how the resolution plan was non-compliant of Section 30(2) of IBC. The Resolution Plan also met the requirements of Regulations 37 and 38 of the CIRP Regulations 2016. Hence the Adjudicating Authority correctly held that the I.A. 5488 of 2023 is a review in disguise of recall. The Appeal is devoid of merit. The impugned order does not warrant any interference - Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

• Whether the Adjudicating Authority erred in rejecting the application seeking recall of the order approving the resolution plan, particularly on the ground that the application was a disguised review petition.
• Whether the claims of the Appellant-State Taxes & Excise Department, including additional tax arrears amounting to Rs 13.60 Cr., were duly considered and admitted within the Corporate Insolvency Resolution Process (CIRP) and the resolution plan.
• Whether the Appellant's claim for priority as a secured creditor under the HPGST/CGST Act could override the distribution mechanism prescribed under the Insolvency and Bankruptcy Code, 2016 (IBC), especially in light of the principle of priority of government dues.
• Whether the principle of finality of the resolution plan approved by the Committee of Creditors (CoC) and the Adjudicating Authority precludes admission of belated claims after approval and near completion of implementation of the plan.
• Whether the recall of the order approving the resolution plan was maintainable in the absence of grounds such as lack of jurisdiction, non-service of notice, or fraud/misrepresentation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility of Recall Application Against the Order Approving the Resolution Plan

Legal Framework and Precedents: Section 61 of the IBC permits appeals against orders of the Adjudicating Authority. The Supreme Court in Ebix Singapore Pvt. Ltd. vs. CoC of Educomp Solutions Ltd. held that once a resolution plan is approved, it becomes binding on all stakeholders unless challenged within the prescribed time. The scope of recall is limited to exceptional grounds such as jurisdictional errors, non-service of notice, or fraud, and cannot be used as a disguised review.

Court's Interpretation and Reasoning: The Tribunal concurred with the Adjudicating Authority's view that the Appellant's recall application was effectively a review of the order approving the resolution plan, which is beyond the Adjudicating Authority's jurisdiction. The Tribunal emphasized that the resolution plan had been approved by the CoC with a 70.02% voting share and subsequently by the Adjudicating Authority, thus becoming binding on all stakeholders including the Appellant.

Key Evidence and Findings: The Appellant had not challenged the resolution plan within the prescribed period and had instead filed a belated recall application after the plan's implementation was nearing completion.

Application of Law to Facts: The Tribunal held that allowing the recall application would derail and delay the CIRP and undermine the finality of the resolution process. Since none of the recognized grounds for recall were pleaded or established, the recall application was rightly dismissed.

Treatment of Competing Arguments: While the Appellant relied on the Supreme Court's judgment in Greater NOIDA Industrial Development Authority vs. Prabhjit Singh Soni to contend that recall applications can be allowed in the interest of justice, the Tribunal distinguished that such exceptional relief was not warranted here given the absence of procedural irregularities or fraud.

Conclusion: The recall application was impermissible and constituted a disguised review petition, rightly rejected by the Adjudicating Authority.

Issue 2: Admission and Treatment of the Appellant's Claims, Including Additional Tax Arrears

Legal Framework and Precedents: The CIRP Regulations and IBC require claims to be submitted within stipulated timelines. The Supreme Court in Committee of Creditors of Essar Steel vs. Satish Kumar Gupta and RP Infrastructure Limited vs. Mukul Kumar emphasized that belated claims should not be entertained to preserve the time-bound nature and finality of CIRP. The "fresh slate" principle, as enunciated in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, underscores the need to conclude insolvency proceedings without reopening claims.

Court's Interpretation and Reasoning: The Tribunal found that the Appellant had submitted a claim of Rs 2.61 Cr., which was duly admitted and considered by the Resolution Professional (RP). However, the additional claim of Rs 13.60 Cr. on account of tax arrears was never formally filed within the prescribed time, despite purported communications to the RP.

Key Evidence and Findings: The Appellant's failure to file the additional claim in time was characterized as a lack of diligence and inaction. The Tribunal noted that allowing such belated claims would open floodgates for multiple similar claims, thereby jeopardizing the CIRP's integrity and delaying resolution.

Application of Law to Facts: The Tribunal applied the settled legal principles to hold that the Appellant could not benefit from its own inaction and that the admitted claim and distribution under the plan sufficed as per Section 53 of the IBC.

Treatment of Competing Arguments: The Appellant argued that the omission of the additional claim rendered the resolution plan unjust and inequitable under Section 30(2) of the IBC and CIRP Regulations 37 and 38. The Tribunal rejected this, noting the absence of any cogent justification for delay and the binding effect of the approved plan.

Conclusion: The Appellant's additional claim was rightly rejected as belated, and the distribution under the resolution plan was in accordance with law.

Issue 3: Priority and Secured Creditor Status of Government Dues Under HPGST/CGST Act

Legal Framework and Precedents: Section 53 of the IBC specifies the waterfall mechanism for distribution, placing government dues under Section 53(1)(e)(i) and (f). The Supreme Court in State Tax Officer vs. Rainbow Papers Limited held that certain government dues could be treated as secured claims under specific statutes like GVAT, which contain overriding provisions. However, in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd., the Supreme Court clarified that such secured creditor status is not universal and depends on statutory context.

Court's Interpretation and Reasoning: The Tribunal distinguished the Rainbow Papers judgment on the ground that it pertained to GVAT, which has overriding provisions, unlike the HPGST/CGST Act. Section 82 of the CGST Act expressly excludes the IBC's application, thereby subordinating government dues to the IBC's distribution scheme.

Key Evidence and Findings: The Appellant failed to establish any statutory provision under HPGST/CGST Act that would elevate its claim to secured creditor status. The RP's liquidation value calculations and distribution under Section 53 of the IBC were accepted as fair and compliant.

Application of Law to Facts: The Tribunal held that the Appellant's claims qualify as government dues under Section 53(1)(e)(i) of the IBC and are not entitled to secured creditor priority. The distribution made under the resolution plan exceeded the Appellant's minimum entitlement, negating any grievance.

Treatment of Competing Arguments: The Appellant's reliance on Section 82 of the CGST Act and Rainbow Papers judgment was rejected in light of the statutory framework and binding Supreme Court precedents.

Conclusion: The Appellant's claims are government dues with priority as per Section 53 of the IBC and do not enjoy secured creditor status under the CGST/HPGST Act.

Issue 4: Finality of the Resolution Plan and Prohibition on Reopening Claims Post-Approval

Legal Framework and Precedents: Section 31 of the IBC mandates that an approved resolution plan shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, State Governments, and other authorities. The Supreme Court in multiple judgments has emphasized the need for finality in insolvency proceedings to prevent protracted litigation and ensure certainty.

Court's Interpretation and Reasoning: The Tribunal underscored that the resolution plan approved by the CoC and Adjudicating Authority is conclusive and binding. Allowing belated claims or recall applications after approval and implementation would undermine the statutory scheme and the commercial wisdom of the CoC.

Key Evidence and Findings: The Appellant's delay and failure to challenge the plan within the prescribed period, coupled with the nearing completion of plan implementation, rendered the recall application untenable.

Application of Law to Facts: The Tribunal applied the principle that the CIRP is a time-bound process and that reopening claims or revisiting approved plans is impermissible unless exceptional grounds are shown.

Treatment of Competing Arguments: The Appellant's plea for equitable relief and justice was rejected as it conflicted with the statutory mandate for finality and the integrity of the insolvency process.

Conclusion: The resolution plan's finality is sacrosanct post-approval, and no reopening of claims or recall of approval order is permissible in the absence of valid grounds.

3. SIGNIFICANT HOLDINGS

"Once a resolution plan is approved by the Committee of Creditors and the Adjudicating Authority, it becomes binding on all stakeholders including government bodies and statutory authorities, and no new claims including statutory dues can be allowed."

"The power to recall a judgment cannot be exercised when the order sought to be recalled was not without jurisdiction, when the party was served with notice, and when there is no allegation of fraud or misrepresentation resulting in gross failure of justice."

"Belated claims should not be entertained as they could lead to indefinite delays in the CIRP process, thereby affecting the certainty and effectiveness of resolution."

"The principle of priority of government dues is subject to the statutory framework of the IBC, and government dues under the CGST/HPGST Act do not enjoy secured creditor status akin to that under GVAT, and are to be treated as operational creditor claims under Section 53(1)(e)(i)."

"The approval of a resolution plan is statutorily recognized as a closure to all claims that persons or entities may have against a corporate debtor, and reopening such claims or the plan itself is impermissible."

Final determinations:

• The recall application was rightly dismissed as a disguised review petition lacking valid grounds.
• The Appellant's additional tax arrears claim was belated and inadmissible.
• The Appellant's claims are government dues under Section 53 of the IBC and do not qualify as secured claims under the CGST/HPGST Act.
• The resolution plan was approved in compliance with Section 30(2) of the IBC and CIRP Regulations and its implementation cannot be disturbed.