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APPROVED RESOLUTION PLAN CANNOT BE CHALLENGED BY A CREDTOR, NOT FILING A CLAIM WITHIN TIME

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APPROVED RESOLUTION PLAN CANNOT BE CHALLENGED BY A CREDTOR, NOT FILING A CLAIM WITHIN TIME
Mr. M. GOVINDARAJAN By: Mr. M. GOVINDARAJAN
January 7, 2023
All Articles by: Mr. M. GOVINDARAJAN       View Profile
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Public announcement

The Adjudicating Authority shall admit the application filed by either a financial creditor or an operational creditor or corporate applicant, if it is satisfied that the application complies with the provisions of the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short).  On admission the Adjudicating Authority shall by an order appoint an interim resolution professional (‘IRP’ for short) and order for public announcement and call for the submission of claims.  The IRP shall cause public announcement within 3 days from the commencement of corporate insolvency resolution process.

Regulation 6 of IBBI (Insolvency resolution process for Corporate Person) Regulations, 2016 (‘Regulation’ for short) provides that the public announcement shall be published-

  • in one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate debtor and any other location where in the opinion of the interim resolution professional, the corporate debtor conducts material business operations;
  • on the website, if any, of the corporate debtor; and
  • on the website, if any, designated by the Board for the purpose.

Claims

The last date for submission of proofs of claim shall be fourteen days from the date of appointment of the IRP.  The creditors of the corporate debtor shall file their claims in the respective forms before the IRP before the last date as stipulated in the Public Announcement. 

A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit the claim with proof to the interim resolution professional or the resolution professional, as the case may be, on or before the 90th  of the insolvency commencement date. 

Once the resolution plan is approved by the Committee of Creditors and by the Adjudicating Authority no claim shall be entertained.  The same shall be extinguished.  In GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. - 2021 (4) TMI 613 - SUPREME COURT the Supreme Court held that on the date of approval of the resolution plan by Adjudicating Authority, all such claims, which are not a part of resolution plan shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.

In M/S AKSHAR PLASTCHEM INVESTMENT PRIVATE LIMITED VERSUS SHRI BIJAY MURMURIA, RESOLUTION PROFESSIONAL OF M/S. KITPLY INDUSTRIES LTD. SUMEDHA MANAGEMENT SOLUTIONS PVT. LTD., SREI MULTIPLE ASSET INVESTMENT FUND, IDBI BANK LTD., M/S. KITPLY INDUSTRIES LTD. - 2022 (5) TMI 1311 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI, the appellant is a private limited company.  It is engaging in the business of solvents, eyes and chemicals for paints, plastics, resins etc.  The appellant supplied goods to the corporate debtor viz. Phenol and Melamine during the year 2010 to the tune of Rs.1.42 crores.  The corporate debtor only paid Rs.19.99 lakhs to the appellant and the balance amount Rs.1.22 remained outstanding.    The appellant initiated winding up proceedings under the Companies Act, 1956 against the corporate debtor in the High Court.  The corporate debtor prayed before the High Court to stay the proceedings of winding up since a reference case is pending before the Board for Industrial Companies (Special Provisions) Act, 1985.  The High Court issued an order keeping the company petition in abeyance with liberty to the appellant to press winding up proceeding after clearance is given by BIFR.

In the meanwhile the IDBI, one of the financial creditors of the corporate debtor filed an application under section 7 of the Code for initiation of corporate insolvency resolution process against the corporate debtor.  The Adjudicating Authority admitted the said application and appointed IRP.  The IRP issued a public announcement in Form - A on 04.05.2018 on compliance with the Section 15 of the Code read with Regulation 6(1) in two newspapers.  The said Public announcement was also uploaded on the website of the corporate debtor.

In response to the public announcement five financial creditors and nine operational creditors filed their claims before the IRP.  Committee of Creditors was constituted and the process was in progress.  Invitation for Expression of Interest was published on 13.07.2018.  The last date for submission for the same has been fixed @ 27.07.2018.  Since no resolution plan was received another publication was made on 27.07.2018 extending the last date to 07.08.2018.  One resolution plan was received by the Resolution Professional.  The same was considered, scrutinized and approved by the Committee of Creditors.  The Adjudicating Authority also approved the resolution plan on 07.12.2018.

The appellant did not submit any claim before the IRP.  The appellant filed an IA before the High Court.  The corporate debtor replied to the above said application that the corporate debtor has already been ordered to be wounded by the Adjudicating Authority.  The appellant withdrew the IA.  The High Court has given liberty to the appellant to make application before the Adjudicating Authority.

The appellant filed an IA before the Adjudicating Authority with the prayer to set aside its order dated 07.12.2018 or direct the IRP to pay the amount due to the appellant to the tune of Rs.1.22 crores with interest.  The Adjudicating Authority rejected the application.  Against this order of Adjudicating Authority the appellant filed the present appeal before the National Company Law Appellate Tribunal (‘NCLAT’ for short).

The appellant submitted the following before the NCLAT-

  • The business place of the corporate debtor is State of Maharashtra and the appellant is doing business in Nasik District, Igatpuri Taluk and Mumbai City.
  • The IRP ought to have made the Public announcement in Maharashtra State also.
  • The appellant did not know about the public announcement made by IRP and he could not make claim before IRP.
  • Since the public announcement has not been made in the place of business of the appellant the same is in contravention of provisions of the Code and regulations made there under.
  • The appellant came to know about the corporate insolvency resolution process when the corporate debtor made a reply before the High Court that the corporate debtor has been ordered to be wound up by the Adjudicating Authority.
  • The resolution plan is not in accordance with section 30(2)(e) of the Code.
  • The particulars of winding up petition were certainly in the business records of the corporate debtor.  The Resolution Professional neither considered the claim of the appellant nor considered the winding up proceedings pending before the High Court.

The First respondent (IRP) submitted the following before NCLAT-

  • The IRP has issued public announcement in two newspapers having wide circulation where the registered office and corporate office of the corporate debtor are situated.
  • Notices were also published at other places like Kolkata, Shillong, Itanagar and also at other places where the office and factory of the corporate debtor was situated. 
  • The IRP uploaded the public announcement on the website of the Corporate Debtor.
  • Since the corporate debtor is a listed company the regulators were duly informed about the corporate insolvency resolution process against the corporate debtor.
  • The appellant never filed its claim before him.
  • Therefore the appellant is not having right to challenge the approved resolution plan.
  • After approval of the resolution plan by the Adjudicating Authority the claim of the appellant stand extinguished.

The NCLAT considered the submissions made by both the parties.  NCLAT analyzed the provisions of Section 15 of the Code and Regulation 6.  The NCLAT observed that the public announcement was made not only at the registered and corporate office of the corporate debtor but several other places at Kolkata, Guwahati, Shilong and Itanagar etc.  where the corporate debtor conducts material business operations.  The NCLAT did not agree with the contentions of the appellant that the public announcement shall be made in the place where the appellant is doing business.  The statutory requirement cannot be stretched to mean that public announcement has to be made from all places where the corporate debtor is receiving goods and supplies. 

The NCLAT also observed that the appellant has not filed any claim before the IRP within the last date mentioned in the public announcement, which is 18.05.2018 whereas he made claim after 20 months from the last date of receiving the claim.  There was compliance of Regulation 6(2)(ii) and (iii) since the publication was uploaded on the website of the corporate debtor as well on the website of the Board. 

The NCLAT did not find any error in the publication made by the IRP.  The appellant cannot be allowed to challenge the resolution plan duly approved by the Committee of Creditors and Adjudicating Authority.  The NCLAT dismissed the appeal since it found no merit in the appeal.

 

By: Mr. M. GOVINDARAJAN - January 7, 2023

 

 

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