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TMI Blog2021 (5) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... CLT) under The Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner's case is that by reason of the subsequent developments after the impugned Award, the application for setting aside of the Award is not maintainable any more. 3. Mr. Jishnu Saha, Senior Counsel appearing for the petitioner relies on the provisions of the IBC, particularly Section 31 thereof, which provides that an approved Resolution Plan is binding on the corporate debtor and its employees, members and other stakeholders and relies on a decision of the Supreme Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta; (2020) 8 SCC 531. Counsel contends that a successful Resolution applicant cannot be faced with undecided claims after the Resolution Plan has been accepted. Counsel places strong reliance on Essar to urge that the debts of the corporate debtor (the petitioner before this court) hence stands extinguished save to the extent of the debts which have been taken over by the resolution applicant under the approved Resolution Plan. Counsel cites Gaurav Dalmia vs. Reserve Bank of India & Ors.; 2020 SCC Online Cal 668, Axis Bank Limited vs. Gaurav Dalmia; MANU/WB/0739/2020; Sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 34 of 1996 Act in October 2008, the Award was automatically stayed and the respondent could not approach the NCLT for lodging its claim. Counsel relies on Board of Control for Cricket in India vs. Kochi Cricket Private Limited; (2018) 6 SCC 287 and Government of India vs. Vedanta Limited (Formerly Cairn India Limited); (2020) 10 SCC 1 for the proposition that amendments will only have prospective application. Counsel submits that with the filing of an application under Section 34 is filed, the dispute raised by the party amounts to a pre-existing dispute which takes the respondent/Award-holder outside the purview of the IBC; Mobilox Innovations Private Limited vs. Kirusa Software Private Limited; (2018) 1 SCC 353 and K. Kishan vs. Vijay Nirman Company Private Limited; (2018) 17 SCC 662. On the factual aspect, counsel submits that the petitioner continues to exist and is hence under an obligation to pay the dues of the respondent Award-holder. Counsel reiterates that the respondent Award-holder could not have lodged its claim before the NCLT by reason of the impugned Award being stayed upon filing of the Section 34 application. Counsel further submits that the petitioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the apprehension of the Award-debtor that it may risk the effect of the observations made by the Court at the time of enforcement of the Award was misplaced since the Court had not gone into the merits of the application. 11. This is the second round in the recourse against the Arbitral Award dated 7th July, 2008 where the petitioner/Award-debtor has urged that the application for setting aside of the Award cannot be proceeded with after approval of the Resolution Plan in relation to the petitioner (corporate debtor before the NCLT). The petitioner has relied upon Essar in respect of its renewed plea before the court. This court is of the view that the threemember Bench decision of the Supreme Court in Essar constitutes a significant -and subsequent- development of the law in relation to the fate of existing claims during and after corporate insolvency resolution proceedings which, in turn, would constitute a sufficient reason for this court to re-visit the judgment dated 10th January, 2020. It should be stated that the order dated 3rd February, 2020 rejecting the application for recalling of the judgment made it clear that the court had refrained from expressing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the Resolution Plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the Resolution Professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count." 16. In this decision, the Supreme Court considered questions relating to the role of resolution applicants, Resolution Professionals and the Committee of Creditors constituted under the IBC as well as the jurisdiction of NCLT and the NCLAT with regard to Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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; (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the Resolution Plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued." The opinion of the Court culminates in:- "As held by this Court, the successful resolution applicant cannot be flung with surprise claims which are not part of the Resolution Plan." 17. The fate of undecided or pending claims such as the one of the respondent before this court can also be gleaned from Sections 25, 29, 30 and 31 of the IBC. Section 25-"Duties of Resolution Professionals"- which contemplates maintenance of an updated list of claims by the Resolution Professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them as part of the list of claims which are collated by the Resolution Professional and approved in the Resolution Plan by the Committee of Creditors and finally by the Adjudicating Authority. The sequence of stages would be evident from :- * Section 8 - Insolvency resolution by operational creditor * Section 9 - Application for initiation of creditor insolvency resolution process by operational creditor * Section 15 - Public announcement of corporate insolvency resolution process * Section 21 - Committee of Creditors: collation of claims received by the Interim Resolution Professional * Section 25 - Maintaining an updates list of claims by the Resolution Professional * Section 29 - Preparation of Information Memorandum * Section 30 - Submission of resolution plan * Section 31 - Approval of resolution plan. 20. Regulation 7 under Chapter IV- "Proof of claims"- of the CIRP Regulations, 2016, provides that an operational creditor shall submit the claim with proof to the Interim Resolution Professional on or before the last date mentioned in the "Public Announcement" (Regulation 12). In the present case, the public announcement was made by the interim Resolution Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia vs Kochi Cricket Pvt. Ltd.; (2018) 6 SCC 287 the Supreme Court held that Section 36, prior to the amendment, can only be seen as a "clog" on the right of a decree-holder who is unable to execute the Award in his favour in the absence of the conditions set forth in Section 36. The Supreme Court further clarified that the aforesaid does not translate to a corresponding right in the judgment debtor to stay the execution of the Award. The most significant clarification of the Supreme Court in Kochi Cricket was expressed in the following words:- "Since it is clear that execution of a decree pertains the realm of procedure, and that there is no substantive vested right in a judgment debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the amendment Act." The dictum hence is clear with regard to Section 34 applications which were pending at the time of the judgment in Kochi Cricket; namely that such pending applications would also be governed by the new Section 36, as amended. In other words, the petitioner/Award-debtor would not have the benefit of the Award being automatically stayed upon fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revisited -and revised- in the light of both Essar and Edelweiss. 23. The view of the Supreme Court as crystallized in Essar and Edelweiss is that pre-existing and undecided claims which have not featured in the collation of claims and consequent consideration by the Resolution Professional shall be treated as extinguished upon approval of the Resolution Plan under Section 31 of the IBC. This can be seen as a necessary and an inevitable fallout of the IBC in order to prevent, in the words of the Supreme Court, a "hydra head popping up" and rendering uncertain the running of the business of a corporate debtor by a successful resolution applicant. In essence, an operational creditor who fails to lodge a claim in the CIRP literally missed boarding the claims-bus for chasing the fruits of an Award even where a challenge to the Award is pending in a Civil Court. 24. Every litigant has a right to argue that an action commenced in a court of law or a statutory forum is not maintainable by reason of the law existing as on that date. A challenge to maintainability of an action must be considered by the court before the substance of the dispute is adjudicated on merits. A court must also d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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