TMI Blog2023 (10) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution. The approval of the Resolution Plan is statutorily recognised as conferring a closure upon all claims that persons or entities may have had against the corporate debtor. The claims or liabilities which could have been enforced against the corporate debtor are duly considered in the course of the CIRP with the Adjudicating Authority undertaking a detailed exercise with respect to identification of the various creditors of the corporate debtor, including the classes thereof, the scrutiny of claims received and the ultimate apportionment of the amounts deposited by the successful Resolution Applicant amongst the creditors inter se. However, once the aforesaid process has been completed and the Resolution Plan comes to be approved, no fresh claims can be laid or enforced against the successful Resolution Applicant. The successful Resolution Applicant is only bound to meet the claims as may have been accepted and ultimately form part of the approved Resolution Plan. This issue assumes seminal importance since the successful Resolution Applicant cannot be left open to defend or oppose claims which are either not factored in the Resolution Plan nor can it be left to fend of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka Sachdeva, Mr. Ashutosh P. Shukla, Advs. for R-1. JUDGMENT 1. Indian Oil Corporation Ltd. seeks to invoke the jurisdiction conferred upon this Court by Section 11 of the Arbitration Conciliation Act, 1996 for the constitution of an Arbitral Tribunal in respect of disputes which are stated to exist and emanate from a Gas Supply Agreement [GSA] which was executed by it in favour of Essar Steel Ltd. [ESL] (originally) and which was thereafter assigned to Essar Oil Limited. [EOL] The GSA is dated 15 January 2009 and the dispute which stands raised essentially arises out of the Take or Pay obligation as contained in Article 14 thereof, and which empowered IOCL to call upon ESL to take remedial steps for payment in case it failed to lift the entire Adjusted Annual Contract Quantity [AACQ]. 2. The record would reflect that on 18 January 2012 the name of ESL was changed to Essar Steel India Ltd. [ESIL] and an Assignment Agreement dated 14 November 2013 is stated to have been executed between IOCL, ESIL and EOL which constituted the First Assignment Agreement and was to remain valid upto 31 August 2014. In terms of the aforesaid agreement, ESIL assigne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 December 2018 apprised IOCL that its claim was being admitted for a notional amount of INR 1. The relevant extracts of the aforesaid email are reproduced hereinbelow: Dear Sir/Madam, This is to inform you upon verification of your claim Form B dated 16 August 2017 against Essar Steel India Limited, the following is the status of your claim filed under regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016: Amount of Claim submitted INR 3762,58,74,503 Amount of Claim admitted Notional amount of INR 1 (Indian Rupee One only) to ensure your participation in the corporate insolvency Reason for non-admission of entire claim amount The remaining claim amount is not admitted because of pending dispute with respect to this claim as the arbitration proceedings were initiated by Indian Oil Corporation Limited You may take your own independent advice in this matter keeping in view the provisions of the Insolvency and Bankruptcy Code, 2016 and rule/regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded sanction by the Adjudicating Authority in terms of an order dated 08 March 2019. [Resolution Professional v. Essar Steel India Ltd., 2019 SCC OnLine NCLAT 750] It, however, becomes pertinent to note that the Adjudicating Authority did not agree with the decision of the RP to admit the claims of operational creditors including the petitioner herein at INR 1. It, accordingly, and while disposing of the IAs that had been filed for its consideration observed as follows: 5. Therefore, these I.As. can be partially succeed only to the extent of such direction may be issued to the Resolution Professional to register their respective claims and to update the claims in the list of creditors, because we have already held in our separate order passed in I.As. Nos. 54 55 of 2018. However, the apportionment of these claims cannot be made as a matter of right, but only their interest, if any, can be taken care of while dealing with the I.A.No.431 of 2018 in succeeding paragraphs for consideration and approval of the Resolution Plan. 9. For the purposes of evaluating the issues which arise in the present petition, it would also be apposite to briefly notice the contentions whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby extinguishing the right to seek any remedy in relation thereto otherwise available to the Applicant in law. There is no provision either in the Code on in the Regulations to justify and/or sustain such extinguishment of remedy of the Applicant against the Corporate Debtor. 10. Since the claim of the operational creditors came to be introduced and made part of the Resolution Plan, various appeals against the decision of the NCLT came to be preferred before the National Company Law Appellate Tribunal [NCLAT] . In terms of its decision dated 04 July 2019 rendered in Standard Chartered Bank vs. Satish Kumar Gupta 2019 SCC OnLine NCLAT 388 and other connected appeals, while dealing with the claim of operational creditors including the petitioner herein it rendered the following pertinent observations: 41. In Interlocutory Applications filed by Dakshin Gujarat Vij. Co. Ltd. ; State Tax Officer ; Gujarat Energy Transmission Corporation Ltd. ; Bharat Petroleum Corporation Limited ; Indian Oil Corporation Ltd. ; MSTC Limited ; Gail (India) Limited and Global Transnational Trading FZE before the Adjudicating Authority, the Adjudicating Authority passed follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited 813,30,00,000 438/2018 Gail India Limited 2,47,26,000 470/2018 Global Transnational Trading FZE NA 200. In view of the aforesaid observations, instead of rejecting the Resolution Plan submitted by ArcelorMittal India Pvt. Ltd. , we modify the plan to safeguard the rights of the Operational Creditors and other Financial Creditors : The impugned order dated 8th March, 2019 stands modified to the extent above. However, the other conditions laid down by the Adjudicating Authority and as mentioned in the Resolution Plan is not interfered with. 210. Having heard rival contentions, we are of the view that the amount of profit if generated during the Corporate Insolvency Resolution Process , cannot be given to the Successful Resolution Applicant as the Successful Resolution Applicant has not invested any money during the Corporate Insolvency Resolution Process . If one or other Financial Creditors would have invested money during the Corporate Insolvency Resolution Process to keep the Corporate Debtor as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts. However, NCLT through its judgment dated 8-32019 directed the resolution professional to register the entire claim of the said respondents. NCLAT in paras 44, 45 and 201 of the impugned judgment upheld the order passed by NCLT as aforesaid and admitted the claim of the abovementioned respondents. We therefore hold that this part of the impugned judgment deserves to be set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of INR 1 due to the pendency of disputes with regard to these claims. 156. The appeals filed by the Committee of Creditors of Essar Steel Ltd. and other civil appeals are allowed. The impugned NCLAT judgment is set aside, except insofar as Civil Appeals Nos. 6409, 7266 and 7260 of 2019 are concerned, which are dismissed. Insofar as Civil Appeals Nos. 6266 and 6269 of 2019 are concerned, the appeals are partly allowed in terms of this judgment. The writ petitions are disposed of in terms of the judgment. It is made clear that the CIRP of the corporate debtor in this case will take place in accordance with the resolution plan of ArcelorMittal dated 23-102018, as amended and accepted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner Mr. Sharma, learned counsel submitted that the admission of claims at INR 1 and the approval of the Resolution Plan cannot possibly be viewed as a conclusive adjudication of the claims of the petitioner as flowing from the GSA and consequently the Court must take appropriate step for constitution of an AT. It was further submitted that the Take or Pay contained in the GSA gave rise to obligations which would continue upto 2028 and thus go far beyond the date when the Resolution Plan came to be approved. It was Mr. Sharma s contention further that the decision of the Supreme Court in Committee of Creditors, and more particularly Para 107 thereof, would indicate that the same had no application and in any case cannot be read as depriving the right of the petitioner to raise claims which otherwise arise out of the GSA. 15. Mr. Sharma submitted that the Resolution Plan does not provide for or envisage the extinguishment of all claims of the petitioner and the admission of the claim at a nominal value of INR 1 cannot lead to such a conclusion. It was his submission further that the validity of the purported termination also did not form part of the proceeding which ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the avoidance of doubt, Rejected Claims Amount and Verification Pending Amounts) against the Corporate Debtor till or as of the Insolvency Commencement Date along with any related Proceedings, including Proceedings for enforcement of any security interest, to the extent approved by the Adjudicating Authority, (other than in respect of invocation of corporate guarantees and personal guarantees issued for and on behalf of the Corporate Debtor by the Existing Promoter Group or their respective affiliates), shall stand irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity and if required, the Resolution Applicant, Corporate Debtor and its Stakeholders shall make necessary filings and take all necessary steps for the same. b. Upon approval of the Resolution Plan by the Adjudicating Authority, the payments contemplated in this Resolution Plan shall be the Corporate Debtor s full and final performance, and satisfaction, of all Claims (including Rejected Claims Amounts and Verification Pending Amounts) against the Corporate Debtor till or as of the Insolvency Commencement Date, shall stand irrevocably and unconditionally settled and extinguis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor till or as of the Insolvency Commencement Date shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity. f. Upon the approval of the Resolution Plan by the Adjudicating Authority, all pending Proceedings relating to the winding-up of the Corporate Debtor shall stand irrevocably and unconditionally abated in perpetuity. Upon such approval of the Resolution Plan, the Government Creditors and Trade creditors shall be deemed to have waived all termination rights on account of payment defaults, and rights to payment of penalty, default payment or any payment of like nature under any agreement or arrangement against the Corporate Debtor, including but not limited to any rights arising from any breach, default, act or omission, under any such agreement or arrangement executed by the Corporate Debtor and/ or the Resolution Professional for and on behalf of the Corporate Debtor. g. Upon the approval of the Resolution Plan by the Adjudicating Authority, in relation to guarantees provided for and on behalf of, and in order to secure the financial assistance availed by the Corporate Debtor, which have been invoked prior to the Effective D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to all Taxes which the Corporate Debtor was or may be liable to pay (including with respect to financial years under assessment), all deductions and all withholding Taxes on any payment, as required under Applicable Law and pertaining to the period prior to the Insolvency Commencement Date shall stand extinguished on the Plan Approval Date. k. All liabilities (whether contingent or crystallized, known or unknown, filed or not filed) in relation to any corporate guarantees, indemnities and all other forms of credit support provided by the Corporate Debtor prior to the Plan Approval Date (whether on behalf of Group Companies or otherwise) shall stand extinguished and discharged with effect from the Plan Approval Date. l. No Person shall be entitled to initiate any Proceedings to enforce any Claims or continue any proceedings in relation to any Claims in so far as the Claims relate to the period prior to the Plan Approval Date. 18. It was his submission further that as would be evident from the various pleas that have been taken by the petitioner before the Adjudicating Authority, a challenge to the validity of termination as well as the claim of the petitioner being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to Dr. Singhvi the aforesaid decision and once it had proceeded to modify the Resolution Plan and reversing its provisions to fall in accord with the decision of the RP, no dispute survives which may justify the reference to an AT. In so far as the plea of extinguishment of liabilities is concerned and the legislative policy underlying the same, Dr. Singhvi drew our attention to the following passages as appearing in the decision of the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657: 65. Bare reading of Section 31 of the I B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in subsection (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I B Code is revival of the corporate debtor and to make it a running concern. 66. The resolution plan submitted-by the successf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards them are required to be contained in the information memorandum. 68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is that he should start with fresh slate on the basis of the resolution plan approved. 93. As discussed hereinabove, one of the principal objects. of the I B Code is providing for revival of the corporate debtor and to make it a going concern. The I B Code is a complete Code in itself. Upon admission of petition under Section 7 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a reopening of the Resolution Plan which would not only be wholly impermissible but would amount to overriding the judicial imprimatur which came to be rendered by the Supreme Court in Committee of Creditors. 21. It was lastly submitted by Dr. Singhvi that bearing in mind the legal position which emerges from Ghanashyam Mishra, the petition under Section 11 is liable to be dismissed even if one were to employ the eye of needle test as propounded in NTPC Ltd. V. SPML Infra Ltd. 2023 SCC OnLine SC 389. Dr. Singhvi referred for our consideration the following passages from that decision: 25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant's privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant being enabled to take over the corporate debtor without being burdened by any uncertainties or a specter of irresolution. The approval of the Resolution Plan is statutorily recognised as conferring a closure upon all claims that persons or entities may have had against the corporate debtor. The claims or liabilities which could have been enforced against the corporate debtor are duly considered in the course of the CIRP with the Adjudicating Authority undertaking a detailed exercise with respect to identification of the various creditors of the corporate debtor, including the classes thereof, the scrutiny of claims received and the ultimate apportionment of the amounts deposited by the successful Resolution Applicant amongst the creditors inter se. 25. However, once the aforesaid process has been completed and the Resolution Plan comes to be approved, no fresh claims can be laid or enforced against the successful Resolution Applicant. The successful Resolution Applicant is only bound to meet the claims as may have been accepted and ultimately form part of the approved Resolution Plan. This issue assumes seminal importance since the successful Resolution Applicant cannot be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a first review alone being undertaken, the decisions handed down on the scope of that jurisdiction also bids High Courts to ensure that dead disputes are not revived and parties forced to undertake arbitration. Thus, where issues which are canvassed on a Section 11 petition are found to be contested or even arguable, the High Court would desist from delving into the merits of the rival claims. The Supreme Court bids us to bear in mind that at the pre referral stage, the court is not supposed to undertake a mini trial for that would clearly be encroaching upon the jurisdiction of the AT. The Section 11 court would also not hesitate from referring disputes to the AT where it finds that contentious questions are raised or where even debatable issues are evident from the case set forth by parties. The Court while considering the issue of reference would refuse to do so only in situations where either the arbitration agreement is found to be non-existent, where the claim can ex facie be said to be unenforceable in law say for instance where it is barred by the statute of limitation or where the dispute of which reference is sought falls within the genre of non-arbitrability. 28. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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