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TMI Blog2025 (5) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ndergone since 2018 is now used as a shield by this respondent to avoid its liability towards the appellant. A lot of business and legal acumen is involved in framing the cause of action in the instant writ petition, preferred by this respondent. 3. Nevertheless, a very substantial point has been raised, which is worthy of very active consideration. 4. The appellant, for whatever reason did not submit its claim before the Corporate Insolvency Resolution Professional under the Insolvency and Bankruptcy Code, 2016. The above debt of the first respondent was not reflected in the corporate insolvency resolution plan or in the statements of financial position of the corporate debtor i.e. the first respondent, which accompany this resolution plan. The plan was approved by the adjudicating authority, NCLT. 5. Now, the first respondent filed the instant writ petition claiming a declaration that the appellant could no longer claim from them the above outstanding due before the effective date of this resolution plan as they were not included in the debts of the said respondent mentioned in the plan. Therefore, all such claims or dues on account of electricity consumption by the said respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore elaborately appear in the facts of the case discussed in this judgment was that it had no dues towards the appellant. Such dues being prior to 22nd December, 2022 had been "extinguished" by sanction of the Corporate Insolvency Resolution Plan by the adjudicating authority, NCLT under the Insolvency and Bankruptcy Code, 2016, as this Corporate Insolvency Resolution Plan did not include the alleged debt of the first respondent to the appellant. 14. The contention of Mr. N. Venkataraman, learned Senior counsel appearing for the first respondent is that his client formerly known as Reliance Telecom Limited had undergone a Corporate Insolvency Resolution process duly complying with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"). On 25th November, 2019, Reliance Projects and Property Management Solutions Limited had submitted a Corporate Insolvency Resolution Plan for the acquisition of the first respondent which was approved with terms and conditions by the NCLT on 3rd December, 2020. 15. The appellant had not submitted any claim for the electricity dues of the first respondent towards it, with the resolution professional. 16. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Official Liquidator took control of the Company (in liquidation), the creditors lost their right to realise the full amount of their claims. 23. More often than not, the court became interested in the revival of the company or in its running as a going concern at the instance of a creditor or contributory or the workers of the company. To facilitate this effort, it would stay the winding up order. It would proceed to consider and approve a scheme for revival or the running of the company as a going concern under the said other part of the Companies Act referred to above, on notice to all creditors, contributories and other stakeholders. The scheme proposed by an interested person which necessarily had to provide for payment to creditors to liquidate their dues would have to be approved by the Court and allowed to be implemented subject to such modification as the Court may make in it from time to time. The winding up application would be adjourned to await the result of the working of the scheme. If the scheme worked out successfully, the winding up application would no longer be proceeded with. Otherwise, the company would be wound up, its assets sold and proceeds distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution applicant. 28. Then under section 31, the resolution plan goes for approval to the adjudicating authority. The adjudicating authority has a concurrent duty of satisfying itself that inter alia the plan provides for payment of the debts of operational creditors. Thereafter, the adjudicating authority which is the NCLT approves the resolution plan. 29. Section 60 provides that during pendency of the resolution plan before the adjudicating authority or NCLT, any application is to be made before it. Such an application under section 60 (5) (c) includes one for determination to any question with regard to insolvency resolution. 30. Under Section 61 an appeal from a decision of the NCLT lies before the appellate authority (NCLAT). Such appeal under section 61(2) has to be filed within 30 (thirty) days of the decision of the NCLT, the Appellate Tribunal may extend such time by a maximum period of 15 days. A further appeal lies under section 62 of the Supreme Court within 45 days which may be further extended by 15 days and no more. Now a look at the decisions in this field. 31. Two landmark decisions are Committee of Creditors of Essar Steel India Limited through authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment has very elaborately identified the powers of the Committee of Creditors and of the Adjudicating Authority, NCLT. It observed in paragraphs 65-73 that the Committee of Creditors was a professional body and was entrusted with the tasks of approving and preparing a resolution plan for the corporate debtor. It was to be treated as an expert and its proposals ordinarily not to be interfered with by NCLT. Once the resolution plan has been approved by the Committee of Creditors and not interfered with by the Adjudicating Authority, subsequently, claims could not be entertained as that would work against the purpose of the Act. 35. In Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Assets reconstruction Co. Ltd. (2021) 9 SCC 657, the Supreme Court in paragraph 98 held that the term "operational Creditor" included Central and State Governments and any other local authority, following its earlier decision in the case of Committee of Creditors of Essar Steel India Limited and went on to conclude: "102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the debts of the corporate debtor before the effective date. If it is found that some debts are not included or that there is no justification for excluding some debts or that this duty of examination of the entire financial position of the corporate debtor has not been discharged properly, then the resolution plan is to be treated as invalid, void and non est. 41. Now, if such is the pronouncement and dictum of the Supreme Court, then on the facts similar to those in that case, such a resolution plan even if approved by the adjudicating authority would not extinguish the debts of the corporate debtor prior to the effective date in the resolution plan. 42. On a proper interpretation of this judgment till such time as a resolution plan is declared as invalid it would be presumed to be valid and all debts not included in the plan prior to the effective date would be deemed to be extinguished. Preliminary points 43. The point raised by the appellant that the first respondent has no locus standi to maintain the writ, has to be dealt with first. 44. The impugned demand notice was raised on the said group company, the third respondent on the footing that it had close connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is binding on them and their successors: see Cull v. Inland Revenue Comrs. (4), Morelle, Ltd. v. Wakeling (5). But the words which the judges use in giving the decision are not binding. This is often a very fine distinction, because the decision can only be expressed in words. Nevertheless, it is a real distinction which will best be appreciated by remembering that, when interpreting a statute, the sole function of the court is to apply the words of the statute to a given situation. Once a decision has been reached on that situation, the doctrine of precedent requires us to apply the statute in the same way in any similar situation; but not in a different situation. Whenever a new situation emerges, not covered by previous decisions, the courts must be governed by the statute and not by the words of the judges." 50. The effect of the decision in Rainbow Papers Limited as I see it is that if the resolution plan does not include all the debts, it is invalid. Furthermore, according to the decision in Rainbow Papers Limited, the resolution professional, the committee of creditors and the adjudicating authority have concurrent duties and responsibilities to check up the plan and satis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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