2021 (1) TMI 965 - HC - Insolvency and Bankruptcy

Court denies plaintiffs' claim post Resolution Plan approval; lack of awareness irrelevant; defendant granted leave to defend.

The court held that the plaintiffs failed to establish a valid claim against the defendant following the approval of the Resolution Plan for the corporate ... Suit for recovery of price of goods sold and delivered - the claim of the plaintiff does not survive the approval of the Resolution Plan - Chapter XIIIA of the Original Side Rules - HELD THAT:- The Adjudicating Authority had accepted the Resolution Plan of the corporate debtor, that is the predecessor-in-interest of the defendant herein. The Resolution Plan has tabulated the liability of such corporate debtor. The plaintiff has not produced any document to establish that, the Resolution Plan approved in respect of the corporate debtor had the claim of the plaintiffs therein. The contentions of the plaintiffs that, the plaintiffs, subsequent to the death of the original plaintiff, was not aware of the insolvency proceedings in respect of the corporate debtor is of no consequence. In view of the ratio laid down in Committee of Creditors of Essar Steel India Ltd. [2019 (11) TMI 731 - SUPREME COURT], the plaintiffs cannot be said to have a valid claim as against the defendant any longer and at least subsequent to the approval of Resolution Plan of the corporate debtor. In a proceedings under Chapter XIIIA of the Original Side Rules the defendant is entitled to unconditional leave to defend the suit, in the event, the defendant establishes that it has a substantial defense to the claim. In the facts of the present case, the defense set up by the defendant on the basis of the ratio of Committee of Creditors of Essar Steel India Ltd. [2019 (11) TMI 731 - SUPREME COURT], is substantial. The application of the plaintiffs fail - Application dismissed. Issues:- Suit for recovery of price of goods sold and delivered- Application for final judgement and decree under Chapter XIIIA of the Original Side Rules- Impact of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 on the claim of the plaintiff- Substitution of original plaintiff by present plaintiffs- Approval and challenge of Resolution Plan by National Company Law Appellate Tribunal- Binding nature of Resolution Plan on all stakeholders- Lack of valid claim against the defendant post-approval of Resolution Plan- Defendant's entitlement to defend the suit if a substantial defense is establishedAnalysis:1. The plaintiff filed a suit for the recovery of the price of goods sold and delivered, seeking a final judgment and decree under Chapter XIIIA of the Original Side Rules. The defendant argued that due to insolvency proceedings initiated by the State Bank of India under the Insolvency and Bankruptcy Code, 2016, and the subsequent approval of a Resolution Plan by the Adjudicating Authority, the plaintiff's claim does not survive. The defendant contended that the plaintiff is not entitled to any relief based on the approval of the Resolution Plan, citing the precedent set by the Committee of Creditors of Essar Steel India Ltd. v. Satish Gupta and others.2. The original plaintiff passed away during the pendency of the suit, leading to the substitution of the present plaintiffs. The defendant's name also changed during the proceedings, and amendments were made to reflect this change. The insolvency proceedings initiated by the State Bank of India and the subsequent Resolution Plan approval were brought to the attention of the court. However, the plaintiffs did not lodge any claims before the Interim Resolution Professional or the National Company Law Tribunal.3. The Resolution Plan submitted by Tata Steel Limited was approved by the Committee of Creditors, leading to the acquisition of control and management of the defendant by Bamnipal Steel Limited. The name of the defendant was subsequently changed to Tata Steel BSL Limited. The court emphasized the binding nature of a Resolution Plan on all stakeholders, including creditors, as outlined in Section 31(1) of the Insolvency and Bankruptcy Code, 2016.4. The court held that the plaintiffs failed to establish a valid claim against the defendant following the approval of the Resolution Plan for the corporate debtor. The lack of awareness of the insolvency proceedings by the plaintiffs post the original plaintiff's death was deemed irrelevant in light of the legal principles established by the Committee of Creditors of Essar Steel India Ltd.5. The defendant was granted unconditional leave to defend the suit based on the substantial defense raised concerning the impact of the Resolution Plan approval on the plaintiff's claim. Consequently, the application of the plaintiffs was dismissed, with no order as to costs, in accordance with the legal findings and precedents cited in the judgment.