2021 (7) TMI 1002 - Tri - Insolvency and Bankruptcy

Tribunal extinguishes pre-CIRP liabilities, orders C Forms issuance, pending Supreme Court appeal

The Tribunal allowed the Applicant's Miscellaneous Application, declaring that all liabilities of the Corporate Debtor prior to the Corporate Insolvency ... Seeking declaration that respondent are entitled to claim any outstanding amount from the Applicant in respect of any due or amount payable - 'statutory charge' created in favour of the Respondents - effect of amendment to Section 32A of the IB Code, 2016, retrospective or not - HELD THAT:- The Hon'ble Supreme Court 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] by clarifying the statutory amendment to Section 32A of the IB Code, 2016 has held that such amendment it clarificatory in nature and it ought to be given retrospective effect. Which means that such provision is made applicable from the date the Insolvency and Bankruptcy Code came in to effect, i.e. 1st December 2016. By taking in to consideration of the above settled legal position and by following the decision of the Hon'ble Supreme Court. It is declared that all liabilities of the Corporate Debtor which were prior to CIRP and are prior to approval of the Resolution Plan and before transfer of the assets of the Corporate Debtor to the Resolution Applicant shall stand extinguished. Application allowed. Issues Involved:1. Entitlement of Respondents to claim outstanding amounts prior to 2nd May, 2018.2. Validity of the Respondents' demands dated 4th September, 2020.3. Jurisdiction of the Tribunal to issue directions under the MVAT Act.4. Binding nature of the approved Resolution Plan on statutory authorities.5. Issuance of C Forms to the Applicant.Detailed Analysis:1. Entitlement of Respondents to Claim Outstanding Amounts Prior to 2nd May, 2018:The Applicant sought a declaration that the Respondents are not entitled to claim any outstanding amount from the Applicant for dues payable before 2nd May, 2018. The Tribunal noted that the Corporate Debtor went into the Corporate Insolvency Resolution Process (CIRP) by an order dated 10th July, 2017. A public notice was issued for claims submission, and the Respondent No. 2 submitted its claim through Form B on 21st September, 2017. The Resolution Plan was approved by the Committee of Creditors (CoC) with a 77.86% majority and subsequently by the Tribunal on 19th April, 2018. The Respondent No. 2's appeal against this approval was dismissed by the NCLAT, and further appeal to the Supreme Court was pending without a stay. The Tribunal reiterated that the claims prior to the CIRP and the approval of the Resolution Plan stand extinguished as per the approved Resolution Plan.2. Validity of the Respondents' Demands Dated 4th September, 2020:The Respondents issued demands on 4th September, 2020, for various periods from 1st April, 2015, to 31st March, 2017, totaling substantial amounts. The Applicant contended that these demands were in violation of the Tribunal's order dated 19th April, 2018, and the NCLAT's order dated 20th March, 2019. The Tribunal found that these demands were indeed in defiance of the earlier orders and thus invalid. The Tribunal emphasized that the claims not included in the Resolution Plan, as approved, stand extinguished.3. Jurisdiction of the Tribunal to Issue Directions under the MVAT Act:The Respondents argued that the Tribunal lacked jurisdiction to issue directions under the MVAT Act and that the issuance of C Forms was governed by the MVAT Act and related trade circulars. The Tribunal, however, held that under Section 238 of the Insolvency and Bankruptcy Code (IBC), it had the jurisdiction to ensure the implementation of the Resolution Plan. The Tribunal referred to the Supreme Court's decision in Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited, which clarified that statutory dues not included in the Resolution Plan are extinguished.4. Binding Nature of the Approved Resolution Plan on Statutory Authorities:The Tribunal emphasized that once a Resolution Plan is approved by the Adjudicating Authority, it is binding on all stakeholders, including statutory authorities. The Tribunal cited the Supreme Court's judgment in Ghanshyam Mishra, which held that all claims, including those of statutory authorities, not part of the Resolution Plan, are extinguished. The Tribunal noted that the 2019 amendment to the IBC, which clarified this position, is declaratory and retrospective.5. Issuance of C Forms to the Applicant:The Applicant requested the issuance of C Forms, necessary for its business operations, which were withheld by the Respondents due to the outstanding demands. The Tribunal found that withholding the C Forms was unjustified given that the demands were invalid. The Tribunal ordered the Respondents to issue the C Forms to the Applicant, ensuring the smooth implementation of the Resolution Plan.Conclusion:The Tribunal allowed the Applicant's Miscellaneous Application, declaring that all liabilities of the Corporate Debtor prior to the CIRP and the approval of the Resolution Plan stand extinguished. The Tribunal's order is subject to the final outcome of the pending appeal before the Supreme Court. The Respondents were directed to issue the C Forms to the Applicant, and the demands dated 4th September, 2020, were quashed.