Tribunal Upholds Binding Nature of Approved Resolution Plan in Meena Jewellers Case

The Appellate Tribunal dismissed the appeals in the case of M/s. Meena Jewellers Pvt. Ltd. concerning assessment years 2009-10 & 2010-11. The Tribunal held that during Corporate Insolvency Resolution Proceedings (CIRP), claims specified in an approved resolution plan become binding on the Corporate Debtor and stakeholders. It emphasized that claims not included in the plan are extinguished upon approval, prohibiting the initiation or continuation of proceedings related to such claims. The Tribunal ruled that the appeals could not proceed during CIRP and granted the opportunity for restoration post-CIRP outcome.

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Issues:
Appeal against order of Commissioner of Income Tax (Appeals) - Corporate Insolvency Resolution Proceedings (CIRP) pending - Interpretation of Insolvency and Bankruptcy Code, 2016 - Effect of resolution plan approval on claims - Prohibition on continuation of pending suits during CIRP.

Analysis:
The Appellate Tribunal, ITAT Hyderabad, heard appeals against the order of the Commissioner of Income Tax (Appeals) in the case of M/s. Meena Jewellers Pvt. Ltd. for the assessment years 2009-10 & 2010-11. The Tribunal noted that Corporate Insolvency Resolution Proceedings (CIRP) were ongoing against the assessee, with the National Company Law Appellate Tribunal (NCLAT) having jurisdiction over the matter. The Tribunal considered the provisions of the Insolvency and Bankruptcy Code, 2016, and referred to the decision of the Supreme Court in the case of Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction (2021) regarding the impact of resolution plan approval on claims.

The Tribunal highlighted that under section 13 of the Code, a moratorium is declared upon admission of an application under sections 7, 9, or 10, which includes a prohibition on the institution or continuation of suits against the corporate debtor. Citing the Ghanashyam Mishra And Sons case, the Tribunal emphasized that claims provided in an approved resolution plan become binding on the Corporate Debtor and stakeholders. Any claims not part of the resolution plan are extinguished upon approval, preventing the initiation or continuation of proceedings regarding such claims.

Further, the Tribunal clarified that once CIRP proceedings commence, the continuation of pending proceedings is prohibited. Upon approval of the resolution plan by the Adjudicating Authority, the claims specified in the plan are frozen and binding on the Corporate Debtor and stakeholders. The Tribunal concluded that the appeals could not proceed during the CIRP and dismissed them, granting the appellants/respondents the opportunity to seek restoration based on the CIRP outcome. The Tribunal drew support for its decision from a previous case of the Mumbai Bench of the Tribunal.

In light of the above analysis, the Tribunal dismissed both appeals of the assessee in limine, indicating that the orders were pronounced in the open court on August 29, 2022.

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