2023 (11) TMI 466 - AT - Central Excise

Appeals automatically abate when Interim Resolution Professional appointed or Resolution Plan approved under Rule 22

Ruchi Soya Industries Ltd Versus Commissioner of CE & ST, Mangalore

CESTAT Bangalore held that appeals abate upon appointment of Interim Resolution Professional or approval of Resolution Plan by NCLT. Following precedent ... Continuation of appeal - Resolution Plan is approved by the Hon’ble NCLT - HELD THAT:- The Mumbai bench of this Tribunal in the case of M/s Alok Industries Ltd’s case [2022 (10) TMI 801 - CESTAT MUMBAI] analysed in detail Rule 22 of CESTAT (Procedure) Rules, 1982 and the case laws on the issue including those cited by the Ld. Advocate for the appellant observed that aforesaid Rule 22 should be applicable the moment the successor interest with sufficient rights is appointed by NCLT to make an application for continuation of the proceeding. The Tribunal is a creature of the statute; it cannot travel beyond the express powers vested under the Statute or Rules framed under the statute while deciding a statutory Appeal filed before it against the Orders of the prescribed statutory authorities mentioned under the statute. The corollary, any order passed by the Tribunal beyond the vested powers under the statute would be non est in law. The view consistently expressed by this Tribunal in a series of cases that the appeal abates once the IRP is appointed and/or Resolution plan approved, agreed upon - the appeal abates as per Rule 22 of CESTAT (Procedure) Rules, 1982. ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal before the Tribunal may be continued after the National Company Law Tribunal (NCLT) approves a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC), or whether the appeal abates. 2. Whether Rule 22 of the CESTAT (Procedure) Rules, 1982 (continuance of proceedings after death or adjudication as insolvent) applies upon appointment of a successor-in-interest or approval of a resolution plan, and the legal consequences thereof (abatement, functus officio, merger of impugned orders into the NCLT order). 3. Whether the Tribunal retains power to adjudicate on claims (including claims for refund) in appeals that are affected by NCLT-approved resolution plans, and the scope of relief the Tribunal can grant post-approval. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Continuance of appeal after approval of a resolution plan by NCLT Legal framework: Proceedings under the IBC culminate in a resolution plan approved by the NCLT under Section 31(1) of the IBC. The CESTAT (Procedure) Rules, 1982 govern continuance and abatement of appeals before the Tribunal, particularly Rule 22 concerning death or adjudication as insolvent. Precedent Treatment: The Tribunal relied on a consistent line of its own Bench decisions (multiple CESTAT Benches) and on relevant High Court and Supreme Court authorities addressing the binding effect of NCLT-approved resolution plans and the procedural consequences for pending statutory proceedings. Interpretation and reasoning: The Tribunal reasoned that when an IRP is appointed and/or a resolution plan is approved by the NCLT, the corporate debtor's rights and liabilities are altered such that the original appellant's interest is succeeded by the resolution applicant / successor-in-interest appointed under the IBC framework. Rule 22 operates from the date of appointment/approval, making it incumbent on the successor-in-interest to apply for continuance within the prescribed period; failing which the appeal abates. The Tribunal concluded that approval of a resolution plan renders the Tribunal functus officio in respect of matters that impinge on the scheme approved by the NCLT, because the Tribunal cannot sit in judgment over the NCLT's approval. Ratio vs. Obiter: Ratio - An appeal before the Tribunal abates upon appointment of a successor-in-interest and/or approval of a resolution plan by the NCLT, unless the successor-in-interest applies for continuance under Rule 22 within the stipulated period; thereafter the Tribunal becomes functus officio in relation to those appeals and cannot override the NCLT order. Obiter - Observations on ancillary procedural approaches (e.g., prospective avenues for seeking refunds from other authorities) are indicative but not essential to the holding. Conclusions: The appeal abates from the date of approval of the resolution plan by the NCLT; continuation is permissible only if the successor-in-interest files the Rule 22 application within the specified period (or with sufficient cause thereafter). The Tribunal is bound by the NCLT's order and becomes functus officio in respect of the abated appeal. Issue 2 - Applicability and operation of Rule 22 of CESTAT (Procedure) Rules, 1982 on corporate insolvency Legal framework: Rule 22 provides for abatement of appeals where a party dies or is adjudicated insolvent or where a company is being wound up, subject to continuance by successor-in-interest or legal representative within sixty days (or further period for sufficient cause). Precedent Treatment: The Tribunal applied prior Bench decisions interpreting Rule 22 in the context of IBC proceedings and NCLT-approved resolution plans, and referenced High Court and Supreme Court pronouncements establishing the binding effect of NCLT orders under the IBC. Interpretation and reasoning: The Tribunal interpreted Rule 22 to be applicable 'the moment the successor interest with sufficient rights is appointed by NCLT' - that is, the event triggering Rule 22 is the change in the status/representation of the corporate debtor effected by the IBC process. The successor-in-interest must seek continuance; absence of such application leads to abatement. The Tribunal emphasized statutory limits on its powers and that it cannot exercise jurisdiction inconsistent with the NCLT-approved plan. Ratio vs. Obiter: Ratio - Rule 22 applies upon appointment of a successor-in-interest under the IBC and causes abatement unless a timely application for continuance is made by that successor; the Tribunal's jurisdiction is constrained post-approval. Obiter - Detailed policy rationales for this application beyond statutory text (e.g., commentary on the wider effects of insolvency processes) are ancillary. Conclusions: Rule 22 operates to abate appeals after an NCLT order appointing a successor-in-interest or approving a resolution plan; continuation depends on an application by the successor-in-interest within the time prescribed or with sufficient cause shown. Issue 3 - Binding nature of NCLT-approved resolution plans; merger of impugned orders and Tribunal's power to grant relief post-approval Legal framework: NCLT approval under Section 31 of the IBC renders resolution plans binding on the corporate debtor, its employees, members, creditors, and other stakeholders to the extent provided in the plan; statutory appellate forum powers are delineated by governing statutes and rules. Precedent Treatment: The Tribunal followed the settled principle in a series of judicial decisions that an NCLT-approved resolution plan is binding and that an appellate body cannot effectively override or sit in judgment over such approval; those decisions were treated as followed rather than distinguished or overruled. Interpretation and reasoning: The Tribunal held that the impugned tax/duty orders merge into the NCLT order approving the resolution plan to the extent they are addressed by the plan; therefore, the Tribunal lacks authority to grant relief inconsistent with the NCLT's scheme. The Tribunal noted that claims such as refunds, if not squarely within the present appeal, may require approaches to appropriate authorities but cannot be resolved by re-litigating the NCLT-approved outcome before the Tribunal. Ratio vs. Obiter: Ratio - NCLT-approved resolution plans are binding and effect a merger of impugned orders to the extent covered, precluding the Tribunal from exercising jurisdiction to set aside or re-decide matters subsumed by the plan. Obiter - Suggestions that applicants may pursue refund claims before other authorities are procedural guidance, not core holdings. Conclusions: The binding character of approved resolution plans extinguishes or merges prior contested claims covered by the plan; consequently, the Tribunal cannot grant relief conflicting with the NCLT order and the pending appeal abates insofar as it relates to the approved plan. Cross-references and Final Observations 1. Issues 1-3 are interrelated: the NCLT's approval of a resolution plan triggers Rule 22's operation, causes abatement, and limits the Tribunal's jurisdiction because the resolution plan is binding and impugned orders merge into it. 2. The Tribunal applied and followed prior decisions of various Benches and higher courts on these points; no precedent was overruled or distinguished in substance-the weight of authority supports abatement and functus officio consequences upon approval of a resolution plan. 3. Practical consequence: continuance of an appeal in such circumstances depends on timely application by the successor-in-interest; absent that, the appeal abates and the Tribunal is precluded from further adjudication on matters subsumed by the NCLT-approved resolution plan.