2024 (8) TMI 159 - HC - Insolvency and Bankruptcy

Delhi HC dismisses suit under Section 151 CPC as Resolution Plan approval rendered relief infructuous

The Delhi HC dismissed the suit under Section 151 CPC after finding it rendered infructuous due to subsequent developments. The court held that following ... Directions to the defendant to produce on record the Resolution Plan - alleged excess payments made by the defendant to the plaintiff - HELD THAT:- On a query from this Court on whether any such requisition was made by the plaintiff to the defendant or its counsel, the learned counsel for the plaintiff fairly admits that no such requisition was made since last date of hearing. The documents that are required for a proper adjudication of IA no. 2769/2022, filed by the defendant, are supplied to the plaintiff. In any case, the plaintiff has also not made any effort to obtain a copy of the Resolution Plan from the NCLT - application disposed off. Dismissal of the instant Suit - Invocation of inherent powers of this Court under Section 151 of the CPC - HELD THAT:- This Court in RAJAN GUPTA VERSUS RAJAN GUPTA [2023 (2) TMI 1323 - DELHI HIGH COURT], while relying on the law laid down in Shipping Corporation (supra), held that though the provisions of Order VII Rule 11 of the CPC may not apply on the facts of the case, however, the Court has ample power under Section 151 of the CPC to dismiss the Suit as having been rendered infructuous due to a subsequent development because of which relief claimed in the Suit cannot be granted. In my opinion, this Suit would be a fit case for the Court to exercise its powers under Section 151 of the CPC to scuttle such a suit as the relief prayed for in the present Suit, due to the subsequent development of the Resolution Plan passed by the learned NCLT, can no longer survive and be granted. The defendant/applicant succeeds in the application - Application allowed. Issues Involved:1. Production of Resolution Plan and related documents.2. Dismissal of the Suit under Order VII Rule 11 of the CPC and Section 151 of the CPC.3. Extinguishment of claims not included in the Resolution Plan.4. Continuation of pending legal proceedings post-Resolution Plan approval.Issue-wise Detailed Analysis:1. Production of Resolution Plan and Related Documents:The plaintiff filed an application requesting the defendant to produce the Resolution Plan, list of undisputed documents, and list of operational creditors. The plaintiff also sought details of individuals and creditors who have been paid and clarification on whether alleged excess payments made to the plaintiff were part of the Resolution Plan. The defendant provided printouts of Clause 1 and Clause 3 of the Resolution Plan and the list of operational creditors. However, the plaintiff contended that Clause 3 was not fully supplied. The Court noted that the plaintiff had not made any requisition for the complete document since the last hearing and had not attempted to obtain the Resolution Plan from the NCLT. Consequently, the application was disposed of.2. Dismissal of the Suit under Order VII Rule 11 of the CPC and Section 151 of the CPC:The defendant filed an application under Order VII Rule 11 of the CPC, seeking dismissal of the Suit, and also invoked Section 151 of the CPC, arguing that subsequent developments rendered the Suit non-survivable. The defendant highlighted that the State Bank of India had initiated insolvency proceedings against the defendant company under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), which led to the approval of a Resolution Plan by the NCLT. The Resolution Plan, approved by the NCLT, extinguished all claims not included in it. The Court agreed with the defendant's contention, noting that the plaintiff's claim was not part of the approved Resolution Plan, and thus, the Suit could not proceed.3. Extinguishment of Claims Not Included in the Resolution Plan:The defendant argued that the plaintiff's claim was extinguished as it was not included in the list of operational creditors in the Resolution Plan. Clauses 3.3.1, 3.3.2, 3.3.3, 3.3.6, and 3.3.7 of the Resolution Plan specified that claims not submitted or admitted by the Resolution Professional would be treated as NIL and extinguished upon the Closing Date. The Court emphasized that the plaintiff, not being listed as an operational creditor, had its claim extinguished under the approved Resolution Plan. The Supreme Court's judgment in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. was cited, affirming that all claims not part of the Resolution Plan stand extinguished post-approval.4. Continuation of Pending Legal Proceedings Post-Resolution Plan Approval:The plaintiff argued that the approval of the Resolution Plan did not automatically waive or abate pending legal proceedings, relying on paragraph 28 of the NCLT's Order dated 08.03.2019. However, the Court clarified that Clause 3.2 of the Resolution Plan, which the plaintiff referred to, applied to financial creditors, not operational creditors like the plaintiff. The Court further cited the Supreme Court's ruling in Shipping Corporation of India Ltd. v. Machado Bros., which allows courts to dismiss suits rendered infructuous due to subsequent events. The Court concluded that the Resolution Plan's approval rendered the plaintiff's Suit non-survivable, thus dismissing it under Section 151 of the CPC.Conclusion:The defendant's application succeeded, and the Suit was dismissed as the plaintiff's claim was extinguished under the approved Resolution Plan. The Court emphasized the binding nature of the Resolution Plan on all stakeholders and the extinguishment of claims not included in it. No costs were awarded.