2024 (10) TMI 575 - HC - IBC

Resolution Plan approval extinguishes all pre-effective date demands under section 31 IB Code

Orissa Manganese & Minerals Limited (Formerly Orissa Manganese & Minerals Private Limited Versus State of Odisha, Director of Mines, Odisha, Deputy Director of Mines, Koira Circle.

The Orissa HC held that demands raised against the petitioner-company for periods prior to the NCLT-approved Resolution Plan's effective date (22.06.2018) ... Alleged outstanding dues owed by the Petitioner-Company to the Opposite Parties in view of the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) - Validity of demands raised against the Petitioner-Company post-approval of the Resolution Plan - HELD THAT:- In the present case, once the Resolution Plan was approved by the NCLT, which attained finality as per the order of the Hon’ble Supreme Court, it is no more open for the Opposite Parties to again raise the demands for the very period covered by the Resolution Plan, which in other words to say that no claim for the period prior to 22.06.2018, the date of approval of the Resolution Plan by the NCLT, i.e., the Plan Effective Date, could have been raised by the Opposite Parties and such demands to the extent as they cover the period up to 22.06.2018 stand automatically extinguished in terms of the Resolution Plan. The observations made above in the case of the Appeal filed by the present successful Resolution Applicant in the case of Ghanashyam Mishra & Sons [2021 (4) TMI 613 - SUPREME COURT] provide the answer to the submission of the learned Counsel for the State that the dues arising out of the judgment of the Hon’ble Supreme Court in case of Common Cause were not specifically dealt with in the ARP - the Resolution Applicant should start with fresh slate on the basis of the Resolution Plan approved. In other-words, upon approval of the Resolution Plan, the Company-OMML no more stands as the Corporate-Debtor and it is only under the legal obligation as being in the management of the Company (OMML) strictly in terms of the Resolution Plan. In terms of section 31 of the I & B Code, the above ARP is binding on all creditors including Central Government and State Government. All those impugned demands raised against the Petitioner-Company pertaining to the period prior to the Plan Effective Date, i.e. 22.06.2018 stand automatically extinguished in terms of Approved Resolution Plan (ARP). In other words, the demands to the extent, which cover the period up to 22.06.2018 are thus unsustainable in law. Thus, while setting aside the impugned letters under which the demands have been raised against the Petitioner-Company, which are the subject matters of all the three writ petitions, this Court directs the Opposite Parties to revise the demands by limiting it to the period from 22.06.2018 onwards and raise the same afresh as against the Petitioner-Company in accordance with law so as to be satisfactorily discharged. Petition disposed off. Issues Involved:1. Validity of demands raised against the Petitioner-Company post-approval of the Resolution Plan.2. Binding nature of the Resolution Plan on creditors, including governmental authorities.3. Applicability of the Insolvency and Bankruptcy Code (I&B Code) provisions to extinguish claims not included in the Resolution Plan.4. Impact of Supreme Court judgments on the enforceability of claims against the Corporate Debtor.Issue-wise Detailed Analysis:1. Validity of Demands Raised Against the Petitioner-Company:The core issue in these writ petitions concerns the validity of demands raised against the Petitioner-Company, Orissa Manganese & Minerals Limited (OMML), post-approval of the Resolution Plan by the National Company Law Tribunal (NCLT). The demands pertain to compensation under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), differential stamp duty, registration fees, dead rent, surface rent, and royalty. The Petitioner contends that these demands, which relate to periods prior to the approval of the Resolution Plan, are extinguished as per the provisions of the I&B Code and the binding nature of the Resolution Plan.2. Binding Nature of the Resolution Plan:The judgment emphasizes that once a Resolution Plan is approved by the NCLT, it becomes binding on all stakeholders, including the Corporate Debtor, its employees, members, creditors, and governmental authorities. This principle is supported by the Supreme Court judgment in Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, which states that all claims not part of the approved Resolution Plan are extinguished. The Court highlights that any additional liabilities imposed post-approval would render the Resolution Plan unworkable, defeating the purpose of the I&B Code, which is to revive the Corporate Debtor.3. Applicability of I&B Code Provisions:The Court underscores the I&B Code as a comprehensive mechanism for Corporate Insolvency Resolution and Liquidation, providing a holistic approach to dealing with claims against a Corporate Debtor. The Resolution Plan, once approved, serves as a clean slate for the successful Resolution Applicant, ensuring no surprise claims are introduced post-approval. The Court refers to the I&B Code provisions, particularly Section 31, which mandates that the approved Resolution Plan binds all stakeholders and extinguishes claims not included in the Plan.4. Impact of Supreme Court Judgments:The judgment extensively discusses the impact of Supreme Court decisions, particularly the Ghanashyam Mishra case, which clarifies that the 2019 amendment to Section 31 of the I&B Code is declaratory and clarificatory, thus having retrospective effect. This amendment ensures that all claims, including statutory dues owed to the Central or State Government, not part of the Resolution Plan, are extinguished. The Court also distinguishes the present case from the Lalit Kumar Jain v. Union of India case, noting that the latter dealt with personal guarantors' liabilities and does not affect the extinguishment of claims against the Corporate Debtor under an approved Resolution Plan.Conclusion:The Court concludes that the demands raised against the Petitioner-Company for periods prior to the approval of the Resolution Plan on 22.06.2018 are unsustainable in law and stand extinguished. It directs the Opposite Parties to revise the demands, limiting them to periods post-22.06.2018, in accordance with the law. The writ petitions are disposed of without costs, reflecting the binding nature of the Resolution Plan and the extinguishment of pre-approval claims.