2024 (10) TMI 1183 - HC - IBC

Appellant's failure to re-file claim with Resolution Professional leads to extinguishment post-resolution plan approval

Union of India Versus OCL Iron and Steel Limited

Union of India Versus OCL Iron and Steel Limited - 2024:DHC:8098 - DB Issues Involved:1. Whether the claims of the appellant were extinguished upon approval of the Resolution PlanRs.2. Whether the respondent can be held liable for past dues post-CIRP under the principle of a 'clean slate'Rs.3. Whether the appellant's claim was still alive and actionable after the Resolution Plan approvalRs.4. Applicability of the 'clean slate' principle and its impact on the eligibility of the respondent to participate in coal mine auctions.Issue-wise Detailed Analysis:1. Extinguishment of Claims Upon Approval of the Resolution Plan:The core issue was whether the claims of the appellant were extinguished after the approval of the Resolution Plan by the NCLT. The court noted that the appellant's claim for Rs. 92.25 crores was submitted as a 'Financial Creditor' but was returned by the Resolution Professional with advice to file it in the appropriate form. The appellant did not re-submit the claim, leading to its exclusion from the Resolution Plan. The court emphasized that once the Resolution Plan is approved, all claims not included are deemed extinguished, as per the Supreme Court's ruling in Ghanashyam Mishra & Sons Private Limited vs. Edelweiss Asset Reconstruction Co. Ltd. & Ors. The court found no evidence of steps taken by the appellant to resurrect its claim post-approval, thus affirming its extinguishment.2. Liability for Past Dues Post-CIRP:The respondent argued that post-CIRP, it should not be held liable for past dues, which were addressed in the Resolution Plan. The court supported the respondent's position, citing the principle of a 'clean slate' established in Ghanashyam Mishra, which allows the Corporate Debtor to continue as an 'ongoing concern' without past liabilities. The court found that the appellant's claims, not forming part of the approved Resolution Plan, were legally extinguished, and thus, the respondent could not be disqualified from participating in coal mine auctions based on these claims.3. Status of the Appellant's Claim Post-Resolution Plan Approval:The appellant contended that its claim was still alive and actionable, as the NCLT did not waive it during the Resolution Plan approval. However, the court highlighted that the appellant did not challenge the Resolution Plan or take any steps to assert its claim after its approval. The court concluded that the appellant's inaction led to the claim's extinguishment, and the mere non-waiver by the NCLT did not resurrect the claim.4. Applicability of the 'Clean Slate' Principle:The court reiterated the 'clean slate' principle, which allows the Resolution Applicant to start afresh without surprise claims. This principle ensures the Corporate Debtor's revival as a going concern, free from past liabilities. The court found no reason to interfere with the learned Single Judge's order, which applied this principle to allow the respondent's participation in future coal mine auctions. The court dismissed the appeal, affirming that the appellant's claims were extinguished and the respondent was entitled to a clean slate.Conclusion:The court dismissed the appeal, affirming that the appellant's claims were extinguished upon the Resolution Plan's approval, and the respondent was entitled to proceed on a 'clean slate' basis. The court found no cogent reason to interfere with the learned Single Judge's order, thus allowing the respondent's participation in coal mine auctions without the burden of past liabilities.