Finality of claim verification prevents collateral challenge to Resolution Plan approval; plan upheld with priority for employee dues.

Challenge to approval of a resolution plan focused on whether employee claims were properly considered where the Liquidator partially admitted/rejected claims and were not challenged under Section 42; the article explains that verification under the liquidation regulations and Sections 38-39 attained finality when not contested, so CoC approval based on those admissions (with full voting and Form H and performance security compliance) is not reopenable on merits, and the plan's approval stands. It also states the plan provided for statutory employee dues with priority and enforceable remedies and that collateral challenge under Section 32/61 is barred by waiver and limited judicial review.

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Issues: (i) Whether approval of the Resolution Plan by the Committee of Creditors and the Adjudicating Authority (impugned order dated 02.05.2024) is vitiated by alleged defects in consideration and quantification of employees' claims where those claims were partially admitted/rejected by the Liquidator and not challenged under Section 42; (ii) Whether the Appellants could challenge the approval of the Resolution Plan under Section 32 read with Section 61 of the Insolvency and Bankruptcy Code, 2016, notwithstanding their failure to challenge earlier partial rejection of claims; (iii) Whether the approved Resolution Plan provided for statutory employee dues (EPF, gratuity, earned leave) and afforded priority and enforceable payment mechanisms as required by law.

Issue (i): Whether approval of the Resolution Plan is vitiated by defects in consideration and quantification of employees' claims where claims were partially admitted/rejected by the Liquidator and not challenged.

Analysis: The Tribunal examined the record of claim verification under the insolvency code and the IBBI liquidation regulations, including requirements of Regulation 19 and Schedule II for proof of claims by workmen/employees, and the Liquidator's partial rejection order of September 2023. The Tribunal noted absence of compliant proof under Regulation 19 by the Appellants, the CoC's considered admission figures, the Form H compliance certificate and performance bank guarantee under Regulation 36B(4A), and that the Appellants did not avail statutory remedy under Section 42 to challenge the Liquidator's partial rejection. The Tribunal applied principles that verification and admission of claims under Sections 38 and 39 followed by non-challenge under Section 42 attain finality and that CoC approval based on those admissions (with 100% voting) is not susceptible to re-examination on merits.

Conclusion: Approval of the Resolution Plan is not vitiated; the contention fails and is against the Appellants.

Issue (ii): Whether the Appellants could challenge the approval of the Resolution Plan under Section 32 read with Section 61 notwithstanding failure to challenge partial rejection of claims earlier.

Analysis: The Tribunal considered the statutory appeal routes and timing under the insolvency code and noted that the Appellants had an available remedy under Section 42 to contest the Liquidator's determination which they did not pursue. Given finality of the Liquidator's partial admissions and the CoC's unanimous approval, the Tribunal held that challenging the plan at the approval stage without having contested the claim determination is estopped by waiver and conduct. The Tribunal further observed that judicial interference with CoC commercial decisions is limited, especially where approval is by 100% voting and requisite compliance (including Form H and performance security) is on record.

Conclusion: The Appellants cannot successfully challenge plan approval under Section 32/61 after failing to challenge the Liquidator's partial rejection; the challenge fails and is against the Appellants.

Issue (iii): Whether the approved Resolution Plan provided for statutory employee dues and afforded priority and enforceable payment mechanisms.

Analysis: The Tribunal reviewed the impugned order and the Resolution Plan extract showing admitted claim amounts and amounts provided in the plan, including priority allocation for EPFO, gratuity and other employee dues, and the fact that EPF amounts had been paid. The Tribunal noted adjustments made from secured financial creditor recovery to meet mandatory payments under Section 53 read with Section 36(4)(a)(iii) and accepted assurances by Respondents to satisfy any marginal shortfall in gratuity/earned leave subject to RP's determination. The Tribunal also observed the availability of remedies (including enforcement under the Companies Act) if payments are not made as per the plan.

Conclusion: The Resolution Plan provided for statutory employee dues with priority and enforceable mechanisms; the Appellants' challenge on this ground fails and is against the Appellants.

Final Conclusion: The appellate challenge to the impugned order approving the Resolution Plan is dismissed; the CoC approval (by 100% voting) and the Adjudicating Authority's approval stand affirmed, and the Resolution Professional is to ensure payment in accordance with the approved plan and its terms.

Ratio Decidendi: Where claims of workmen/employees were verified and partially admitted by the Liquidator in accordance with regulation 19 and related verification provisions and not challenged under the statutory remedy, and where the Committee of Creditors approved the Resolution Plan with full voting and requisite compliance (including performance security and Form H), judicial review is limited and the plan approval will not be set aside for re examining commercial decisions or claim quantification absent demonstrable legal infirmity.

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