AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 537
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....ion as contained in Article 14 thereof, and which empowered IOCL to call upon ESL to take remedial steps for payment in case it failed to lift the entire Adjusted Annual Contract Quantity [AACQ]. 2. The record would reflect that on 18 January 2012 the name of ESL was changed to Essar Steel India Ltd. [ESIL] and an Assignment Agreement dated 14 November 2013 is stated to have been executed between IOCL, ESIL and EOL which constituted the "First Assignment Agreement" and was to remain valid upto 31 August 2014. In terms of the aforesaid agreement, ESIL assigned all its rights and obligations as flowing from the GSA to EOL. The parties are stated to have executed a "Second Assignment Agreement" on 25 September 2014 and which was to remain valid upto 30 September 2015. 3. On 04 May 2016, IOCL is stated to have placed ESIL on notice of its failure to comply with the AACQ for the Contract Year 2015 and consequently the former being entitled to invoke Article 14.1 of the GSA. 4. On 10 March 2017 the ESIL purporting to invoke powers conferred by Article 19.1 of the GSA proceeded to issue a notice of termination. The aforesaid termination was disputed by IOCL vide letter dated 21 March ....
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.... corporate insolvency Reason for non-admission of entire claim amount The remaining claim amount is not admitted because of pending dispute with respect to this claim as the arbitration proceedings were initiated by Indian Oil Corporation Limited You may take your own independent advice in this matter keeping in view the provisions of the Insolvency and Bankruptcy Code, 2016 and rule/regulations made under the said Code. This is also to inform you that the erstwhile management of Essar Steel India Limited (Company) is stating that Indian Oil Corporation Limited (IOCL) sold the gas that was to be supplied to the to alternate buyer, thus, IOCL has not incurred any losses. You are therefore directed to file an affidavit to confirm that the gas that was to be supplied to the Company was not sold to any third party and it actually vanished because the Company had not taken it. Thanking you, Sincerely, Satish Kumar Gupta Resolution Professional" 7. It would at this stage and before proceeding further also be pertinent to refer to the following passages as they appeared in the Resolution Plan which ultimately came to be framed by the RP and was approved by the Committee of....
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....nnot be made as a matter of right, but only their interest, if any, can be taken care of while dealing with the I.A.No.431 of 2018 in succeeding paragraphs for consideration and approval of the Resolution Plan." 9. For the purposes of evaluating the issues which arise in the present petition, it would also be apposite to briefly notice the contentions which were raised by the petitioner before the NCLT in its IA. The Court extracts paras 12, 13, 15, 16, 17 & 18 thereof hereinbelow: "12. The Resolution Plan is wholly one sided and arbitrary as it provides that after the distribution of amounts to the Financial Creditors and Operational Creditors in terms of the Resolution Plan, all other liabilities and obligations of Operational Creditors shall stand extinguished in full and further that even all Litigations and proceedings in respect to the debts pending against the Corporate Debtor prior to commencement of CIRP shall stand abated thereby depriving the Applicant of any remedy to pursue the claim not provided for in the Resolution Plan. 13. That under the impugned Resolution Plan, all inquiries. investigations, claims etc. even with regard to pending or future periods are soug....
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....ed by 'Dakshin Gujarat Vij. Co. Ltd.'; 'State Tax Officer'; 'Gujarat Energy Transmission Corporation Ltd.'; 'Bharat Petroleum Corporation Limited'; 'Indian Oil Corporation Ltd.'; 'MSTC Limited'; 'Gail (India) Limited' and 'Global Transnational Trading FZE' before the Adjudicating Authority, the Adjudicating Authority passed following directions: "That these I.As. can be partially succeed only to the extent of such direction may be issued to the Resolution Professional to register their respective claims and to update the claims in the list of creditors, because we have already held in our separate order passed in I.As. Nos. 54 & 55 of 2018. However, the apportionment of these claims cannot be made as a matter of right, but only their interest, if any, can be taken care of while dealing with the I.A.No. 431 of 2018 in succeeding paragraphs for consideration and approval of the Resolution Plan." 42. The grievance of 'Dakshin Gujarat Vij. Co. Ltd.'; 'State Tax Officer'; 'Bharat Petroleum Corporation Limited'; Indian Oil Corporation Ltd.'; 'MSTC Limited'; 'Gail (India) Limited'; 'Global Transnational Trading FZE'; 'Oil and Natural Gas Corporation Ltd.' and Indian Oil Corporation Lt....
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....lated under the IBC explained the importance liable to be attached to the clean slate doctrine which had come to be enunciated and the statutory closure which ensues once a Resolution Plan comes to be duly approved. This Court deems it apposite to extract the following passages from that decision hereinbelow: "107. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then....
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....he NCLAT which had held that the claims of the operational creditors were liable to be factored in full in the Resolution Plan. The effect of the said decision was that the action of the RP admitting the claims of the petitioner at a notional value of INR 1 came to be affirmed and the Resolution Plan so amended conferred a seal of finality. 13. The respondent who was the successful Resolution Applicant acquired 100% of the shareholding of ESIL on 16 December 2019 and took over its management. Once the Resolution Plan had come to be successfully implemented and one would have thought that all controversies would have been laid to rest, the petitioner issued a notice dated 09 August 2021 calling upon the respondent to pay various amounts which according to it were payable in terms of the GSA and pertained to the Contract Years 2014, January to September, 2015, Contract Years 2016, 2017, 2018, 2019 and 2020. IOCL in terms of the aforesaid notice claimed an amount of INR 8772,30,79,969/-. The respondent by its letter of 12 September 2021 repudiated the claims as raised by the petitioner. This led to the petitioner invoking arbitration against the respondent in terms of its letter of 2....
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....tinues to subsist notwithstanding the closure of proceedings under the IBC, and thus the petitioner is justified in calling upon the Court to exercise its jurisdiction conferred by Section 11. 16. On a more fundamental plane, Mr. Sharma argued that the various objections which are addressed by the respondent relate to the merits of the dispute all of which should be left open for the consideration of the AT. Learned counsel submitted that bearing in mind the contours of the Section 11 power and which proceeds on the principle of a prima facie consideration alone, all disputes must be left open for the consideration of the AT. 17. Appearing for the respondents Dr. Singhvi, learned Senior Counsel firstly invoked the principles of extinguishment of claims and which according to him is a unique characteristic of the IBC. According to Dr. Singhvi the extinguishment of all claims including those which may have been admitted at a notional value of INR 1, would have to be considered not only in light of the principles that have been laid down by the Supreme Court but additionally in light of the expressed language of the Resolution Plan itself. Dr. Singhvi, apart from adverting to the ex....
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.... and unconditionally reduced to and capped at the amounts that would be realizable by the Claimant, if the contingent liability had fructified at any time prior to the Insolvency Commencement Date. d. With effect from the Plan Approval Date, all Encumbrances created or suffered to exist over the assets of the Corporate Debtor or over the Securities of the Corporate Debtor, whether by contract or by Applicable Law, whether created for the benefit of the Corporate Debtor or any Third Party (except the Security Interest that is created or purported to be created for the benefit of the Resolution Applicant and/or its Connected Persons, and/or banks or financial institutions designated by the Resolution Applicant), shall stand unconditionally and irrevocably assigned or novated in favour of the Resolution Applicant or released (if required by the Resolution Applicant) upon making the relevant payments under the Resolution Plan on the Effective Date and all enforcement of security by any Persons commenced over any of the assets of the Corporate Debtor or over any Securities of the Corporate Debtor shall stand released and reversed, without the requirement of any further deed or action ....
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....ing Promoter Group or their respective affiliates, which guarantees shall continue to be retained by the Financial Creditors and shall continue to be enforceable by them. h. Upon the approval of the Resolution Plan by the Adjudicating Authority, all the outstanding negotiable instruments issued by the Corporate Debtor including demand promissory notes, postdated cheques and letters of credit, till or as of the Insolvency Commencement Date, shall stand terminated and the liability of the Corporate Debtor under such instruments shall stand extinguished unless otherwise determined by the Corporate Debtor in compliance with the provisions of Section VII or solely for the purpose of operating the Corporate Debtor as a going concern i. On the Plan Approval Date, other than as contemplated under Section X, the rights of any Person (whether exercisable now or in the future and whether contingent or not) to call for the allotment, issuance, sale or transfer of shares or Securities or loan capital of the Corporate Debtor, whether on a change of control, or otherwise, shall stand unconditionally and irrevocably extinguished. In addition to the foregoing, on the Plan Approval Date, the rig....
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.... 1) has updated the list of Creditors of the Corporate Debtor to include the amount being claimed by the Appellant but the same is meaningless and of no avail in as much as the Resolution Plan has already been passed by the Adjudicating Authority on 08.03.2019. 32. It is also pertinent to mention herein that the Corporate Debtor had, by way of the communication dated 10.03.2017, sought to wrongfully terminate the GSA between the parties, which had been opposed to by the Appellant. The issue of termination of the GSA vitally affects the rights of the parties, more so of the Appellant. However, the Resolution Plan and/or the Order dated 08.03.2019 is absolutely silent on this aspect, giving rise uncertainty and ambiguity. Further the impugned Order does not, either explicitly or implicitly specify that only those claims are being settled which are part of the Resolution Plan. To be noted that the issue of purported termination of the GSA is not considered in or part of the Resolution Plan. The Resolution Plan does not deal with and / or all issues that it ought to have and approval thereof is thus bad in law. 33. Not only does the Resolution Plan totally extinguish Appellant's hu....
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....dance with the order of priority in sub-section (1) of Section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, which also shall not be less than the amount to be paíd to such creditors if accordance with subsection (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1 to clause (b) of sub-section (2) of Section 30 of the I&B Code clarifies for the removal of doubts that a distribution in accordance with the provisions of the said clause shall be fair and equitable to such creditors. The resolution plan is also required to provide for the management of the affairs of the corporate debtor after approval of the resolution plan and also the implementation and supervision of the resolution plan: Clause (e) of sub-section (2) of Section 30 of the I&B. Code also casts a duty on RP to examine that the resolution plan does not contravene any of the provisions of the law for the time being in force. 67. Perusal of Section 29 of the I&B Code read with Regulation 36 of the Regulations would reveal that it requires RP to prepare an....
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....en CoC and the resolution applicant, various modifications may be made so as to ensure that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the corporate debtor is revived and is made an on-going concern. After CoC approves the plan, the adjudicating authority is required to arrive at a subjective satisfaction that the plan conforms to the requirements as are provided in sub-section (2) of Section 30 of the I&B Code. Only thereafter, the adjudicating authority can grant its approval to the plan. It is at this stage that the plan becomes binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The legislative intent behind this is to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans would go haywire and the plan would be unworkable." 20. It was submitted by Dr. Singhvi that the approval of a Resolution Plan under the IBC results in cessation and extinguishment of all....
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....ompass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator , as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd." 22. It was the submission of learned Senior Counsel that in proceedings like the present the Court would not be guided or influenced by the mere expediency to refer but be obliged to weigh and balance the closure which stands accorded to claims which formed part of a Resolution Plan which had come to be approved under the IBC. According to Dr. Singhvi, it is the aforesaid aspect of the present matter which renders the disputes raised "non arbitrable". 23. Having noticed the rival submissions which were addressed, this Court finds that it is called upon to principally answer two fundamental questions: - A. Whether the approval of the Resolution Plan results in an extinguishment of all claims that the Petitioner....
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....e "hydra headed monster". In fact, Ghanashyam Mishra significantly observes that all claims which are not part of the Resolution Plan shall stand extinguished and no person would be entitled to "initiate or continue" any proceedings in respect of the claim. 26. Undisputedly and as would be evident from the challenges which were raised by the petitioner against the decision of the RP to admit its claim at a notional value of INR 1, it had assailed all aspects of the said decision including with respect to termination as well as the abridgment of its claim itself. Although the NCLT and NCLAT had accorded relief to the petitioner and reinstated its claim to an extent, those decisions came to be set aside by the Supreme Court in Committee of Creditors. The aforesaid decision of the Supreme Court thus lends an evident quietus to the entire controversy. While arriving at the said conclusion, the Court also bears in mind the final direction of the Supreme Court in Committee of Creditors and which commands the implementation of the Resolution Plan in terms of its observations and as framed by the RP. The Court is thus of the considered opinion that approval of the Resolution Plan in terms....