TaxTMI 
TaxTMI 
2026 (1) TMI 570
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....esent Writ Petition qua the IBC and confirm/declare that the approved Resolution Plan is binding on all creditors of the Petitioner, including the Second Respondent herein; 2. To issue an appropriate writ, order or direction in the nature of Certiorari setting aside the Order dated October 07.2020 passed by the Arbitral Tribunal; 3. To issue an appropriate writ, order or direction in the nature of Mandamus directing the Arbitral Tribunal to terminate the arbitration proceedings in Arbitration-I/Matter of 2009 and Arbitration II/Matter of 2006 as there being no cause of action surviving in favour of the Second Respondent and alleged claim of the Second Respondent having been extinguished abated and withdrawn; 4. To issue any other suitable writ, order or direction which the Hon'ble Court may deem fit and proper in the circumstances of the case; 5. To award cost of this writ petition to the Petitioner." 2. Relevant facts, as stated by the Petitioner, necessary for adjudication of the present petition are as under: - i. Tata Steel Limited, being the successor-in-interest of Angul Energy Limited (formerly known as Bhushan Energy Limit....
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....ng the pendency of the Arbitral proceedings, Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "IBC") was initiated against the Petitioner by the State Bank of India, on 22.11.2017 before the Adjudicating Authority, National Company Law Tribunal (hereinafter referred to as "Adjudicating Authority") by way of a Company Petition bearing No. (IB)-530(PB)/2017; vi. The aforesaid petition was admitted by the Adjudicating Authority vide order dated 08.01.2018, whereby a moratorium was imposed and an Interim Resolution Professional (hereinafter referred to as the "IRP") was appointed to look after the affairs of the Petitioner in terms of Section 13 of IBC; vii. Subsequently, vide public announcement dated 10.01.2018, the IRP invited claims from all the creditors of the Petitioner; viii. In view thereof, Respondent No. 2 submitted its claim before the IRP contending to be an Operational Creditor of the Petitioner, vide its affidavit and Form-B dated 22.01.2018 for an amount of INR 80,29,27,121/- (INR Eighty Crores Twenty Nine Lakhs Twenty Seven Thous....
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.....2019 the new management took charge of the Petitioner after successful completion of the CIRP; xvii. On 27.02.2020 the name of the Petitioner was changed from "Bhushan Energy Limited" to "Angul Energy Limited" and a fresh certificate of incorporation was issued by the Registrar of Companies, Delhi. The said certificate is reproduced as under: - xviii. In view of completion of the Insolvency proceedings of the Petitioner and upon lifting of the moratorium, Respondent No. 2 sent a communication dated 19.06.2019 to the learned Arbitral Tribunal for resuming the Arbitral proceedings; xix. On 27.07.2019 the learned Arbitral Tribunal informed the parties that since the mandate of the tribunal had expired, parties may seek extension from the Court; xx. Subsequently, the Respondent No. 2 preferred an O.M.P.(Misc.) (Comm.) No. 305/2019 before this Court, in which an order dated 08.11.2019 was passed and mandate of the learned Arbitral Tribunal was extended by this Court for a period of 9 months; xxi. During the course of the Arbitral proceedings, two separate applications were preferred on behalf of the Petitioner under Section 32(2)(c) of the A....
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....cluding the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued." 5. It was further contended by the learned Senior Counsel that the impugned order undermines the binding value of the approved Resolution Plan and the law is well settled that a corporate debtor cannot be made to face undecided claims after the approval of the Resolution Plan. It was further submitted that if the impugned order is sustained, the effect of it will militate against the entire insolvency resolution process undergone by the Petitioner. 6. Learned Senior Counsel drew the attention of this Court to Section 5(21) of the IBC, and submitted that the said provision defines "operational debt" as a claim in respect of provision of the goods and services, including employment, or a debt in respect of the dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. It....
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.... the category of an operational creditor of the Petitioner, who willingly participated in the CIRP of the Petitioner by duly submitting its claims before the IRP. 10. It was contended that since the learned Arbitral Tribunal had ventured into the interpretation of terms and provisions as defined under the IBC, despite a categorical bar to that effect under Section 63 of the IBC, the impugned order is patently illegal and beyond the jurisdiction of the learned Arbitral Tribunal and the same is liable to be set aside. The said provision is reproduced as under: - "63. Civil court not to have jurisdiction.-No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which National Company Law Tribunal or the National Company Law Appellate Tribunal has jurisdiction under this Code." 11. It was further submitted that by virtue of the non obstante clause contained in Section 238 of the IBC, the provisions of the Code have an overriding effect over all other laws. The said provision is reproduced as under: - "238. Provisions of this Code to override other laws.-The provisions of this Code shall have effect, not....
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....mmercial nature of the transaction. 15. It was submitted that the impugned order wrongly recorded that the claim of Respondent No. 2 was not a part of the Information Memorandum, whereas the name of Respondent No. 2 is duly reflected in the List of Operational Creditors of the Petitioner. It was further submitted that the approved Resolution Plan categorically bears the name of Respondent No. 2 in its Clause 8.6.2, whereby the claims of Respondent No. 2 had been extinguished, and thus, if the claim of Respondent No. 2 had not been a part of the Information Memorandum, then the name of Respondent No. 2 would have neither featured in the List of Creditors, nor in the approved Resolution Plan. 16. Learned Senior Counsel further placed reliance on the decision of the Hon'ble Supreme Court in K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150, and submitted that the CoC may accept or reject a Resolution Plan submitted by a resolution applicant and the commercial wisdom, as applied by the CoC in either accepting or rejecting the said plan, is non-justiciable. It was further submitted that in the event of approval of a Resolution Plan by the CoC, the treatment given to the credi....
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....ity. That is made non-justiciable." 17. Learned Senior Counsel contended that the impugned order challenges the commercial wisdom of the CoC and the same is contrary to the settled position of law. It was further contended that the CoC was aware of the treatment being given to the alleged claims of Respondent No. 2, however, despite the same, proceeded with the approval of the Resolution Plan applying its commercial wisdom. The learned Arbitral Tribunal, therefore, was precluded from questioning the commercial wisdom of the CoC and the approval of the treatment given to the claims of Respondent No. 2. 18. It was further submitted by the learned Senior Counsel that TSL, keeping in view the financial status of the Petitioner, submitted its Resolution Plan subject to certain conditions, including that it would not assume any liability towards claims pertaining to a period prior to the approval of the Resolution Plan, save and except those admitted by the RP. It was submitted that TSL had put a specific clause namely Clause 8.10.12 in the Resolution Plan, and in terms of the said clause, all claims pertaining to the Petitioner, including those arising out of Arbitral proceedings,....
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....s full, due and payable as on the insolvency commencement date and not merely as contingent claims. It was further submitted that the Resolution Plan provided that since the liquidation value of the Petitioner, as available to the operational creditors, was assumed to be NIL, no amount was due and payable towards such "sub-judice claims", and the said division was taken keeping in view the commercial viability of Petitioner. Attention of this Court was drawn to Clause 8.6 of the Resolution Plan which deals with "Treatment of Claims on Matters that are Sub Judice", and specifically to Clause 8.6.2. The said clause is reproduced as under: - "8.6.2. In respect of Sub Judice Claims from Operational Creditors (including without limitation, claims made by ISGEC Heavy Engineering Limited), each such Sub Judice Claim is a "claim" and "debt", each as defined under the IBC, and would consequently qualify as "operational debt" (as defined under the TBC) and therefore the full amount of such Sub Judice Claims shall be deemed to be owed and due as of the Insolvency Commencement Date, the Liquidation Value of which is assumed to be NIL, and therefore no amount is payable in relation the....
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....ies have been provided, however, jurisdiction of a Civil Court and Authorities (including the Arbitral Tribunal) have expressly been barred under the IBC by virtue of Section 63 of the IBC. The IBC being a complete Code, the legislature has consciously enacted the said provision to ensure that the functioning of the adjudicatory forums is not hindered and interfered with by other judicial and quasi-judicial bodies. 23. It was further submitted that the findings of the learned Arbitral Tribunal in the impugned order are in contravention to the fundamental principles and the legislative intent of the IBC. In terms of Section 63 of the IBC, the learned Arbitral Tribunal was not empowered to adjudicate upon the functioning of the RP or the interpretation of the term "creditor" and such issues fall exclusively within the jurisdiction of the Adjudicating Authority and the National Company Law Appellate Tribunal (hereinafter referred to as "NCLAT"). Therefore, the impugned order suffers from lack of inherent jurisdiction and is liable to be set aside. 24. It was further submitted by the learned Senior Counsel that the impugned order is perverse and there exists a patent lack of juri....
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....ng that the judgment under appeal correctly held that in the circumstances of the present case no stay order could possibly have been granted by the arbitrator under Section 17 on the basis of fundamental principles contained in the Specific Relief Act, in that damages could always be granted, and that therefore, the injunction granted in the facts of the present case should have been denied. *** *** *** 17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us hereinabo....
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....produced as under: - "4. We are of the view that a foray to the writ court from a Section 16 application being dismissed by the arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever - it must be the perversity of the order that must stare one in the face." 27. Learned Senior Counsel further contended that the instant petition is maintainable and in support of the same, reliance was placed upon the judgment of this Court in Surender Kumar Singal and Ors. v. Arun Kumar Bhalotia and Ors. 2021 SCC OnLine Del 3708, wherein while relying upon the decisions of the Hon'ble Supreme Court in Deep Industries (supra) and Punjab State Power Corporation (supra), this Court had held that a Writ petition under Articles 226 and 227 of the Constitution of India, 1950 would be maintainable against an order passed by an Arbitral Tribunal. The relevant paragraph of the said judgment is as under: - "25. A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the sc....
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.... resolution professional - see Sections 22(1) and (2) of the Code. Under Section 23(1), the resolution professional shall conduct the entire CIRP and manage the operations of the corporate debtor during the same. Importantly, all meetings of the Committee of Creditors are to be conducted by the resolution professional, who shall give notice of such meetings to the members of the Committee of Creditors, the members of the suspended Board of Directors, and operational creditors, provided the amount of their aggregate dues is not less than 10% of the entire debt owed. Like the duties of the interim resolution professional under Section 18 of the Code, it shall be the duty of the resolution professional to preserve and protect assets of the corporate debtor including the continued business operations of the corporate debtor - see Section 25(1) of the Code. For this purpose, he is to maintain an updated list of claims; convene and attend all meetings of the Committee of Creditors; prepare the information memorandum in accordance with Section 29 of the Code; invite prospective resolution applicants; and present all resolution plans at the meetings of the Committee of Creditors - see Sect....
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....pply to the corporate debtor, once corporate debtors start defaulting in payment. Financial creditors may exit on their long-term loans, either upon repayment of the full amount or upon default, by recalling the entire loan facility and/or enforcing the security interest which is a time consuming and lengthy process which usually involves litigation. Financial creditors are also part of a regulated banking system which involves not merely declaring defaulters as non-performing assets but also involves restructuring such loans which often results in foregoing unpaid amounts of interest either wholly or partially. *** *** *** 88. By reading para 77 (of Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17]) dehors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Para 76 clearly refers to the Uncitral Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in para 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, p....
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....e resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count. 29. Further, reliance was placed upon the judgment of the Hon'ble Supreme Court in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657, and the relevant portion of the said judgment is reproduced as under: - "Conclusion 102. In the result, we answer the questions framed by us as under: 102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which....
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.... has come into effect. 102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued." 11. Admittedly, the claim in respect of the demand which is the subject-matter of the present proceedings was not lodged by Respondent 2 after public announcements were issued under Sections 13 and 15 IBC. As such, on the date on which the resolution plan was approved by the learned NCLT, all claims stood frozen, and no claim, which is not a part of the resolution plan, would survive. 12. In that view of the matter, the appeals deserve to be allowed only on this ground. It is held that the claim of the respondent, which is not part of the resolution plan, does not survive. The amount deposited by the appellant at the time of admission of the appeals along with interest accrued thereon is directed to be refunded to the appellant." 31. Learned Senior Counsel further pl....
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....all be payable by the Company to the Resolution Applicant. Nothing set out in Section 8.1.3 shall apply to the rights of the Resolution Applicant (or limit the same in any manner) in respect of the Remaining Financial. Debt, with regard to the period commencing as of the Closing Date; and (ii) The Remaining Financial Debt shall be unsecured and subordinated debt, and the rights of the Resolution Applicant with regard to the Remaining Financial Debt shall be subordinated to any new borrowings of the Company and any other instruments issued by the Company (other than equity shares) with effect from the Closing Date, as set out in Annexure 5 and as shall be provided in the Novation Agreement proposed to be executed in this regard. Further, the Resolution Applicant shall not be entitled to repayment of the principal amounts of the Remaining Financial Debt (excluding conversion of such subordinated debt into equity), or be entitled to payment of interest prior to payment, repayment or redemption of the entire debt due to the Financial Creditors. The Remaining Financial Debt shall be classified as "standard assets" in the books of the Resolution Applicant. The provision....
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....ores on the basis of 3 arbitration awards in its favour and against the corporate debtor and that it has initiated execution proceeding by filing execution petitions before the hon'ble High Court of Calcutta. Those proceedings were pending when the CIRP was initiated on July 26, 2017. Later on, different submissions were made and it was claimed that its claim is contingent liability but not an operational debt and that contingent liability can never be resolved under a resolution plan. It was thus argued that the resolution applicant has to assume a risk to contingent liability devolving on the corporate debtor in future. In a separate application filed, Jaldhi again shifted which is stand by arguing that although its claim had been admitted by the RP but the resolution plan categorises its claim has an identified contingent liability. It was contended that it is the operational creditor and its claim as a contingent liability then it cannot be dealt within the resolution plan." 174. It can thus be seen that the stance adopted by the appellant is varying and inconsistent. On one hand, the appellant-Jaldhi had claimed to be a contingent creditor and raised the ....
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.... a classification was made by the SRA-JSW, the same had been duly approved by the CoC who has the power to sanction the resolution plan or enter into negotiations to modify it prior to its approval. Such a decision squarely falls under the protected umbrella of the "commercial wisdom" of the CoC which has been given paramount status by this court in the case of K. Sashidhar v. Indian Overseas Bank [(2019) 213 Comp Cas 356 (SC); (2019) 12 SCC 150; (2019) 4 SCC (Civ) 222; 2019 SCC OnLine SC 257.]. It will be relevant to take note of the relevant paragraphs of the said judgment which read thus [ See page 394 of 213 Comp Cas.] : "As aforesaid, upon receipt of a 'rejected' resolution plan the Adjudicating Authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under section 33(1) of the Insolvency and Bankruptcy Code. The Legislature has not endowed the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the backg....
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.... (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under section 188 of the Insolvency and Bankruptcy Code. The powers and functions of the Board have been delineated in section 196 of the Insolvency and Bankruptcy Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under section 30(4) of the Insolvency and Bankruptcy Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have....
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....w after the amendment with effect from June 6, 2018, 44 per cent.). The inevitable outcome of voting by not less than requisite per cent. of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection... The argument, though attractive at the first blush, but if accepted, would require us to rewrite the provisions of the Insolvency and Bankruptcy Code. It would also result in doing violence to the legislative intent of having consciously not stipulated that as a ground-to challenge the commercial wisdom of the minority (dissenting) financial creditors. Concededly, the process of resolution plan is necessitated in respect of corporate debtors in whom their financial creditors have lost hope of recovery and who have turned into non-performer or a chronic defaulter. The fact that the corporate debtor concerned was still able to carry on its business activities does not obligate the financial creditors to postpone the recovery of the debt due or to prolong their losses indefinitely. Be that as it may, the scope of enquiry and the grounds on which the decision of 'approval' of the resolution plan by the CoC can be int....
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....rporate debtor, making it clear that once triggered, the resolution process under the Code is a collective proceeding in rem which seeks, in the first instance, to rehabilitate the corporate debtor. Under Section 7(4), the adjudicating authority shall, within the prescribed period, ascertain the existence of a default on the basis of evidence furnished by the financial creditor; and under Section 7(5), the adjudicating authority has to be satisfied that a default has occurred, when it may, by order, admit the application, or dismiss the application if such default has not occurred. On the other hand, under Sections 8 and 9, an operational creditor may, on the occurrence of a default, deliver a demand notice which must then be replied to within the specified period. What is important is that at this stage, if an application is filed before the adjudicating authority for initiating the corporate insolvency resolution process, the corporate debtor can prove that the debt is disputed. When the debt is so disputed, such application would be rejected. *** *** *** 82. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7....
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....et Ispat and Energy Ltd., Order dated 10.08.2018 in SLP (C) No. 6483/2018; xv. Innoventive Industries Ltd. v. ICICI Bank and Ors. (2018) 1 SCC 407; xvi. Duncan Industries Limited v. A.J. Agrochem (2019) 9 SCC 725; xvii. Unigreen Global Private Limited v. Punjab National Bank and Ors. 2017 SCC Online NCLAT 566; xviii. Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and Ors. (2001) 3 SCC 71; xix. Jotun India Private Limited v. PSL Limited 2018 2018 SCC OnLine Bom 20570; xx. State of Haryana Ors. v. Vinod Kumar and Ors. 1986 P&H 407; xxi. Srei Infrastructure Finance Ltd. v. Tuff Drilling Private Limited 2018 (11) SCC 470; xxii. Pratap Technocrats (P) Ltd. and Others v. Monitoring Committee of Reliance Infratel Limited and Another (2021) 10 SCC 623; SUBMISSIONS ON BEHALF OF RESPONDENT NO. 1/MCA 37. Learned CGSC appearing on behalf of Respondent No. 1/MCA submitted that the IBC had been enacted to consolidate and amend the laws pertaining to reorganisation and insolvency resolution of corporate persons, in a time-bound manner, for maximisation of value of assets, promotion of entrepreneurship and av....
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....at it was probably intended to leave it unaltered....' We must therefore construe the provisions of the Indian Income Tax Act as forming a code complete in itself and exhaustive of the matters dealt with therein, and ascertain what their true scope is." *** *** *** 58. There can be no doubt, therefore, that the Code is a Parliamentary law that is an exhaustive code on the subject-matter of insolvency in relation to corporate entities, and is made under Entry 9, List III in the Seventh Schedule which reads as under: "9. Bankruptcy and insolvency" 41. Learned CGSC had further relied upon the judgment of the Hon'ble Supreme Court in Embassy Property Developments (P) Ltd. v. State of Karnataka (2020) 13 SCC 308, wherein it was observed as under: - 11. It is beyond any pale of doubt that the IBC, 2016 is a complete code in itself. As observed by this Court in Innoventive Industries Ltd. v. Icici Bank [Innoventive Industries Ltd. v. Icici Bank, (2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356 : AIR 2017 SC 4084] it is an exhaustive code on the subject-matter of insolvency in relation to corporate entities and others. It is also true that the IBC, ....
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....ub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal: Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. (4) An appeal ....
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....judication by an Arbitral Tribunal on issues arising out of or relating to the CIRP, the Resolution Plan or claims dealt with therein, would be without jurisdiction and hence the impugned order is liable to be set aside. SUBMISSIONS ON BEHALF OF RESPONDENT NO. 2 48. Learned counsel appearing on behalf of Respondent No. 2 submitted that the remedy under Articles 226 and 227 of the Constitution of India, is not available to the Petitioner in the present case, since an alternate and more efficacious remedy is presently available under the Arbitration Act. 49. It was further submitted by the learned counsel that the law is well settled that if a statute provides an alternate remedy, which is equally efficacious, a Writ should ordinarily not be entertained. In support of the said proposition, reliance was placed on the judgment of the Hon'ble Supreme Court in Seth Chand Ratan v. Pandit Durga Prasad (2003) 5 SCC 399. The relevant portion of the judgment is reproduced as under: - "13. Even otherwise, the view taken by the Division Bench of the High Court for repelling the objection of the appellant regarding the maintainability of the writ petition that an alternative remedy d....
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....arranted by this Court. 51. It was further submitted that the Hon'ble Supreme Court in Lalitkumar V. Sanghavi v. Dharamdas V. Sanghavi (2014) 7 SCC 255, had held that the question as to whether or not the mandate of the Arbitrator stands terminated under Section 12(2)(c) of the Arbitration Act, can be examined by the Court only under Sections 14(2) of the Arbitration Act. Relevant portion of the judgment reads as under: - "12. On the facts of the present case, the applicability of clauses (a) and (b) of Section 32(2) is clearly ruled out and we are of the opinion that the order dated 29-10-2007 by which the Tribunal terminated the arbitral proceedings could only fall within the scope of Section 32, sub-section (2), clause (c) i.e. the continuation of the proceedings has become impossible. By virtue of Section 32(3), on the termination of the arbitral proceedings, the mandate of the Arbitral Tribunal also comes to an end. Having regard to the scheme of the Act and more particularly on a cumulative reading of Section 32 and Section 14, the question whether the mandate of the arbitrator stood legally terminated or not can be examined by the court "as provided under Section....
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....egislative intention to make the arbitration fair and efficient. *** *** *** 21. Viewed from a different perspective, the arbitral process is strictly conditioned upon time limitation and modelled on the "principle of unbreakability". This Court in P. Radha Bai v. P. Ashok Kumar [P. Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445 : (2018) 5 SCC (Civ) 773], observed : (SCC p. 459, paras 36-37) "36.3. Third, Section 34(3) reflects the principle of unbreakability. Dr Peter Binder in International Commercial Arbitration and Conciliation in Uncitral Model Law Jurisdictions, 2nd Edn., observed: 'An application for setting aside an award can only be made during the three months following the date on which the party making the application has received the award. Only if a party has made a request for correction or interpretation of the award under Article 33 does the time-limit of three months begin after the tribunal has disposed of the request. This exception from the three month time-limit was subject to criticism in the working group due to fears that it could be used as a delaying tactics. However, although "an unbreakable time-limit for applications....
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....fter considering all relevant facts and circumstances, and therefore, no ex-facie conclusion can be drawn with regard to any alleged lack of jurisdiction. Without prejudice to the above, it was submitted that even if the impugned order is assumed to be incorrect, the same would, at best, amount to an incorrect exercise of jurisdiction and not a case of inherent lack of jurisdiction. 57. It was further submitted that the "clean slate doctrine" applies in cases where claims are admitted or rejected, and in cases where claims are not filed. The said doctrine would not apply where a claim is preferred, but is kept artificially contingent. Therefore, it was submitted that the present case is not covered by the clean slate doctrine as expounded in by the Hon'ble Supreme Court in Committee of Creditors of Essar Steel (supra). 58. It was contended that it is an admitted position that the claim of Respondent No. 2 was never accepted and was classified as a "contingent liability". It was submitted that as a result, Respondent No. 2 was effectively excluded from the CIRP process and, therefore, the approved Resolution Plan cannot be made binding upon Respondent No. 2. 59. It was furt....
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....** *** *** 6.1.2. The total Outstanding Operational Debt of the Company (excluding claims of workmen and employees) admitted towards its Operational Creditors, as of August 30, 2018, is < 98, 12, 15,611 (Indian Rupees Ninety Eight Crore Twelve Lakh Fifteen Thousand Six Hundred and Eleven only) and details of the same are set out in Annexure 8 of this Plan." 63. Attention of this Court was drawn to the List of Creditors (pursuant to claims received and updated as on 13.09.2018), wherein the name of Respondent No. 2 finds mention at Serial No. 3. It was further noted that a corresponding remark had been recorded against the said entry, categorizing the claim of Respondent No. 2 as contingent. The said list is reproduced as under: - Bhushan Energy Limited List of Creditors (Pursuant to claims received and updated as on 13.09.2018) Category: Operational Creditors other than Workmen and Employees (Subject to further information being received from 30th August 2018 till the date of approval of the resolution plan by COC) Official Exchange Rate as on 08.01.2018 (Insolvency Commencement Date]: USD 1: INR 63.3482 SI.No. Names Nature of Operational Debt....
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.... 86,184 86,184 19 Juli Constructions 4,96,190 4,96.190 TOTAL 1,38,943 2,04,47,58,833 98,20,03,794 Notes 1 The claim has been kept as contingent for the time being. The same has been duly commincated to the claimant. 2 The claim has been rejected and has been communicated to the claimant. 3 Pending for want of information by the claimant. 4 Claim has been withdrawn by the claimant. 5 The claim is kept as contingent as the same is pending under adjudication with the court of law. Also, the same is disclosed as a contingent liability in the books of accounts. *The Claimant has agreed to the amount as accepted by the RP. # The claims admitted shall be subject to fulliment of conditions/stipulations as required per contract or as per the ordinary course of business. 64. Reliance was placed on the judgment of the Hon'ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. (2022) 1 SCC 401, and it was submitted that the position i....
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....oned in the Resolution Plan. 4. Recording the aforesaid, the appeal is dismissed on the ground that the appellant has no grievance." 66. It was submitted that Arbitration proceedings in respect of disputed or contingent claims may continue, notwithstanding the approval of a Resolution Plan, for the purposes of adjudication and quantification thereof, and in support of the said submission, reliance was placed on the order dated 21.01.2022 passed by the Hon'ble Supreme Court in Fourth Dimension Solutions Ltd. v. Ricoh India Ltd. & Ors 2022 SCC OnLine SC 2379., in Civil Appeal No. 5908 of 2021. The relevant portion of the said order reads as under: - "2. ...During the hearing of the stated appeal, it was brought to the notice of the Court that the appellant had preferred some appeal before the National Company Law Appellate Tribunal (in short "NCLAT") and it was still pending at the relevant time. This Court, in paragraph 160 of the judgment, therefore, directed that the said appeal shall proceed on merits. Pursuant to that liberty, the concerned appeal has now been decided by the NCLAT vide impugned judgment. 3. In our opinion, it was sufficient for the ....
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....d that the averments made by Respondent No. 2 in its Counter Affidavit are misconceived, misleading and liable to be rejected. 69. Learned Senior Counsel submitted that the present petition is maintainable, and the impugned order passed by the learned Arbitral Tribunal suffers from patent lack of inherent jurisdiction. It was further contended that the learned Arbitral Tribunal had ventured into a domain expressly barred by Sections 63 and 231 of the IBC, and had rendered findings contrary to the binding effect of an approved Resolution Plan under Section 31(1) of the IBC. 70. It was further submitted by the learned Senior Counsel that the approved Resolution Plan constitutes a final and binding document governing all rights and liabilities of the Petitioner for the period prior to its approval. Any claim, whether admitted, disputed contingent or sub-judice, stands extinguished, abated and withdrawn, except to the extent expressly provided for in the Resolution Plan. 71. It was further submitted that the Claim of Respondent No. 2 was duly categorized as a "contingent liability" and the Resolution Applicant expressly dealt with the same in the approved Resolution Plan. It w....
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....r, irrespective of what the RP may say. The submission of Mr. Bhatnagar cannot be accepted. The RP, under Regulation 13,14 and 15 of the IBBI (Corporate Insolvency Resolution Process) Regulations, 2016 is obligated to verify the claims submitted by individuals and affording them the status of Creditor, if he deems fit. Those claims are then as per Regulation 36 made part and parcel of the information memorandum which is in effect all the data pertaining to the Corporate Debtor (the Respondent in the present case). Finally, a Resolution Plan submitted is governed by Section 30(1) of the IBC. Section 30(1) makes it clear that a Resolution Plan is to be prepared on the basis of the information memorandum. 19. Reading together the provisions as stated above, it is clear that a Resolution Plan cannot be submitted contrary to the Information Memorandum. The Information Memorandum is based on the RPs decision on verification of claims. In the present case, since the RP did not verify the claim of the Claimant and merely treated the Claimant as a Contingent Creditor, the Claimant could not have been a part of the Information Memorandum (as a creditor). Therefore, a Resolution Plan....
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.... the creditor yet it would stand wiped out in spite of the fact that the creditor had invoked the jurisdiction of appropriate civil forum (arbitral Tribunal), in the present matter and his claim would not be permitted to be crystallized as per law and would simply stand nullified. *** *** *** 29. Mr. Datta, Ld. Counsel for the Claimant submitted that the Resolution Plan only binds creditors and stakeholders. In the present matter, it is an admitted fact that the claim of the Claimant was disputed by Respondent and never admitted. Therefore, there can be no question of the Resolution Plan being binding upon the Claimant. 30. On behalf of the Respondent, Mr. A nil Bhatnagar, Ld. Sr. Counsel placed reliance on the judgment of the Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC Online SC 1478. Their Lordships have rejected the contention that claims may exist apart from those decided on merits by the Resolution Professional and can be decided by an appropriate forum as such contention militates against the rationale of Section 31 of the IBC. However, their Lordships have further held - 'all claims must be ....
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.... petitions bearing Case No. 330/2014 and Case No. 331/2024 respectively. iv. As per the requirement of the MSME Act, conciliation proceedings were initiated, but were failed. Subsequent thereto, arbitration proceedings between the parties commenced on 07.06.2017. v. During the pendency of the said Arbitral proceedings, financial creditors of the Appellant initiated proceedings under Section 7 of the IBC before the learned National Company Law Tribunal, Kolkata Bench, and the same was registered as C.P. (IB) No. 361/KB/2017. Vide order dated 21.07.2017, the learned National Company Law Tribunal imposed a moratorium under Section 14 of the IBC and appointed an Interim Resolution Professional. Pursuant thereto, a public announcement dated 24.07.2017 was issued by the Interim Resolution Professional, calling upon all creditors to submit their claims. In view of the moratorium, the Arbitral proceedings before the Facilitation Council were kept in abeyance. Subsequent thereto, the Respondent submitted its claim before the Resolution Professional, which was partly admitted. vi. On 29.03.2018, a Resolution Plan was submitted by Vedanta Limited, and the same was p....
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.... 06.07.2018, within a period of 15 days. The said order was challenged before the Hon'ble High Court, under Article 227 of the Constitution of India, 1950. The Hon'ble High Court had framed the following questions for consideration: a. The arbitral award having not been challenged under Section 34 of the Act of 1996, whether the objection to execution of the arbitral award referrable to Section 47 of the Civil Procedure Code, 1908 (CPC) was maintainable by alleging that the arbitral award itself was a nullity and hence non-executable? b. Whether the arbitral award in the present case could be assailed as a nullity and hence non-executable within the permissible grounds of raising such a plea? c. Irrespective of maintainability of the objection to the arbitral award under Section 47 of the CPC, whether on facts, the Facilitation Council lost its jurisdiction to proceed and pronounce the arbitral award in view of the insolvency resolution plan of the petitioner which was duly approved under Section 31 of the IBC? xii. Insofar as the first question was concerned, the Hon'ble High Court was of the opinion that the plea of nullity qua an Arbitral Awar....
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....ellant to continue as a going concern. A reading of the relevant paragraphs of the resolution plan i.e. paragraphs 3.2(v), 3.4(ii) and 3.8(i) would indicate that the claims of the operational creditors including the debt of the respondent were settled at nil and, therefore, they were not entitled to any payment. *** *** *** 22.3. Learned senior counsel submits that on 17.04.2018 when the NCLT had approved the resolution plan, claims of the operational creditors were settled at nil. This became binding on the respondent and all other authorities as per Section 31(1) of the IBC. In this connection, learned senior counsel has referred to and relied upon the decision of this Court in Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd.1 In the said decision, this Court had made it abundantly clear that the creditor has no option but to join the process under the IBC. Once the plan is approved, it would bind everyone under the sun. He contended that the respondent had submitted its claim before the resolution professional but the same was not included in the resolution plan as was approved by the committee of creditors and then by the adjudicating....
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....dings. After the award was passed, appellant did not challenge the same under Section 34 of the 1996 Act. Having not challenged the award in the forum designated by law, he could not have challenged the same by filing objections to the arbitral award in a proceeding under Section 47 of the CPC. Learned counsel asserts that Section 34 of the 1996 Act is the only acknowledged remedy available to challenge an award. Appellant had the opportunity to assail the award under Section 34 of the 1996 Act but he did not do so. Therefore, filing of application to declare the award a nullity in execution proceedings instituted by the respondent for execution of the award is a clear abuse of the process of law and was rightly rejected by the Executing Court which decision has been upheld by the High Court. Learned counsel further submits that since the claim of the respondent was pending before the Facilitation Council and in view of the information memorandum issued by the interim resolution professional, there was no need for the respondent to have challenged the resolution plan. Therefore, the High Court was fully justified in rejecting the petition filed by the appellant under Article 227 of....
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....uidation value of the operational creditors or the other creditors or stakeholders of the corporate debtor including dues of the employees (other than workmen), government dues, taxes etc. and other creditors and stakeholders was nil. As such, they would not be entitled to any payment. The dissenting financial creditors would be entitled to receive 21.65 percent of the value of their admitted debt which would be paid in priority to any payment to the assenting financial creditors. 37. Clause 3.2(xii)(A) is relevant. It says that notwithstanding what is contained in the mandatory contents of the resolution plan, upon approval of the resolution plan by the NCLT under Section 31 of the IBC, on and from the effective date all pending proceedings relating to the winding up of the company i.e. the corporate debtor shall stand irrevocably and unconditionally abated in perpetuity and claims in connection with all violation or breach of any agreement by the corporate debtor shall be settled at nil value at par with operational creditors. 38. Clause 3.4 provides for a proposal for operational creditors (excluding employees and workmen). Sub-clause (ii) says that since the l....
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....al, the committee of creditors and the adjudicating authority noted about the claim lodged by the respondent in the arbitration proceeding. However, the respondent was not included in the top 30 operational creditors whose claims were settled at nil. This can only mean that the three authorities conducting the corporate insolvency resolution process did not deem it appropriate to include the respondent in the top 30 operational creditors. If the claims of the top 30 operational creditors were settled at nil, it goes without saying that the claim of the respondent could not be placed higher than the said top 30 operational creditors. Moreover, the resolution plan itself provides that all claims covered by any suit, cause of action, arbitration etc. shall be settled at nil. Therefore, it is crystal clear that in so far claim of the respondent is concerned, the same would be treated as nil at par with the claims of the top 30 operational creditors. 50.1 Lifting of the moratorium does not mean that the claim of the respondent would stand revived notwithstanding approval of the resolution plan by the adjudicating authority. Moratorium is intended to ensure that no further deman....
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.... understands that the Company has recognized certain contingent liabilities towards certain persons in the FY 17 Annual Financials aggregating to approximately Rs. 64.36 crores (Indian Rupees Sixty Four point Three Six Crore only). Particulars of such contingent liabilities are set out in Part A of Annexure 10 hereto, and set out in Part B of Annexure 10 hereto are particulars of other potential contingent liabilities of the Company. The matters set out in Annexure 10, together with all other contingent liabilities of the Company (whether known or unknown) until the Closing Date, are collectively the "Contingent Liabilities". Such Contingent Liabilities shall be treated as follows: 8.7.1. In respect of Contingent Liabilities which are in the nature of financial debt or are towards Financial Creditors (for instance any outstanding guarantees issued by the Financial Creditors, counter guarantee by the Company in connection with the letter(s) of credit), no further payments from the Resolution Applicant shall be due in respect of any Contingent Liabilities which are capable of being crystallised prior to the Closing Date. Please refer to Section 8.1.3(ii) regarding effect of ....
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....by the RP, the fact that their said claims were duly considered and rejected in the Resolution Plan, which was ultimately approved by the Adjudicating Authority, is a matter of record. 81. The order relied upon by learned counsel for Respondent No. 2 in Adani Power Limited (supra), cannot be of any assistance, in as much as the Hon'ble Supreme Court, while passing the said order, clearly observed as under: - "3. However, the claim even if allowed in favour of M/s Shapoorji Pallonji and Co. Pvt. Ltd. will have no bearing on the rights and obligations of the appellant - M/s. Adani Power Limited, which are in terms of the Resolution Plan. It has been held by the judgment dated 23.02.2023, that the appellant cannot be saddled with any liability except what is mentioned in the Resolution Plan." 82. Thus, it is noted that the Hon'ble Supreme Court reiterated the principle of law, that once a Resolution Plan has been approved, no further claims can be raised or pursued with respect to the corporate debtor. 83. Furthermore, the Hon'ble Supreme Court in Essar Steel India Limited (supra) reiterated that a successful resolution applicant cannot be made to face undecided clai....
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....fication was duly approved by the CoC, who had the power to sanction the Resolution Plan or to enter into negotiations to modify it by its approval. It was held that such a decision would squarely fall under the protected umbrella of "commercial wisdom" of the CoC, and after considering the judgment of the Hon'ble Supreme Court in K. Shasidhar (supra), it was held as under: - "179. It can thus be seen that this court has held that the Legislature purposefully did not include a means to challenge the commercial wisdom exercised by the CoC. This makes a challenge to the same non-justiciable. It has been further held that a challenge cannot be raised against the decision making of the CoC unless and until the grounds for challenge as given in the Code are satisfied. Any interference in the paramount objective of the CoC of exercising its commercial wisdom would amount to the court rewriting the law and going against the very objectives of the IBC." (emphasis supplied) 86. In the present case, as already noted hereinabove, the Resolution Plan in Clause no. 8.6.2, has duly considered the sub-judice claim of Respondent No. 2, and has duly noted that the sub-judice cl....
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....earned Arbitral Tribunal did not have the jurisdiction to proceed further with the adjudication of the said claim. 88. In view of the aforesaid discussion, the impugned order dated 07.10.2020 is hereby set aside. The arbitral proceedings before the learned Arbitral Tribunal stands terminated. 89. The present petition is allowed in the aforesaid terms. 90. Pending application(s), if any, also stand disposed of. 91. Judgment be uploaded on the website of this Court, forthwith. ============= Document 1 .... Forwarded message -- From: IP . Prushan Energy To: Rohan Malik Cc: [email protected] ; BEL - IP Team ; Meghna Bansal Sent: Tuesday, 17 April, 2018, 8:01:08 PM IST Subject: Re: Submission of proof of claim by M/s ISGEC Heavy Engineering Limited (Form B) against Bhushan Energy Limited Dear Sir, The claim of ISGEC is pending adjudication in arbitration, Bhushan Energy Ltd has categorically disputed the amount being claimed by ISGEC. The same cannot be considered to be a crystallised liability of Bhushan Energy Ltd. In light of above, and legal advice sought, it will be advisable for Resolution Professional to not accept ISGEC's Form B and to t....
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....onse. Kindly treat this as most urgent. Yours sincerely, For K. DATTA & ASSOCIATES (Rohan Malik) Advocate Document 3 BHUSHAN ENERGY LIMITED BHUSHAN July 30. 2018 Registered Office : Onushan Centre, 7th Floce, Hyatt Regency- Complex, Khách Cap) Mace, New Delhi - 1100G6 Tel :93-12-26214290 Fax : 91-21-46518 To. K. Daita & Associates Advocates B-4/66, Lower Ground Floor, Safdarjung Enclave, New Delhi - 110029 Attn: Mr. Rohan Malik SUB: Submission of proof of claim by Mis, ISGEC Heavy Engineering Ltd. vide emad slated January 22. 2018 in respect of the corporate insolvency resolution process ("CIR Process") of Bhushan Energy Linuted ("BEI.") REF: 1. Letter dated June 6, 2018 issued by the legal counsel of ISGEC to Mr. Navneet Kumar Gupta, Resolution Professional of BEL ("Resolution Professional"): 2. Email dated April 17, 2018 issued by the Resolution Professional to the legal counsel of' ISGEC in response to email dated January 22, 2018; and 3. Email dated January 22, 2018 issued by the legal counsel of ISGEC to the Resolution Professional. Sir. I am in receipt of your letter dated June 6, 2018 issued on behalf of your cl....