The National Company Law Tribunal (NCLT) of Bengaluru bench has held that all claims including subject matter of ongoing arbitration proceedings will stand extinguished after the approval of the Resolution Plan under Insolvency Bankruptcy Code (IBC), 2016.
In February 2019, Vikas Telecom Private Limited (Developer/VTPL) appointed Synergy Property Development Services Pvt. Ltd. (Synergy) [currently Colliers International (India) Property Services Limited’s (Colliers)] as the Project Management Consultant of Parcel 3A & MLCP at Embassy Tech Village, Devarabisanahalli Village, Bangalore (Project).
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The Developer also awarded the contract for the Design and build package works of the Project to Katerra India Pvt Ltd as the contractor of the Project. On 23 December 2020, by way of a deed of assignment read with the Contract, (Embassy Commercial Projects (Whitefield) Private Limited) ECPWPL, the Applicant herein was appointed as a co-developer by VTPL for undertaking the development, operation and maintenance of Block 3 & Block 4 of the Embassy Tech Village including the Project with effect from 28 December 2020.
Katerra failed to complete the project on time thereafter deadline was extended. Still it failed to complete the task within the extended period. Consequently, it was admitted into the insolvency and EPCWPL filed its claims as an operational creditor to the tune of Rs. 78.16 crore before the RP for the looses incurred due to non-fulfillment of the contractual obligations. This claim was disputed by the Katerra which instead claimed Rs 160.46 crores.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
Thereafter, a demand cum arbitration notice was issued by the RP in which it was communicated to the EPCWPL that its claim was disputed and could not be accepted due to the katerra’s claims. In a reply to the Arbitration notice, it was contended that there is no liability of the EPCWPL to pay the amount claimed by the Katerra and instead it is katerra which is liable to pay the amount of Rs. 78 crores for not performing its contractual obligations.
The applicant submitted that the arbitration proceedings were initiated at the behest of the RP raising its claims against ECPWPL.It was also submitted that Katerra’s Claim can only be determined after determination of ECPWPL’s Claim in the same arbitral proceedings and hence, both Katerra’s Claim and ECPWPL’s Claim ought to be heard together by the arbitral tribunal.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
It was argued that any attempt to extinguish ECPWPL’s Claim through the resolution plan would be unjust and detrimental as it would, while keeping RP’s claim alive, nullify ECPWPL’s rights and deprive it from asserting its claim and formulate necessary defences in the arbitration proceedings after the CIRP of the Katerra is complete.
Per contra, the respondent submitted that Successful Resolution Applicant cannot suddenly be faced with undecided claims after the resolution plan is submitted by him and has been accepted by the committee of creditors.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The two member bench of K. Biswal (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member) observed that the claim and counterclaim of the parties is already a subject matter of the Arbitration proceedings.
It was evident from various decisions of Apex Court and NCLAT that determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of this Adjudicating Authority.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
In Ghanshyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Ltd (2021) the bench viewed that, “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.”
The tribunal held that approval of the resolution plan cannot be subjected to the ongoing arbitral proceedings between the parties. Once the plan is approved, all liabilities of the corporate debtor stand extinguished for which no proceedings can be initiated. The bench dismissed he plea of the applicant as it cannot be accepted.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
