The Income Tax Appellate Tribunal (ITAT), Hyderabad held that claims not part of the resolution plan stands extinguished on approval of the resolution plan by Adjudicating Authority.
The Counsels for the assessee, Ch G Murali Krishna Murthy and Rajesh Kumar Ghai, submitted that the assessee, M/s. Sirpur Paper Mills Ltd underwent the corporate insolvency resolution proceedings and such proceedings came to an end by order dated 19/7/2018 approving the resolution plan to be found at page numbers 1 to 40 of the paper book.
The assessee, relied on the judgment Ghanashyam Mishra and Sons vs Edelweiss Asset Reconstruction, wherein the Supreme Court of India held 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 and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders.”
The Court further added that “On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect.
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.”
Rama Kanta Panda, Accountant Member and K Narasimha Chary, Judicial Member observed that “In the circumstances, we are of the considered opinion that the parties are bound by the resolution plan as approved by the competent adjudicating authority and nothing needs to be done.”
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