Claims or Claim of any Debts cannot be recovered from Corporate Debtor Accruing Prior to Transfer Date: CESTAT Reiterates SC Decision [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), reiterated the Supreme Court decision, wherein it was held that Claims or claim of any debts cannot be recovered from the Corporate Debtor accruing prior to the transfer date.

The appellant in the present matter is M/s. Electrosteel Steels Ltd.

The Advocate appearing on behalf of the Appellant submitted that against the Appellant National Company Law Tribunal (NCLT) provisions were invoked by the State Bank of India. Accordingly, Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP).

In the Appeal Petition before the Supreme Court of India vide Civil Appeal No.8129 of 2019 in the Appellant’s own case, the Apex Court has answered the questions framed by it as:

• 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 the resolution plan by the Adjudicating Authority, all such claims, which are not a part of the 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.
• Consequently, all the dues including the statutory dues owed to the Central 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.

Finally, the Supreme Court has held that the respondents, in that case, are not entitled to recover any claims recording as under:- “We hold and declare, that the respondents are not entitled to recover any claims or claim any debts owed to them from the Corporate Debtor accruing prior to the transfer date. Needless to state, the consequences thereof shall follow.”

The Tribunal of R. Muralidhar, Member (Judicial) observed that “In view of the above developments, the present Appeal has become infructuous and accordingly the same is dismissed.”

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