Challenge against Bombay HC order refusing claim of revenue citing NCLT’s Approval of Resolution Plan: Supreme Court Dismisses Delayed SLP [Read Order]

The bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan observed that there was a gross delay of 308 days in filing the Special Leave Petition, which had not been satisfactorily explained by the petitioners. The counsel appearing for the petitioners (Revenue) fairly submitted that similar Special Leave Petitions had already been dismissed by the Court.

The SLP arose out of the final judgment and order dated 23rd April 2024 in WPL No. 6313/2024 passed by the High Court of Judicature at Bombay, which was in favour of AMNS Khopoli Limited.

The assessee was formerly known as Uttam Galva Steels Limited (UGSL). Pursuant to the Corporate Insolvency Resolution Process (CIRP) of UGSL under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code), 100% shareholding of UGSL was acquired by AM Mining India Pvt. Ltd. (Resolution Applicant), and thereafter the name of UGSL was changed to the present name, i.e., AMNS Khopoli Limited.

On 1st October 2020, the National Company LawTribunal (NCLT), Mumbai, admitted a petition filed by the State Bank of India under Section 7 of the Code against UGSL and appointed an Interim Resolution Professional (IRP). The NCLT also declared a moratorium under Section 14 of the Code. A public announcement was made on 8th October 2020 by the IRP in accordance with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, calling upon the creditors of UGSL to submit proof of their claims on or before 20th October 2020.

Though the respondent, being a Central Government department, was covered under the definition of “operational creditors” under the Code, no claims or proof of claims were submitted by Respondent No.1 or Respondent No.2. On 4th November 2020, the first meeting of the Committee of Creditors (CoC) was held, and the IRP was appointed as the Resolution Professional (RP). On 9th May 2021, the Resolution Applicant submitted a Resolution Plan before the CoC, which was approved by the CoC on 2nd June 2021 and submitted to the NCLT for approval. By an order dated 14th October 2022, the NCLT approved the Resolution Plan.

In terms of the Resolution Plan approved by the NCLT, any claim and/or liability pertaining to the period prior to the effective date, i.e., 10th November 2022 (Effective Date), stood extinguished and/or settled. All proceedings, suits, and claims in connection with the corporate debtor, i.e., UGSL or its affairs, in relation to any period prior to the Effective Date, stood withdrawn and dismissed. Mr. Dhond submitted that the approved Resolution Plan also provides that all new claims, disputes, litigations, or other judicial or administrative proceedings, including recovery of demands, shall be deemed to be barred and shall not be initiated or admitted against the corporate debtor (the petitioner) in relation to any period prior to the Effective Date, i.e., 10th November 2022.

Since the Resolution Plan expressly provides that no person shall be entitled to initiate any proceedings, inquiry, or assessment, enforce any claim, or continue any proceedings in relation to claims pertaining to a period prior to the Effective Date of the Resolution Plan, i.e., 10th November 2022, the impugned notices were held to be bad in law.

Further, the impugned notices were bad in law also because the respondents failed to take into account that, after approval of the Resolution Plan by the NCLT, a creditor, including the Central Government, State Government, or local authority, is not entitled to initiate proceedings against the Resolution Applicant in relation to claims that are not part of the Resolution Plan approved by the NCLT.

The Bombay High Court observed that the impugned notice issued under Section 143(2) of the Act and the impugned notices issued under Section 142(1) of the Act, along with all subsequent actions undertaken pursuant to them, are bad in law as no proceedings can be initiated against the petitioner for a period prior to the Effective Date.

Pertinently, the Resolution Plan provides that new claims, disputes, litigations, or other judicial or administrative proceedings (including assessments) will be deemed to be barred and shall not be initiated or admitted against the petitioner in relation to any period prior to the Effective Date.

The approved Resolution Plan clearly provides that any claim and/or liability pertaining to the period prior to the Effective Date (i.e., 10th November 2022) stood extinguished and/or settled in terms of the Resolution Plan. The NCLT approved the Resolution Plan on 14th October 2022, which is binding on all stakeholders of the assessee, including the respondent-Revenue.

The Special Leave Petition was dismissed on the ground of delay as well as on merits.

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