All Claims Including Subject Matter Of Ongoing Arbitration Proceedings Stand Extinguished After Approval Of Resolution Plan: NCLT Bengaluru

The NCLT Bengaluru bench of K. Biswal (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member) has held that all claims including subject matter of ongoing arbitration proceedings will stand extinguished after the approval of the Resolution Plan under section 31 of the Code. Brief Facts 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) vide work order dated 6 February 2019. 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. 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. Contentions: The applicant submitted that the arbitration proceedings were initiated at the behest of the RP raising its claims against ECPWPL, and thereafter, ECPWPL's Claim was filed in such proceedings. This clearly demonstrates the RP's acknowledgment and intent to pursue the dispute, including its claim, before an arbitral tribunal, rather than through Katerra's CIRP. 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. It was further submitted 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. Decision of The Tribunal: In the present case, it is an admitted fact that the claims were filed filed by the applicant in the CIRP of the corporate debtor. It is also an admitted position that in pursuance of the claims being filed, the RP issued a demand cum arbitration notice to the applicant. The claim and counterclaim of the parties is already a subject matter of the Arbitration proceedings and as it has already been held in various decisions of Hon'ble 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. Therefore, the tribunal observed that it is not appropriate to address this dispute by this tribunal on merits. The tribunal noted that it the case of the Applicant that the since there are claims and counterclaims existing between the parties the same ought to be adjudicated before the Arbitration Tribunal. In this regard Reliance was placed on the judgment of Hon'ble NCLAT in the case of Shaapoorji Pallonji & Co (P) Ltd v. Kobra West Power Co. Ltd , 2023 wherein the NCLAT has held that the parties even after the approval of the resolution plan are at liberty to proceed with the pending Arbitration and such proceedings are to be decided on its own merits. Hence, there is no hindrance to Applicant of the Respondent to continue their respective claims in the Arbitration proceedings. The next issue before the tribunal whether any liability or claim that is not included in the Resolution Plan will...

All Claims Including Subject Matter Of Ongoing Arbitration Proceedings Stand Extinguished After Approval Of Resolution Plan: NCLT Bengaluru

Mohd Malik Chauhan

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