All Claims Prior To Approval Of Resolution Plan Stand Extinguished U/S 31 Of IBC: Bombay High Court

The Bombay High Court Bench of Justices Bharati Dangre and Abhay J Mantri held that once the petitioner has acquired the assets of the corporate debtor, the claims, if any, which were not raised, stand extinguished and the respondent cannot now seek to recover those claims from the petitioner, who acquired the assets of the corporate debtor through auction process under the IBC. Brief Facts The petitioner Company, incorporated under the provisions of the Companies Act, 2013 and in the business of coal beneficiation, dedicated to the processing and enhancement of coal. This court has been approached seeking a declaration that the demand notice and the communication issued to it by Gram Panchayat, Gowari, through its Secretary, Tahsil Rajura, District Chandrapur, be quashed and set aside, being arbitrary, as the demand pertain to the dues for the period prior to 2019 i.e. the period prior to the petitioner's acquisition of the assets of the corporate debtor under the Insolvency and Bankruptcy Code, 2016. Gupta Global Resources Private Limited availed various credit facilities from the banks/financial institutions. However, since it was unable to repay the credit facilities, an application was filed under Section 10 of the IBC before the 'NCLT' for initiation of Corporate Insolvency Resolution Process (CIRP). The petition was admitted by the NCLT. Since no resolution plan was approved in the meetings held by the CoC, the Corporate Insolvency Resolution Process failed and the NCLT by its order dated 28.08.2018 ordered for liquidation of the corporate debtor – Gupta Global Resources Private Limited. Admittedly, no claim was submitted by the respondent-authority before the Liquidator for the alleged recovery of the tax in terms of Maharashtra Village Panchayat Act, 1959, though the departments of the State Government. In terms of Section 36 of the IBC, a Liquidator took the possession of the assets of the company Gupta Global Resources Private Limited, including the washery in question for sale through e-auction. The Liquidator issued a letter of intent in favour of the petitioner and called upon it to deposit amount towards sale consideration. Contentions The petitioner contended that the sale and transfer of the assets of Gupta Global Resources Private Limited, including the washery, shall remain free from all encumbrances and shall be free from payment of any levies, taxes or dues levied on the assets of Gupta Global Resources Private Limited. It was further contended that during the subsequent liquidation proceedings of Gupta Global Resources Private Limited, the respondent though a creditor, failed to submit its claim for recovery of taxes, under the provisions of the Maharashtra Village Panchayat Act, 1959. It was further argued that when the respondent has failed to lodge its claim before the Liquidator, the petitioner is not duty bound to satisfy the demand as regards the tax payable before acquisition of the assets by the petitioner. Court's Analysis The court at the outset perused the required documents and sale certificate issued in favour of the petitioner. Based on this, the court observed that it is not in dispute that the respondent as an operational creditor of Gupta Global Resources Private Limited, had a statutory obligation under the IBC to submit its claim, if any, during the Corporate Insolvency Resolution Process and the liquidation proceedings. The court further held that the respondent having failed to fulfill this obligation mandated by the IBC, thus resulted in extinguishing of its claim, even if it existed. The court further observed that there were latches on the part of the respondent. They did not submit their claims before the liquidator also. The court held that section 38 of the IBC made it imperative for the Liquidator to consolidate the claims and issue public announcement for submission of the claim within 30 days. The Liquidator also gave/issued public notice on 30.08.2018 requiring the claims to be submitted but the respondent failed to raise any claim even at this time before the Liquidator. The court further held that once the petitioner has acquired the assets of the corporate debtor, the claims, if any, which were not raised, stand extinguished and the respondent cannot now seek to recover those claims from the petitioner, who acquired the assets of the corporate debtor through auction process under the IBC. The court referred to the supreme court judgment in Ghanshyam Mishra & Sons Pvt Ltd vs. Edelweiss Asset Reconstruction Company Ltd [(2021) wherein it was held that once the 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...

All Claims Prior To Approval Of Resolution Plan Stand Extinguished U/S 31 Of IBC: Bombay High Court

Mohd Malik Chauhan

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