Creditor Who Don’t Submit Claim Or Raises Issues In CIRP, Has No Right To Challenge Resolution Plan: NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Shri Naresh Salecha (Technical Member), while adjudicating an appeal filed in Madhya Pradesh Paschim Kshetra Vidyut Vitaran Co. Ltd. v Jagdish Kumar & Anr., has held that a creditor who neither submits its claim before the IRP/Resolution Professional, nor raises any issue during the entire CIRP period, cannot be allowed to challenge resolution plan which has already been implemented. Background Facts Madhya Bharat Phosphate Pvt. Ltd. (“Corporate Debtor”) is engaged in the manufacture and sale of single super phosphates. Madhya Pradesh Paschim Kshetra Vidyut Vitaran Co. Ltd. (“Appellant/Electricity Department”) was supplying electricity to the Corporate Debtor’s plant located at Jhabua. On 16.02.2018 the Electricity Department issued a Notice of Permanent Disconnection to the Corporate Debtor over non-payment of dues and adjusted the latter’s security deposit amounting to Rs. 15,66,267.99/- against outstanding dues. The electricity connection was permanently disconnected on 23.03.2018 over outstanding payments of Rs. 19,99,792/-, after adjusting the Security Deposit. The Corporate Debtor had admitted its liability to pay. On 11.09.2018 the Corporate Debtor was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT and an Interim Resolution Professional (“IRP”) was appointed. The Electricity Department did not submit the claim pertaining to its outstanding payments before the IRP. Subsequently, the Resolution Plan submitted by Shree Pushkar Chemicals and Fertilisers Limited (“Successful Resolution Applicant/SRA”) was approved by the Committee of Creditors (CoC). On 05.03.2020 the NCLT also approved the SRA’s resolution plan. The approved Resolution Plan did not provide for payment of full outstanding dues of the Electricity Department, rather proposed payment to Operational Creditors (including the Electricity Department) on pro-rata basis. The Electricity Department challenged the order of plan approval before the NCLAT. It was argued that the electricity dues of the Corporate Debtor cannot be waived off and its payment has to be made in full. The Resolution Plan was further challenged on the ground that it does not accord equal treatment to creditors, since financial creditors were being paid more than the operational creditors. NCLAT Verdict The Bench observed that since the electricity connection of Corporate Debtor was disconnected prior to initiation of CIRP, thus it would not form part of essential services. Further, the dues being claimed by the Electricity Department belong to pre-CIRP period. “This ‘Appellate Tribunal’ also observes that the ‘Resolution Plan’ approved by the ‘Adjudicating Authority’ has taken care of the interest of all the stakeholders who have filed claim with the IRP/RP. It is noted that the ‘Appellant’ has not filed any claim with the IRP/RP nor raised any issue during the entire ‘CIRP’ period or during the approval of the ‘Resolution Plan’ by the ‘Adjudicating Authority’, therefore, the ‘Appellant’ at this stage cannot be allowed to raise such issues especially when the ‘Resolution Plan’ stand implemented.” The Bench held that since the Electricity Department has neither submitted its claim with the IRP/Resolution Professional nor raised any issue during the entire CIRP period, it cannot be allowed to raise issues with respect to the resolution plan which has already been implemented. Further, once a resolution plan is implemented, no subsequent claim can be entertained. It was further held that the payment of electricity dues is to be claimed in response to public announcement of the ‘IRP/RP’. The 2019 amendment to Regulation 12(1) of IBBI (Resolution Process for Corporate Persons) Regulation, 2016 substituted ‘claim with proof’ in place of ‘proof of claim’. Therefore, a creditor is required to submit claims with proof on or before the last date mentioned in the public announcement. However, if any creditor fails to submit claim within stipulated time, then it may submit the claim with proof to IRP/RP on or before 90th days of the insolvency commencement date. Since the Electricity Department failed to fulfil these provisions, it is not entitled to relief. Case Title: Madhya Pradesh Paschim Kshetra Vidyut Vitaran Co. Ltd. v Jagdish Kumar & Anr. Case No.: Company Appeal (AT) (Ins) No. 1113 of 2020 Counsel For Appellant: Mr. Manu Agarwal, Mr. Shubham Budhiraja, Advocates. Counsel For Respondent: Mr. Palash S. Singhai, Advocate. Click Here To Read/Download Order

Creditor Who Don’t Submit Claim Or Raises Issues In CIRP, Has No Right To Challenge Resolution Plan: NCLAT Delhi

Pallavi Mishra

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