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All Related Proceedings Stand Discharged, Settled, Abated, & Extinguished On Approval Of Resolution Plan: Gujarat High Court

17 May 2022 7:48 AM GMT
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The Gujarat High Court reiterates the legal position and has allowed the civil application filed by Essar Steel Limited seeking declarations that the claims raised by the original espondent stand abated and extinguished in view of Section 31(1) of the Insolvency and Bankruptcy Code read with the Resolution Plan and the judgement passed by the Supreme Court in Essar Steel India Limited vs Satish Kumar Gupta and Ors.

The Applicant (Arcelor Mittal Nippon Steel India Ltd) formerly known as Essar Steel India Ltd after undergoing the insolvency resolution process submitted its Resolution Plan where the dues/claims against the Applicant organisation ie Essar Steel Limited were duly approved by the Supreme Court in Satish Kumar Gupta. It was held that no outstanding liability of ESIL/AMNS remained. Therefore, the Applicant was challenging the impugned notices seeking discharge of claims towards water charges against the Applicant prior to December 2019. The Applicant contested that the water charges which were claimed by the Opponents No. 1 and 2 to the tune of INR 60,65,46,812 stood extinguished pursuant to the successful conclusion of the corporate insolvency resolution process and the approval of the plan by the Supreme Court in Satish Kumar Gupta. Pursuant to the Resolution Plan, INR 10,65,02,083 was accepted as discharge amount by the Opponent No. 2. The AGP affirmed that the amount was accepted by the Opponent party which was treated as full and final payment of all outstanding claims.

Justice Vaibhavi Nanavati while placing reliance on Section 31 of the Code observed:

"The Resolution Plan provides that all the claims of ESIL whether contingent or crystallized, known or unknown, filed or not filed shall stand irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity upon approval of the Resolution Plan. In view of Section 31 of the Code, the Resolution Plan is binding to all stakeholders, including the respondents herein."

Averring that the Resolution Plan was approved by the Supreme Court, the High Court opined that under Section 31 of the Code all past dues, claims and liabilities against ESIL stood extinguished. No outstanding liability of ESIL remained. Referring to the Supreme Court's judgement, the High Court quoted:

"Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were."

The Bench further explained that no person is entitled to continue any proceeding to any claim when such claim relates to a period prior to plan approval date. The Supreme Court was referred to by the High Court in the following manner:

"The Resolution Plan provides that all the claims along with the related proceedings shall stand irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity upon approval of the Resolution Plan."

The Resolution plan, thus, operates 'in rem' and it disentitles anyone from agitating any claims that existed prior to the Resolution period. Referring to the demand draft paid by ESIL to the Opponents "without any demurer or protest" on 6th December 2019, the High Court held that the rights of Opponents stood extinguished. Accordingly, the civil application was allowed.

Case Title: ESSAR STEEL LIMITED & 1 other(s) Versus STATE OF GUJARAT & 1 other(s)

Citation: 2022 LiveLaw (Guj) 168

Case No.: C/SCA/8741/2006

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