IBC | Operational Creditor's Failure To File Its Claim Before Approval Of Resolution Plan Extinguishes Such Claim: Gujarat High Court

The Gujarat High Court recently upheld the argument made by an insolvent company having undergone Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, that failure of an Operational Creditor to file its claim with the Resolution Professional during the insolvency resolution process or to challenge the Resolution plan before NCLT/NCLAT, extinguishes its claim upon approval of the Resolution Plan.Thus, it set aside an order of the Liquidator creating a charge on the insolvent company's property for recovery by such an Operational Creditor.The insolvent company (writ-applicant) had challenged the legality of the order passed by the Liquidator of Petrofils Cooperative Limited (Respondent No. 1) declaring an outstanding amount of Rs. 3,20,79,087 as due from the Applicant. The Bench comprising Justice Vaibhavi Nanavati observed that the Applicant had undergone CIRP before the NCLT Ahmedabad and the Respondent-Operational Creditor had not filed any claim before unanimous approval of the Resolution Plan by the Committee of Creditors. It had even failed to file any objections to the Resolution Plan before NCLT, nor did the respondent no.1 challenge the approval thereof before the NCLAT.Therefore, it opined that the Resolution Plan had become binding on "all stakeholders and creditors" and the same had been executed and irreversibly completed. Reliance was placed on Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited [C.A. No. 8129 of 2019] where the Apex Court had held that the plan is "binding on the corporate debtor, and its employees, members, creditors, including the central government, any state government or any local authority, guarantors and other stakeholders, and no proceedings in respect of such dues for the period prior to the date on which the NCLT grants its approval under Section 31 of IBC can be continued." Significantly, the counsel appearing for Respondent No. 1 had not controverted the aforesaid position.Thus, the High Court allowed the writ-application in terms of Prayers 17(B1) and 17(B2) which sought that claim of the Respondent be declared extinguished and that the mutation entry for the Petitioner's lands be reversed. Case Title: GARDEN SILK MILLS LIMITED & 1 other(s) v/s LIQUIDATOR OF PETROFILS COOPERATIVE LIMITED & 1 other(s) Case No.: C/SCA/5430/2016Citation: 2022 LiveLaw (Guj) 262Click Here To Read/Download Order

IBC | Operational Creditor's Failure To File Its Claim Before Approval Of Resolution Plan Extinguishes Such Claim: Gujarat High Court

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