IBC| Demands Raised Pertaining To Period Before Plan Effective Date Stand Automatically Extinguished In Terms Of Approved Resolution Plan: Orissa HC
The Orissa High Court enunciated that the demands raised against the company pertaining to the period prior to the Plan Effective Date stand automatically extinguished in terms of Approved Resolution Plan (ARP).
The Court was deciding a batch of writ petitions concerning the validity of the demands raised against a company in view of the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC).
A Division Bench of Justice D. Dash and Justice V. Narasingh observed, “… in terms of section 31 of the I & B Code, the above ARP is binding on all creditors including Central Government and State Government. All those impugned demands raised against the Petitioner-Company pertaining to the period prior to the Plan Effective Date, i.e. 22.06.2018 stand automatically extinguished in terms of Approved Resolution Plan (ARP). In other words, the demands to the extent, which cover the period up to 22.06.2018 are thus unsustainable in law.”
Advocate S.K. Dash appeared for the petitioner while Additional Standing Counsel (ASC) G.N. Rout appeared for the opposite parties.
Factual Background -
The State Bank of India (SBI) being the Financial Creditor filed an application under Section 7 of IBC read with Rule 4 of IBC (Application to Adjudicating Authority) Rules, 2016 against the Corporate Debtor (Orissa Manganese and Minerals Limited i.e., OMML). The said application was filed before the NCLT and the same was admitted. Corporate Insolvency Resolution Process (CIRP) was initiated and the Interim Resolution Professional (IRP) was appointed. Responding to the invitation for Expression of Interest (EOI), three Resolution Plans were received from prospective Resolution Applicants by the IRP.
Edelweiss Asset Reconstruction Company Limited (EARC) was declared as the H-1 bidder but it failed to satisfy Committee of Creditors (CoC) in the negotiation. Hence, its Resolution Plan was rejected and the CoC then sat for negotiation with GMSPL (another private company) but its Resolution Plan was also found to be unacceptable. The EARC being aggrieved by the order of the NCLT, filed a company appeal before the National Company Law Appellate Tribunal (NCLAT) against the rejection of its claims as Financial Creditor and thereby its non-inclusion in CoC. Other companies also filed the appeals. The NCLAT rejected the same and its order was challenged before the Supreme Court. The Apex Court allowed the appeals.
The High Court after hearing the contentions of the counsel, noted, “In the present case, therefore, once the Resolution Plan was approved by the NCLT, which attained finality as per the order of the Hon’ble Supreme Court, it is no more open for the Opposite Parties to again raise the demands for the very period covered by the Resolution Plan, which in otherwords to say that no claim for the period prior to 22.06.2018, the date of approval of the Resolution Plan by the NCLT, i.e., the Plan Effective Date, could have been raised by the Opposite Parties and such demands to the extent as they cover the period up to 22.06.2018 stand automatically extinguished in terms of the Resolution Plan.”
While setting aside the impugned letters under which the demands were raised against the Petitioner-Company, the Court directed the opposite parties to revise the demands by limiting it to the period from June 22, 2018 onwards and raise the same afresh as against the petitioner in accordance with law so as to be satisfactorily discharged.
Accordingly, the High Court disposed of the writ petitions.
Cause Title- Orissa Manganese & Minerals Limited v. State of Odisha & Ors.
Appearance:
Petitioner: Advocates Susanta Kumar Dash, S.P. Sarangi, D.K. Das, P.K. Dash, and S.N. Mallick.
Opposite Parties: ASC Gajendranath Rout
