Case Briefs
Truth and Youth (TAY) 2021. All rights reserved.

Ghanashyam Mishra And Sons V. Edelweiss Asset Reconstruction


Author: Niyush Kumar, 4th year at  Amity Law School, Delhi.

Citation: 2021 SCC OnLine SC 313

Date Of Decision: 13 April 2021

Bench: Rohinton Fali Nariman, B.R. Gavai, Hrishikesh Roy

Original Copy: VIEW

 

Issue In Question

  • Whether all the creditors are bound by the agreement which is made by NCLT on resolution plan?
  • Whether any creditor can sue any other party who is not a party for the agreement for recovery of debts?

Facts Of The Case

  • The Supreme Court of India resolved many issues, but the main complaint was Civil Appeal No. 8129/2021 which initiated the Corporate Insolvency Resolution Process (CIRP) in relation to Orissa Manganese. & Minerals Ltd. makes an application under Section 7 of the Code by the State Bank of India to NCLT, Kolkata.
  • Interim Resolution Professional (IRP) was appointed on March 8, 2017 and CIRP was launched on March 8, 2017. The PIR was then confirmed by the Committee of Creditors (CoC) as a Resolution Professional  (RP). RP then compiled the claims and convened the wind-up plan in accordance with the provisions of the Code.
  • RP received three wind-up plans from:

(i)       Edelweiss Asset Reconstruction Company Ltd. (EARC),

(ii)      Orissa Mining Pvt. Ltd. and

(iii)      Ghanashyam Mishra & Sons Pvt. Ltd. (GMSPL).

  • Initially, EARC was declared, but as the highest bidder, the CoC was not satisfied in the negotiations and the EARC’s resolution plan was rejected.
  • The CoC then conducted the negotiations with bidder H2, EARC believed that its claim was not considered by the RP and therefore RP was in breach of Rules 13 and 14 of the Insolvency Resolution Process for Corporate Persons, 2016. In the above motion, it was asked that GMSPL could be instructed to undertake payment of the entire amount owed and payable under this corporate guarantee in addition to other required instructions, NCLT through an NCLT Detailed Order dated 06/22/2018 approved the resolution of the GMSPL Plan and denied the motions presented by EARC.
  • EARC and then, contrary to the previous order, lodged two separate appeals before the National Court of Appeals of Company Law, New Delhi (NCLAT). With the first appeal, the rejection of the EARC’s claims as a financial creditor and thus its non-inclusion in the CoC was challenged. The other appeal challenged the RP and CoC’s decision that the GMSPL plan was better than the EARC plan. It was also filed by the Sundargarh Mines & Transport Workers Union (SMTWU) on behalf of the corporate debtor’s workers.
  • NCLAT in the judgment of 23.04.2019, found that RP was entitled not to accept EARC’s claim and NCLT rightly denied EARC’s request of right to enforce the corporate guarantee against the corporate debtor. NCLAT also claimed that GMSPL’s plan was better than the one submitted by EARC.
  • Regarding SMTWU’s appeal, RP was criticized for ignoring the legitimate wages, statutory duties and other benefits of 1,476 employees of the corporate debtor. NCLAT noted that after the moratorium period, individuals would be free to appear in court or file a lawsuit with the competent court against the corporate debtor.
  • Compounded by NCLAT’s earlier observations that the parties’ allegations not included in the resolution plan could be made by them in front of the other forums, the GMSPL demanded that, in relation to other appeals, some government departments preferred the same in relation to some of the allegedly legal fees to be paid by the respective corporate debtors, which is why it was alleged that the legal fees set out in Section 3.

Judgment

  • In the present case, the complainant challenged the judgment and the order of the Division Chamber of the Jharkhand High Court of 1.2020, in which the complainant’s motions appear contesting the defendants’ action – authorities that are trying to exploit the added value of Jharkhand Tributaria (JVAT) for the period 2011-2012 and 2012-2013 were rejected.
  • Both learned judges wrote separate sentences; In the judgment of H. Mishra, the applications submitted by the complainant were rejected for two reasons, namely that, since the management of the complainant was taken over by M/s Vedanta Limited on 4/2018, only M/s Vedanta Limited who had the place to file car petitions.
  • JVAT is covered by the terms “debts relating to the payment of fees incurred under any law then in force and payable to the central government, any state government” so they fall under the definition of “or The Declaration of Shri Guru Krishna Kumar, Senior Scholar Advisor, that the finding of non-compliance with Section 13 is not challenged by Electrosteel Steels Limited is also incorrect, as Electrosteel Steels Limited has put forward the specific justification in the ‘U’ to ‘AA’ in the appeal memo,  justifications to the effect that it makes sense the appeal note. As a result, the vocations deserve to be admitted.
  • The judgment under appeal and the order of the Jharkhand High Court of 01.05.2020 are set aside and declared null and void. We hold and declare that the defendants are not entitled to collect any claims or debts that they accrued against the corporate debtor prior to the transfer date. Needless to say, the consequences will follow.

Case Analysis

  • As soon as a wind-up plan has been duly approved by the NCLT in accordance with Section 31 (1), the claims provided for in the wind-up plan remain frozen and are binding on all interested parties involved, including the corporate debtor and its employees, members, creditors, the headquarters, any state government, or any local authority.
  • On the day that the wind-up plan is approved by the NCLT, all claims that are not part of the wind-up plan will lapse and no one will have the right to initiate or continue any proceeding in relation to such claims. The amendment to Section 31 of the IBC from 2019 had a declarative and clarifying character and would therefore have to be applied retrospectively.

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