Once CoC Approves Resolution Plan Then No Claim Is To Be Entertained: NCLAT

Brief Facts:

Vaishno Devi Foods Pvt. Ltd. (Corporate Debtor) was admitted into Corporate Insolvency Resolution Process (CIRP) on 27.10.2020 on an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016. On 12.11.2020, the IRP issued a public announcement inviting claims to be submitted to him. The deadline for submitting the claim was fixed as 24.11.2020. The resolution plan submitted jointly by Sharda Constructions & Corporation Pvt. Ltd. and Vikram Infratech Developers Pvt. Ltd. was approved by the CoC on 18.10.2021. Vadilal Industries Ltd. (Appellant) filed its application in Form B on 19.03.2022, which was rejected by the Resolution Professional (RP) on the ground of delay. On 19.07.2023, the Tribunal also dismissed the application. The appellant filed the appeal against the rejection of its application.

Contentions of the Parties:

Counsel for the Appellant submitted that the application and claim were wrongly rejected on the ground of delay despite the extension granted by the Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 to exclude the time from 15.03.2020 to 28.02.2022. Reliance was placed on State Tax Officer (1) vs. Rainbow Papers Limited to argue that claims cannot be rejected only on the grounds of delay. It was argued that it is the duty of the RP to comply with Section 30(2) of the Code before forwarding the plan to the CoC. The Appellant also contended that even after approval of the resolution plan, the Tribunal has the power to allow claims if there was an error in their rejection by the RP.

Counsel for the Respondent stated that IBC is a time-bound process and drew attention to the case of M/s RPS Infrastructure Ltd. vs. Mukul Kumar & Anr., wherein it was held that no claims can be entertained after the CoC approves the resolution plan. It was further argued that public announcements constitute “deemed knowledge” to creditors. It was also submitted that allowing claims after approval would prejudice the rights of the SRA and revive undecided claims. It was argued that the Appellant having already filed a suit in Civil Court, cannot pursue two remedies before two different forums and is indulging in “forum shopping”. The appeal was argued to be infructuous since the resolution plan had been fully implemented and the Corporate Debtor had been handed over to the SRA.

Observations:

The Tribunal noted that the Appellant filed the claim much after when the members of the CoC approved the plan submitted by the resolution applicant.

The Tribunal referred to the judgment in M/s RPS Infra wherein it was observed:

"The mere fact that the Adjudicating Authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon."

The Tribunal relied upon the dicta of the Supreme Court in M/s RPS Infra which held that once the CoC has approved the plan then no claim is to be entertained.

The Tribunal held that the Tribunal committed no error in rejecting the application of the Appellant. It dismissed the appeal.

Case Title: Vadilal Industries Ltd. vs. Fanendra Munot & Ors.

Case Number: Company Appeal (AT) (Ins.) No. 748 of 2023

For Appellant: Mr. Sandeep Grover and Ms. Richa Deshpande, Advocates.

For Respondents: Mr. Rajat Sinha, Mr. Madhur Jhavar, Advocates for RP. Mr. Gaurav Mitra, Ms. Lavanya Pathak, Mr. Prashant Puri, Advocates for SRA.

Date of Judgment: 16.12.2024