Supreme Court clarifies on the resolution plans

Supreme Court clarifies on the resolution plans

The aggrieved party had contended that a resolution applicant could not be suddenly faced with an 'undecided' claim

In a recent order, the Supreme Court has held, "The claim of the respondent, which is not part of the resolution plan, does not survive. The amount deposited by the appellant at the time of the admission of the appeals along with interest accrued thereon is directed to be refunded to the appellant."

The appeal arose out of a June 2002 notification issued by the Government of India's Department of Revenue, the Central Board of Indirect Taxes and Customs (CBIC), formerly known as the Central Board of Excise and Customs that imposed a tax on imported goods of Ruchi Soya Industries Ltd.

It was about 1647.414 metric tonnes of crude palmolein oil covered under the bill of entry for home consumption.

Ruchi Industries challenged the notification before the Karnataka High Court. But the court dismissed it in its January 2012 order.

Assailing the order, the oil firm filed a Special Leave Petition (SLP) before the Supreme Court in May 2012. The apex court passed an interim order, which said that subject to Ruchi Industries depositing the recovery amount as sought by the April 2012 notice (with the concerned commissioner), the operation of the action of recovery notice remain stayed.

In compliance with the order, the firm deposited the required amount, which reflected in the January 2013 order passed by the court and the SLP was granted.

Meanwhile, the Standard Chartered Bank had filed a plea before the National Company Law Tribunal (NCLT), Mumbai, under the Insolvency and Bankruptcy Code, 2016 for the initiation of the Corporate Insolvency Resolution Process (CIRP) and NCLT had granted approval of the resolution plan of the successful resolution applicant. The same was allowed vide its August and September 2019 orders.

In February 2022, the matter came up before the top court for final disposal. The issue pertained to the claim that was not lodged before the resolution professional after public notices were issued under IBC.

The court held that the claim made by the Government of India was not a part of the resolution plan, and hence, it did not survive. It directed that the amount deposited by Ruchi Industries in compliance with the May 2021 order be refunded along with the accrued interest.

The court made it clear that an authority, having made any claim against the company concerned but failed to bring it to the notice of the resolution professional, could not be allowed to raise such demand at a later stage.

Pertinently, during the arguments, the firm contended that a resolution applicant could not be suddenly faced with an 'undecided' claim after the resolution plan was submitted. And that the applicant should know exactly what was to be paid so that it may take over and run the business of the corporate debtor.

It was also argued that the legislature clarified that once a resolution plan was approved by NCLT, all claims/dues owed to the State/Central Government or any local authority, including the tax authorities (not a part of the resolution plan), would stand as terminated. It was also noted that the legislative intent behind it was to freeze all the claims so that the resolution applicant could start on a clean slate and was not flung with any surprise claims.

Another clarification was that the words 'other stakeholders' would squarely cover the State/Central Government or any local authority. Also, the 2019 amendment was declaratory and clarificatory in nature and, therefore, retrospective in operation.

The team of advocates led by Parag P Tripathi and assisted by Rajesh Rawal appeared on behalf of Ruchi Industries. Advocates from the Athena Legal team included Simranjeet Singh, Gautam Talukdar, Rhea Dube and external counsels Kunal Vaishnav and Mishika.