Bank Of Baroda vs Binani Cements Limited

Rajasekhar V.K., Member (Judicial):

This court convened viahybrid mode.

Binani Cement Limited (‘Corporate Debtor’) was engaged in the business of manufacturing and marketing of cement and had appointed Binani Business Developers (‘BBD’) for networking, collection from dealers, sales and marketing within specific geographical locations.

As per the agreements between the Corporate Debtor and the BBDs, the BBDs shall be responsible for supervising the activities of the dealers/distributors appointed by them and shall also be responsible for making all payments due and payable to the Corporate Debtor. While executing an agreement with the BBD, the Corporate Debtor used to collect security amount from the BBD, depending upon the region/districts.

The Corporate Debtor had also authorised retailers/dealers at different locations to sell the cement. The Corporate Debtor collected security deposit from the authorised retailers as per the norms decided from time to time.

However, an application under section 7 of the Insolvency and Bankruptcy, Code, 2016 was filed by one of the Financial Creditors of the Corporate Debtor before this Adjudicating Authority. Thereafter, vide order dated 26 July 2017 Corporate Insolvency Resolution Plan (‘CIRP’) wasinitiated againstthe Corporate Debtor. Mr. Vijay Kumar V. Iyer was appointed as the Interim Resolution Professional and later as the Resolution Professional (‘RP’).Subsequently, the Interim Resolution Professional made the public announcement on 27 July 2017 for inviting claims.

On 13 October 2017, the RP made a public announcement and invited prospective Resolution Applicants to submit their respective Resolution Plans. Subsequently, the RP received responses from sixty-five prospective Resolution Applicants but only six Resolution Plans were receivedas on 15 January 2018.

Thereafter, the Committee of Creditors (‘CoC’) after due deliberation and interaction with the prospective Resolution Applicants on 27 February 2018 desired to continue with the Resolution Plan submitted by Rajputana Properties Private Limited (‘RPPL’). The Resolution Plan submitted by RPPL was put for voting and was approved with 99.43% of votes of the CoC. On 19 March, 2018, the Resolution Plan submitted by RPPL came up before this Adjudicating Authority for approval.

However, the Resolution Plan submitted by RPPL was rejected by this Adjudicating Authority vide its order dated 04May 2018 on the grounds of gross misconduct by the RP while performing his duties. Aggrieved by the order of the Adjudicating Authority, several appeals were filed before the Hon’ble NCLAT.

The Hon’ble Supreme Court vide its order dated 02 July 2018 had directed transfer of all proceedings before this Adjudicating Authority to the Hon’ble NCLAT.

In the meantime, the CoC after reviewing concluded that the Resolution Plan submitted by UCL was the best in order to achieve the purpose of the Code and the same was unanimously approved by the CoC. Thereafter, the Hon’ble NCLAT approved the Resolution Plan submitted by Ultratech Cement Limited (‘UCL’ or ‘Successful Resolution Applicant’ or ‘SRA’) vide its order dated 14 November 2018.

An appeal was again filed before the Hon’ble Supreme Court against the order dated 14 November 2018 of the Hon’ble NCLAT. However, the appeal was dismissed on 19 November 2018 and the order of the Hon’ble NCLAT attained finality. UCL took over the management of the Corporate Debtor with effect from 20 November 2019.

It is observed that all the Applications calls for the attention of this Adjudicating Authority on a common issue, hence, all the Interlocutory Applications shall be dealt in this common order.

These are applications under section 60(5) of the Code, filed by the Applicants, against UCL. The Applicants kept on providing their services during the CIRP period, to help the Corporate Debtor run as a going-concern. Some of the Applicants had also entered into BBD Agreement with the Corporate Debtor.

The Corporate Debtor was admitted into CIRP on 26 July 2017 and the public announcement for inviting claims was made on 27 July 2017. In pursuance such public announcement the Applicants also submitted their claims with the RP. From time to time they also about the same. However, on enquiry the Applicants were informed that their claims are under the verification process and shall be considered by the RP in due course. Nevertheless, the verification of the claims of the Applicant was pending even when during the final hearing of the approval of the Resolution Plan.

The Resolution Plan of UCL, as approved by the Hon’ble NCLAT vide order dated 14 November 2018 provides for payment of 100% dues of the Operational Creditors, except related parties. But no payments have been received by the Applicant despite several requests and meetings.

The reliefs sought by the Applicant in their respective Applications are, inter alia, as follows:

¹ IA (IBC) No.582/KB/2021, IA (IBC) No.596/KB/2021, IA (IBC) No.597/KB/2021, IA (IBC) No.598/KB/2021, IA (IBC) No.606/KB/2021, IA (IBC) No.609/KB/2021, IA (IBC) No.610/KB/2021, IA (IBC) No.611/KB/2021, IA (IBC) No.728/KB/2021, IA (IBC) No.729/KB/2021 and IA (IBC) No.1004/KB/2021

The Applicants have interpreted the approved the Resolution Plan in a mistaken way. Upon bare perusal of the approved Resolution Plan of UCL operational trade creditors were to be paid 100% of their verified claims and not 100% of their amount as claimed.The respondents have already made payment to three Operational Creditors as per the approved Resolution Plan. The alleged claims of the remaining Operational Creditorswere not admitted by the RP.

The Applicants are not entitled to any amount as per the Approved Resolution Plan. The Applicants have also failed to provide appropriate claim forms. The RP upon receiving the claim used to verify claim and maintained a list of creditors, which contained the names of the creditors along with the amount claimed from them. The list also reflected the details of claims admitted or rejected. As per the final list of the RP only three claims have been admitted.

As per section 31(1) of the Code, the Resolution Plan shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan. Hence, the Applicants are bound by the terms of the approved Resolution Plan.

Further, point 6.2.3 of the Resolution Plan as approved by the Hon’ble NCLAT by its order dated 14 November 2018categorical states that the liabilities of the Operational Trade Creditors in respect of the claims verified/admitted shall stand fully discharged by payment. Within thirty days of the date of transfer. Further, point 6.2.7 of the Resolution Plan also states that the Resolution Applicant shall not be liable to any other creditor or any other liability of the Corporate Debtor including Contingent Liabilities for a period prior to the Transfer Date.

The Resolution Plan also stated that the no person shall have any claim against the Corporate Debtor or the Resolution Applicant in respect of the liabilities of the Corporate Debtor to the period prior to the Transfer Date, except to the extent provided for payment in the Resolution Plan.

Reliance has been also placed on the Judgment passed by the Hon’ble Supreme Court in Ultratech Nathdwara Cement Limited v State of Uttar Pradesh &Ors,^{22.(2021) 9 SCC 657 decided on 13 April 2021} where the Hon’ble Supreme Court has held that section 31 of the Code is clarificatory and declaratory in nature, and therefore will haveretrospective effect. Further, when a Resolution Plan is approved by the Adjudicating Authority then the claims which are not part of the Resolution Plan shall stand extinguished and the proceeding related thereto shall stand terminated.

The Respondent has also relied on the decisions of the Hon'ble Rajasthan High Court inUltratech Nathdwara Cement Limited v Union of India,^{33.2020 SCC OnLine Raj 1097 decided on 07 April 2020} Ultratech Nathdwara Cement Limited v State of Rajasthan, Dept. of Mines &Ors.,^{44.2021 SCC OnLine Raj 2536 decided on 08 November 2021}and of the Hon'ble Supreme Court inCommittee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Ors^{55.(2020) 8 SCC 531 decided on 15 November 2019}(Para 86 and 88). The respondent also relied on the decision of the Hon'ble NCLAT in Binani Industries Limited v Bank of Baroda & another,^{66.2020 SCC Online NCLAT 521 decided on 14 November 2018}whereby the revisedResolution Plan of the Corporate Debtor was approved. This decision was assailed before the Hon'ble Supreme Court in Commissioner of Central Excise, Goods and Service Tax, Jodhpur v Binani Industries Limited &Ors,^{77.2020 SCC OnLine SC 1185 decided on 24 January 2020}which dismissed the appeal, finding no reason for interference.

The instant Applications has been filed with a view to harass the respondents into paying sums which are neither due nor payable by the Successful Resolution Applicant.

The issue that arises for consideration in the present batch of applications is this: Can a creditor initiate proceedings for recovery of any of the dues which are not part of the resolution plan, from the Corporate Debtor after approval of resolution plan by the adjudicating authority?

We have heard the Ld. Counsel appearing for the Applicant and the Ld. Senior Counsel appearing for the Respondent. It is noticed that in all the IAs, there is only one Respondent, i.e.,Ultratech Cement Limited, who is also the Successful Resolution Application but all the replies on record has been filed on behalf of the Respondent No.2.

Upon perusal of the record it is relevant to mention the points, as follows:

As envisaged under section 31 of the Code, the Adjudicating Authority approves a Resolution Plan if it is satisfied that the same has been approved by the Committee of Creditors by the requisite 66% votes, after taking into consideration the feasibility and viability of the Resolution Plan[section 30(4) of the Code]. However, in this instant case, the Resolution Plan of Ultratech Cement Limited was unanimously approved by the CoC and was approved by the Hon'ble NCLAT on 14 November 2018. The Hon’ble Supreme Court vide Order dated 19 November 2018 also upheld the Order of the Hon’ble NCLAT.

It is also pertinent to mention that the issue arising here have been dealt by the Hon’ble Supreme Court in a plethora of cases. Every now and then, the Apex Court has made it explicit that the commercial wisdom of the Committee of Creditors has to be given paramount status without any judicial intervention.^{88.Kalpraj Dharamshi v Kotak Investment Advisors Limited (2021) 10 SCC 401 decided by the Hon'ble Supreme Court on 10 March 2021} Further, when a Resolution Plan is being approved by the CoC there is an intrinsic assumption that the Financial Creditors are fully informed about the viability and feasibility of the proposed Resolution Plan.^99.Ibid There is no provision in the Code, which envisages challenge to the commercial or business decision of the Financial Creditors taken collectively or their individual opinions, as the case may be.^{1010.K. Sashidharv Indian Overseas Bank & Others, (2021) 12 SCC 150 decided by the Hon'ble Supreme Court on 05 February 2019}

Further, in Ghanashyam Mishra & Sons Private Limited v Edelweiss Asset Reconstruction Company Limited,^{1111.(2021) 4 SCC (Civ) 638 decided on 13 April 2021}the Hon’ble Supreme Court has held that any debt in respect of the payment of dues arising under any law, including the ones owed to the Central Government, any state Government or any local authority, which does not form a part of the approved Resolution Plan shall stand extinguished.

Nevertheless, in this instant case, we have observed that the payments to the Operational Creditors have been made by Ultratech Cement Limited in terms of the approved Resolution Plan. Further, these applications have been filed three years after the date of approval and implementation of the resolution plan.

The Applicants should have taken proper recourse under the Code at the relevant point of time, against the admission or rejection of their claims by the RP. It is a bit too late in the day at this point of time to ask the Corporate Debtor under new management to make payment of operational debts which stand extinguished by the approval of the resolution plan way back in 2018. It is precisely such claims popping up long after the approval of the resolution plan, that the Hon'ble Supreme Court cautioned against, when it said in the Essar Steel (supra) judgment that the successful resolution applicant should not be required to face these hydra heads popping up.

In view of the above facts and circumstances and the precedents laid down by the Hon’ble Supreme Court, each of the IAs, i.e.,IA (IBC) No.582/KB/2021, IA (IBC) No.596/KB/2021, IA (IBC) No.597/KB/2021, IA (IBC) No.598/KB/2021, IA (IBC) No.606/KB/2021, IA (IBC) No.609/KB/2021, IA (IBC) No.610/KB/2021, IA (IBC) No.611/KB/2021, IA (IBC) No.728/KB/2021, IA (IBC) No.729/KB/2021 and IA (IBC) No.1004/KB/2021, shall stand dismissed as not maintainable after the approval of the resolution plan.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.