Embassy Commercial Projects (Whitefield) Pvt. Ltd. vs Pankaj Srivastava, Resolution Professional Of Katerra India Private Ltd.

Per : Justice Sharad Kumar Sharma, Member (Judicial):

The instant Company Appeal(AT) (CH) (INS) No. 439 / 2024, revolves around on a basic crucial issue in debate with regards to the maintainability of the counter claim in the proceedings of the CIRP, but, since the issue emerges from the Impugned Order of 20.11.2024, which was rendered in IA No. 545 / 2024, as passed in CP(IB) No. 74 / BB / 2023 is on a different issue, we would be avoiding to venture into the issue, about the maintainability of the counter claim in a proceeding of the CIRP.

The brief facts that emerge for consideration in the instant Appeal are; M/s. Vikas Telecom Pvt. Limited, the Developer, appointed Synergy Development Services Pvt. Ltd., as the Project Management Consultant in a project called as ``Parcel 3A & MLCP at Embassy Tech Village, Devarabisanahalli Village, Bangalore, vide work order dated 06.02.2019. Further, Vikas Telecom Pvt. Ltd. awarded a contract for the `engineering and build’ package work of the Project to the Corporate Debtor M/s. Katerra India Private Limited, as a Contractor of the Project.

The Vikas Telecom Pvt. Ltd., is said to have appointed the Appellant as a co-developer for the purposes for undertaking the development, operation and maintenance of several projects, including the said project at Embassy Tech Village.

For the purposes of guaranteeing execution of the awarded project, as per Schedule, the Financial Creditor namely `Yes bank’, is said to have issued an unconditional Performance Bank Guarantee on behalf of the Corporate Debtor on 02.02.2021, to the tune of Rs.16.77 Crores in favour of the Appellant. Another Bank Guarantee being the second one was issued by the `Yes Bank’, for an amount of Rs.40.19 Lakh on 11.08.2021.

It was contended that, due to the non-performance of the Corporate Debtor in respect of the awarded project, the Appellant invoked the two `Performance Bank Guarantees’, as above and called upon the Yes Bank to pay the amount of Rs.17,17,53,862/-, which was due to be paid and as shown in the Demand letter of 31.01.2023.

The Corporate Debtor in turn, issued a Legal Notice to the Appellant, seeking inter alia payment of its claim amounting to Rs.160,45,27,775/- which was said to be due to be payable under the terms of the Contract for completion of the project as referred to hereinabove, on account of breach of several terms of the contract, unforeseen items, design changes, etc.

The Legal Notice thus issued on 13.07.2023 was denied and while denying the same, the Appellant on 04.12.2023, set out its counter claim against the Corporate Debtor, under the contract alleging that Rs.78.16 Crores was due to be paid by the Corporate Debtor after adjustment of the amount already received upon the invocation of the Performance Bank Guarantee.

Meanwhile, the Corporate Debtor was admitted into the insolvency process by the learned Adjudicating Authority by an order of 08.09.2023. Consequent to initiation of CIRP proceedings, the Appellant filed a claim in Form-F on 05.12.2023 with IRP, raising a claim of Rs.78.16 Crores, projecting itself as `other Creditor’.

Owing to the fact that the work contract entered into by the Corporate Debtor including an Arbitration Clause for the redressal of the grievances, the Respondent / RP, had issued a Demand-Cum-Arbitration Notice on 01.03.2024, claiming an amount of Rs.160,45,27,775/- on behalf of the Corporate Debtor from the Appellant.

In continuation, the Respondent being the RP for the Corporate Debtor sent an email to the Appellant on 11.03.2024, holding thereof that the claim of the Appellant is disputed and hence, it cannot be classified as to be an admitted claim. In response to the Arbitration Notice dated 01.03.2024 by the Respondent / RP, the Appellant issued a `Response’ on 05.04.2024, denying the liability to pay the amount in respect of the purported claim raised by the Respondent / RP and reiterating his counter claim, as against the Corporate Debtor, which stood at Rs.78.16 Crores as on 08.09.2023. Further, the Appellant proceeded to file an Interlocutory Application i.e. IA No. 545 / 2024, before the learned NCLT, Bengaluru, on 20.06.2024, praying for issue of directions to clarify that his claims shall not be extinguished under the approved Resolution Plan.

The learned Adjudicating Authority, dismissed the said Application being IA No. 545 / 2024, holding the same to be barred by the ratio laid down by the Hon’ble Apex Court as propounded in the recent Judgment of the Adani Power Limited.

The learned counsel for the Appellant had submitted, that the view taken by the learned Adjudicating Authority, while deciding the IA No. 545 / 2024 was that, owing to the fact that the sustainability of a counter claim was an issue, which was considered by the Principal Bench of NCLAT in CA (AT) (INS) No. 285 of 2018 – Jharkand Bijli Vitran Nigam Ltd. V. IVRCL Ltd., wherein vide its Judgment of 03.08.2018, the learned Tribunal has observed in its Para 3, that in the absence of there being any legal bar created by the I & B Code, 2016, the counter claim could be entertained, heard and decided on merits. Relevant Para 3 is extracted hereunder:-

Secondly, he referred to yet an another Judgment rendered by the Hon’ble Apex Court in Civil Appeal No. 5908 of 2021 – Fourth Dimensions Solutions Ltd. V. Ricoh India Pvt. Ltd., wherein, while drawing its analogy while dealing with the observations made, which was under challenge in the Judgment before the Hon’ble Apex Court, the Appeal was disposed of, by reiterating the said fact with the liberty to the parties to pursue all the contentions available to them in the proceedings pending at the relevant time. The directions thus given by the Hon’ble Apex Court was as under:-

In fact, if the said judgment is taken into consideration, as it was rendered by the Hon’ble Apex Court on 21.01.2022, it did not touch these aspects of the present controversy, which is presently being addressed by the learned counsel for the Appellant while pressing the instant Company Appeal, qua the relief sought as against the Impugned Order of 20.11.2024, rejecting the IA No. 545 / 2024. In the Application IA No. 545 / 2024, preferred by the Appellant in CP / 74 / BB / 2023, by invoking Section 60(5) of the I & B Code, 2016, the Appellant had sought for the following reliefs:

The issue which arose was in the context of the instant proceedings, where the controversy pertains to raising of a counter claim by the Appellant, against the Corporate Debtor, whether the relief as extracted above, would at all be tenable to be pressed in before the Tribunal and that too, by invoking the provisions contained under Section 60(5) of the I & B Code, 2016, which being a residuary clause, is to be used for the aspects and fields not covered by I & B Code, 2016.

In fact, the reliefs sought as extracted above is read in precision, the Appellant was seeking a direction to clarify that its claims are not diluted under the approved Resolution Plan and a further direction to direct the RP to disclose the treatment of the Appellant’s claim under the Resolution Plan.

The Appellant submitted that, the nature of relief, which was sought for in the IA No. 545 / 2024, would be falling well within the ambit of the provisions of Section 60(5) and that ought to have been positively considered in their favour, which has been decided otherwise by the Impugned Order under challenge, by rejecting the Application IA No. 545 / 2024 holding it to be not maintainable.

The learned Adjudicating Authority, after dealing with the factual backdrop of the case as projected, had considered the Demand / Arbitration Notice raised by the Corporate Debtor dated 01.03.2024, raising a claim of Rs.160.46 Crores and the counter claim of the Appellant to the tune of Rs.78.16 Crores which for obvious reasons has been disputed and has not been admitted by the RP / Respondent herein. After going through the records, in the light of the Judgments which has been referred to therein, the Tribunal has observed that, the claim of the Appellant in the shape of counter claim as against the claim of the Corporate Debtor, can only be determined after the determination of the claim of the Principal Claimant i.e. the Corporate Debtor in the same Arbitral proceedings. The ultimate conclusion drawn by the learned Adjudicating Authority, was where it has observed that, it is not in controversy that the Appellant did file its claim in Form B on 29.01.2024 and thereafter, the Resolution Professional has issued a Demand Cum Arbitration Notice on 01.03.2024, the issuance of which has not disputed by the Appellant, that the issue pertaining to the claim or the counter claim between the parties is already a subject matter of Arbitration proceedings, that as it has already been held in various decisions of the Hon’ble Apex Court, that the determination of the tenability of the claim arising from a contractual agreement falls under the realm of a civil dispute, the current dispute is outside the scope of the jurisdiction of the learned Adjudicating Authority and it should be adjudicated by an appropriate civil forum.

Further, while considering the implications of IA No. 545 / 2024, the learned Adjudicating Authority has observed that any claim, which is or has not been part of the Resolution Plan, shall stand extinguished and no person would be entitled to persist upon the continuance of the proceedings in respect of a claim, which is or has not been part of the Resolution Plan. The aforesaid legal principle with regards to the settled principles of the `clean slate’, has been determined in the light of the observations made in Para 86 of the Judgment of Ghanshyam Mishra & Sons Pvt. Ltd. V. Edelweiss Assets Reconstruction Co. Ltd. (2021) 9 SCC 657. The relevant para 86 is extracted as under:-

Owing to the observation which has been made in para 86 of the said Judgment, where it has come to a conclusion that, once a Resolution Plan has been duly approved by the learned Adjudicating Authority under Sub Section (1) of Section 31 of the I & B Code, 2016, the Claim as provided under the Resolution Plan shall stand frozen for all purposes and it will be binding on the Corporate Debtor and all the proceedings consequent thereto are to be governed within the ambit of the aforesaid approved plan, which has been considered in the light of the implications of Sub Section (1) of Section 31. If the ratio as propounded in Ghanshyam Mishra & Sons Pvt. Ltd. (Supra) is considered, it has provided that any claim, which has not been the part of the Resolution Plan, shall not be extinguished, merely since not being part of Resolution Plan, but rather, the person who claims it, being a claim outside the Resolution Plan, would be entitled to initiate an appropriate proceedings in respect of such claim, which did not happen to be a part of the Resolution Plan. Hence, the principle laid down therein that, no claim which is not a part of claim of the Resolution Plan, can still exist of to be continued, pursued and pressed, as it has been observed in Para 86 of the Judgment. The Judgment also provides for that as soon as the Resolution Plan has been approved, any other claim outside its ambit will stand frozen and it cannot be agitated in a proceedings. Relevant Para 95 of the Ghanshyam Mishra & Sons Pvt. Ltd.(Supra) is extracted hereunder:-

Based upon the aforesaid analysis and considering the implications from the perspective of the preamble of the I & B Code, 2016, which gives an insight to achieve the object of the Code, the first and foremost of it, aims for the re-organisation of the insolvency resolution of the Corporate Debtor and when it envisages that, it should be concluded within the time bound process, all such proceedings lying outside the purview of Resolution Plan, may not be permitted to be agitated by invoking Sub Section (5) of Section 60 of the I & B Code, 2016, so as to delay the proceedings, and to widen the scope of Section 60(5) to its disproportionate implication and application, so as to distort the application and object of I & B Code, 2016.

The learned Adjudicating Authority, while considering the claim as it was raised by the Appellant, in the Application preferred being IA No. 545 / 2024, has also considered the Judgment rendered by the Hon’ble Apex Court in the matters of Adani Power Limited V. Shapoorji Pallonji & Co. Pvt. Ltd. & Ors. (Supra), as reported in 2023 IBC Law in 338 SCC wherein, the Hon’ble Apex Court has observed that in the statute or the precedence of the Hon’ble Apex Court or the NCLAT, there is no ambiguity as such, which reflects that once the plan is approved it is binding and it cannot be made a subject matter to be considered, analysed or interpreted before the Arbitration or for that matter before any proceedings and thus, it has opined that the claim even if allowed in favour of Shapoorji Pallonji & Co. Pvt. Ltd., will have no bearing on the right and obligations of the Appellant, as against the Corporate Debtor, who would be bound by its own terms of contract with the Corporate Debtor, owing to the fact that the Appellant cannot be saddled with a new liability except which is mentioned in the Resolution Plan. Thus, the opinion drawn by the learned Adjudicating Authority by the Impugned Judgment particularly, in the context of the reliefs sought by the Appellant in its application preferred before the learned Adjudicating Authority is that, in the light of the reliefs sought for, by the Applicant, qua his claim due under the contract from the Corporate Debtor, the application, it was nothing but an attempt to review a decision, which was already taken on 11.03.2024, where upon submission of claim by the present Appellant, against the Corporate Debtor, the RP has declined to admit the claim based on pre-existing dispute with the following observations therein:

If the aforesaid extract is taken into consideration, it has observed that the Demand Cum Arbitration Notice of 01.03.2024, has been sent to the Appellant, in which KIPL (the `Corporate Debtor’), has put a counter claim of around Rs.160.46 Crores from the Appellant, and since the claim of the present Appellant has been disputed by the Corporate Debtor, on the basis that it has a counter claim of Rs.160.46 Crores, the claim cannot be admitted by the Resolution Professional. What is important is that the observation made in the communication of 11.03.2024, which has been extracted above, constitutes a specific denial to consider the claim of the present Appellant, The decision of RP on 11.03.2024 is not under challenge by the Appellant before any superior proceedings.

In view of the aforesaid fact, the observations made in Para 2 of the email communication of 11.03.2024, will always create an impediment for raising of the claim of the Appellant beyond, what has not been permitted to be admitted by the Resolution Professional as reflected in the communication of 11.03.2024.

In the absence of there being any challenge given with regards to the effect of non-admission of the claim of the present Appellant by the Resolution Professional, the reliefs was sought for in IA No. 545 / 2024 in the shape of seeking a necessary directions to clarify that the Appellant’s claim not be extinguished upon the approval of Resolution Plan, would be barred by the Judgment of Adani Power Limited (Supra) as relied by the learned Adjudicating Authority, because the same cannot be permitted to be widen the scope of the claim by consideration of the counter claim particularly, when the denial of acceptance of the claim on 11.03.2024, has attained finality, having not been questioned, before any Appropriate Forum.

The logic assigned by the learned Adjudicating Authority, while putting a denial to the relief sought for in IA No. 545 / 2024, could be very well culled out that the relief sought for in the Application was held to be not maintainable and being in-contravention to the very covenants of the I & B Code, 2016, and its objective, besides being in contravention to the provisions of the I & B Code, 2016, which does not provide for any such scope of entertainment of reliefs of such nature, by pressing upon an application under Section 60 (5) of the I & B Code, 2016.

The logic behind it is that, the Successful Resolution Applicant, should not be made to face, sudden aggravated claims, after submission of the Resolution Plan as submitted by him and its acceptance by the Committee of Creditors and approval by the learned Adjudicating Authority. Since, the claim of the Appellant was not admitted by the Resolution Professional, the nature of relief sought for in the application preferred by the Appellant would not be maintainable, to be pressed upon by invoking Section 60(5) of I & B Code, 2016.

In fact, through the said application of IA No. 545 / 2024, the Appellant was trying to move the Tribunal to reconsider their claim which has already stood closed by the decision of RP on 11.03.2024 and he had sought not only to overcome the extinguishment of their claim, but also had sought for a contrary relief which instead of helping in resolving the dispute, would rather, result in multiplying the same, because, apart from the findings recorded, the stage at which the IA No. 545 / 2024 was being considered, the Resolution Plan, had already been finally accepted and owing to its acceptance, there was no avenue left for incorporation of the leftover claims or the counter claims. Thus, the same could not have been permitted to be added by the learned Adjudicating Authority, on the basis of the relief sought for in the application.

There is another reason, as to why the reliefs sought for in the application i.e. IA No. 545 / 2024, could not be granted, its because of its lack of clarity and also, because, the claim of the Applicant / Appellant herein already filed in Form B on 29.01.2024 has not been admitted by the RP, holding it as disputed, based on issuance of a Demand / Arbitration Notice dated 01.03.2024, by the Corporate Debtor against the Appellant. Since, the parties i.e. the Appellant and the Corporate Debtor have raised claims and counter claims before the Arbitration proceedings, the learned Adjudicating Authority was right in holding that such type of dispute which has a civil blend in it, is outside the scope of the jurisdiction of the learned Adjudicating Authority, to be considered and that too, by way of the instant Interlocutory Application and in view of the nature of the relief sought.

The Principal Bench of the NCLAT in the matters of Shapoorji Pallonji & Co. Pvt. Ltd., (Supra) in its Judgment of 23.02.2023 has already observed that, the parties even after the approval of the Resolution Plan, are at liberty to proceed with the pending Arbitration and such proceedings are still have to be decided on its merit. The said observation of the ratio which has been propounded implies that the Arbitration case, can independently be proceeded with and the approval of Resolution Plan will not be creating any impediment in the Arbitration proceedings. Hence, it is the settled that the legislative intent behind it, is to freeze all the claims at some point so that the Resolution Applicant starts with a `clean state’, and is not to be faced with surprise claims, which were not there during the initiation of CIRP proceedings.

Thus, all such claims, which are not a part of the Resolution Plan will stand extinguished and no person would be entitled to initiate the same, which were not part of the Resolution Plan and that too, particularly in the instant case, when the same has been sought to be made by the instant Application, where the relief itself was not clearly spelling out, as to what major relief it was claiming in the application, except for seeking an answer to the status of the claim of the Appellant, which is not a proceeding which could be agitated under Sub Section (5) of Section 60 of the I & B Code, 2016.

The Application thus preferred does not meet out the objective of the I & B Code, 2016, where finalization of the claims against the Corporate Debtor are required to be done in a Time-bound manner in order to take steps, for restructuring of the Corporate Debtor. Since, the same was being infringed by the nature of the relief sought for, the same would not be sustainable and the restrictions which was imposed by the Judgment of Adani Power Ltd. V. Shapoorji Pallonji & Co. Pvt. Ltd. & Ors. (supra), would be attracted, to make the Interlocutory Application preferred by the Appellant as to be not maintainable.

In view of what is being observed above, the Company Appeal (AT) (CH) (INS) No. 439 / 2024, lacks merit and the same is accordingly dismissed. All the connected pending Interlocutory Applications, if any, would stand closed.