Hindustan Adhesive And Chemicals vs Alishan Veneer And Plywood Private Limited

TABLE OF CONTENTS

O R D E R

Prologue

Particulars of the Corporate Debtor

Initiation of Corporate Insolvency Resolution Process

Publication

Constitution of CoC

Collation of Claims

Appointment of Registered Valuers and Transactional Auditors:

CIR Process and its Compliances

Evaluations and Voting:

Compliance of the Resolution Plan submitted by the SRA with various provisions under the IBC and CIRP Regulations:

About the SRA:

Financial Proposal given by the SRA

Realisable amount:

Details of Realisable amount:

Provision for Implementation and Monitoring of the Resolution Plan:

On PUFE Transaction:

Our Inference:

“PNB proposed for the incentive fees of Rs five lakh and the same was agreed by the RP. PNB mentioned that that the incentive of Five lakh may be considered as approved (subject to approval from head office, which is awaited). Other members also agreed to the same.

Members with 100% voting share voted for the motion by show of hands.

Resolved that the performance incentive of the Resolution Professional stand approved for Rs 5 (Five) lakh plus applicable.”

“19.

In the present case, avoidance application has been filed which are pending consideration. There can be no quarrel to the preposition that avoidance application has to be decided by the Adjudicating Authority which shall not affect the proceedings of the CIRP. The legislative intent is very clear that avoidance application is not to affect the proceedings in the CIRP. The proceeding in CIRP i.e. the Resolution of the Corporate Debtor is the objective of IBC and the Resolution Plan has been approved by the CoC and Application for approval is pending before the Adjudicating Authority since 09.11.2021, there is no reason for adjourning consideration of the said application to await the decision of PUFE Application. PUFE Applications are a different scheme of proceedings which has to be concluded to its logical act which shall have its consequences as contemplated in the statute. When the CoC approved the Resolution Plan and has also reiterated that Application for Resolution Plan be considered by tis 17^th CoC Meeting dated 27.02.2023, we do not find any reason not to consider the said application merely on the ground that PUFE Applications are pending. The Adjudicating Authority is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but the Adjudicating Authority erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided.

24.

Taking into consideration the overall facts and circumstances of the present case, ends of justice will be served in disposing of this Appeal with following directions: I. The Adjudicating Authority shall proceed to consider the Resolution Plan Application being I.A. No. 5385 of 2021 and not to await the decision in PUFE Applications.”

On the Statutory Obligations or Seeking Approvals from the Authorities:

On the Reliefs, Waivers and Concessions:

I. Save and except specifically dealt with under this Resolution Plan, no other payments or settlements (of any kind) shall be made to any other person in respect of claims filed under the CIRP (including, for avoidance of doubt, any unverified portion of their claims) and all claims against the corporate debtor along with any related legal proceedings, including civil proceedings, criminal proceedings and/or any other penal proceedings, shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity on the effective date.

II. Upon approval of plan by AA under section 31 of IBC code, all pending proceedings, arbitration cases or liabilities (whether admitted or not, ascertain or unascertained, disclosed or undisclosed, due or contingent, asserted or unasserted, crystallized or uncrystallized, known or unknown, secured or unsecured, disputed or undisputed, present or future) if any against the corporate debtor shall stand irrevocably and unconditionally abated in perpetuity. Similarly, all the pending proceedings, arbitration cases or liabilities relating to the recovery of dues from the corporate debtor of whatsoever nature, of any authorities involved with regards to the corporate debtor for the tie being in the force shall also stand irrevocably and unconditionally abated in perpetuity. Further no proceedings/penalty, etc. shall be initiated on Resolution Applicant or the corporate debtor pertaining to the period prior to the effective date.

III. On making of full payment as proposed in the Resolution Plan to the financial creditors, all encumbrances, security interest, liens and/or attachment (including pursuant to applicable acts & laws), whether covered in the Resolution Plan or not, created or suffered to exist over the assets of the corporate debtor (changed or not changed with the lenders) or over the securities of the corporate debtor, whether by contracts or by applicable law shall cease to exist and shall be irrevocably released and all enforcement commenced by any Secured Financial Creditors or any other person over any of the assets of the corporate debtor or over any securities of the corporate debtor shall stand extinguished in perpetuity.

IV. On the effective date, all the outstanding negotiable instruments issued by directors/ promotors or the corporate debtor or by any person on behalf of the corporate debtor for any dues of corporate debtor including demand, promissory notes, postdated cheques, letters of credit, etc. shall stand terminated and corporate debtor's liability under such instruments shall stand extinguished perpetuity.

V. On the sanction date, the rights of any person (whether exercisable now or in the future and whether contingent or not) to call for the allotment, issue, sale or transfer of shares or loan capital of the corporate debtor, whether on a change of control, or otherwise, shall stand unconditionally and irrevocably extinguished in perpetuity.

VI. On the approval of Resolution Plan by Adjudicating Authority, why pending cases at any forum in name of the corporate debtor shall stand withdrawn and settled without any liability and further action.

VII. On the approval of Resolution Plan by Adjudicating Authority, any pending cases in DRT/DRAT, in the name of the corporate debtor shall stand withdrawn and the name of corporate debtor shall be removed from all future proceedings.

VIII. On the approval of Resolution Plan by Adjudicating Authority, any pending cases from Enforcement Directorate in the name of the corporate debtor shall stand withdrawn and the name of corporate debtor shall be removed from all future proceedings.

IX. Any amount of GST balance/GST input credit or any other indirect tax balance and Income Tax refunds or any other refunds for direct or indirect tax, if available to the corporate debtor than the same should be available as it is, and no adjustment shall be made against the same for the dues that have been extinguished as per the plan.

X. All pending Assessments/litigations/orders/demands etc. including but not restricted to those mentioned in Information memorandum shall be extinguished on effective date and no amount shall be payable by Resolution Applicant or corporate debtor against the same.

XI. All dues by Excise Department, Income Tax Department, Service Tax Department, VAT/GST department or any other department or any other person as applicable, unless provided in the plan shall be deemed to be extinguished, various Authorities, Courts, Adjudicating Authority and constitutional bodies/ departments give certain refunds, pre deposit of legal cases/appeals etc. interest subsidy receivable by the corporate debtor which shall have no effect by the ongoing resolution process and should be given to corporate debtor without making any adjustment for the dues that have been extinguished as per the plan.

XII. The Adjudicating Authority is requested to grant other reliefs as deemed appropriate/necessary for successful implementation of resolution plan.

XIII. In the event, the Resolution Applicant faces any difficulty including non-cooperation in the implementation of this Resolution Plan, execution of the necessary documents, handing over the management, affairs and assets, books and records of the corporate debtor and/or with respect to any other matter required in connection with or respect to implementation of this Resolution Plan, the Resolution Applicant shall be entitled to make necessary applications to the Adjudicating Authority for necessary directions/order in this regard or take such remedial actions as the Resolution Applicant may deem fit.

XIV. In the event, that any difficulty or ambiguity arises in the interpretation of any provision of this resolution plan or otherwise, the resolution applicant shall be entitled to make necessary applications to the Adjudicating Authority to remove such difficult or ambiguity without the requirement of the further approval of the CDC or any financial creditors.

XV. Upon approval of this resolution plan by the NCLT, all dues (including but not limited to taxes, duty, penalties, interests, fines, cess, unpaid tax deducted at source/tax collected at source, Dividend Distribution Tax) under the provisions of various direct/indirect taxes including but not limited to Income Tax Act, 1961, the Central Excise Act, 1944, the Finance Act, 1994 (Service Tax), the Custom Act, 1962, the Central Sales Tax, 1956, State VAT Act, the Goods and Services Tax Act, 2017, whether admitted or not, ascertain or un-ascertain, disclosed or undisclosed, due or contingent, asserted or unasserted, crystallized or uncrystallized, present or future, known or unknown, secured or unsecured, disputed or undisputed, whether part of above claim of tax authorities or not, whether part of the above mentioned contingent liability schedule dues or not, whether part of the above mentioned contingent liability schedules dues or not, whether part of tax due diligence finding or not, in relation to any period prior to the effective date pursuant to this resolution plan, shall stand extinguished by virtue of the order of the Adjudicating Authority approving this resolution plan and the resolution applicant or corporate debtor shall not liable to pay any amount against such demand. All outstanding litigations/ demands, assessments/appellate or other proceedings having any adverse effect on the resolution applicant or corporate debtor, including but not limited to any audits, Investigations, search and seizure, pending in case of corporate debtor, on the effective date, relating to period prior to that date, shall stand terminated and all consequential liabilities, if any, shall be deleted and shall be considered to be not payable by the corporate debtor by virtue of the order of the Adjudicating Authority. All notices proposing to initiate any proceedings against the corporate debtor in relation to the period prior to the effective date and pending on that date shall be considered deleted and shall not be proceeded against. Post the order of the adjudicating Authority, no re-assessment/ revision or any other proceedings having any adverse effect on the resolution applicant or corporate debtor, under the provisions of the any direct or indirect tax acts shall be initiated on the resolution applicant or corporate debtor in relation to period prior to the effective date or acquisition of control by resolution applicant and any consequential demand shall be considered non-existing and as not payable by the corporate debtor. Any proceedings which were kept in abeyance in view of the insolvency process or otherwise shall not be revived post the order of the Adjudicating Authority.

XVI. The resolution applicant or the corporate debtor shall not be liable towards any claims or obligations (admitted or not, ascertain or un-ascertain, disclosed or undisclosed, due or contingent, asserted or unasserted, crystallized or uncrystallized, known or unknown, secured or unsecured, disputed or undisputed, present or future) towards or relating to the subsidiaries or associates companies (domestic or foreign) or any other concern of corporate debtor, domestic or foreign, that relate to a period prior to the sanction date, including in relation to any undertakings or guarantees issued by the corporate debtor for such subsidiaries and associate companies, in any manner whatsoever. Without prejudice to the aforementioned, all guarantees/supports/credit comforts/ put options/ indemnities or any agreement of similar nature given by corporate debtor in relation to such subsidiaries or associate companies before sanction date shall stand irrevocably and unconditionally withdrawn for no consideration and no claim shall be made pursuant to such guarantees/supports/put options/indemnities or any agreement of similar nature whether for actions prior or post the sanction date.

XVII. The resolution applicant shall require no permission from any Authority/SGM/Board/RBI etc. for written off the investments/loans.

XVIII. The Resolution Applicant may write back, Financial creditors, sundry creditors or any other credit balances. The same shall not be liable as Income/under MAT under Income Act, 1961.

XIX. Resolution Applicant shall not be liable to comply with non-compliance made by Corporate Debtor before the Effective Date and same shall be deemed to be complied and waiver shall be deemed to be given from filing of the required forms and/or returns. Further it shall be deemed that all the penalty, fine, charges, interest etc. other than those already proposed to be paid under the Resolution Plan, with respect to noncompliance of Applicable Acts & Laws up to sanction date are waived off by Adjudicating Authority and Resolution Applicant or the Corporate Debtor shall not be liable to pay any amount in excess of the amount already provided in the Resolution Plan and all the non-compliances are considered as complied.

XX. The Resolution Applicant shall be exempt from payment of any charges, duty, levy for transfer of ownership of the Corporate debtor in pursuant to the Resolution Plan approved by Adjudicating Authority. The Resolution Applicant or Corporate Debtor shall not be liable for any liability other than those specifically provided in the Resolution Plan.

XXI. The Resolution Applicant and Corporate Debtor shall not be held responsible with reference to any investigation related to the period prior to the sanction date. Resolution Applicant and Corporate debtor shall be granted immunity from any adverse actions and penalties under any applicable acts & laws for such period.

XXII. With regards to any belated return of Income Tax of the Corporate Debtor, pertaining to any past period till sanction date, the said belated Income Tax return shall be deemed to be filed in time and the Corporate Debtor shall be deemed to be entitled to all benefits under Income Tax Act, 1961 including various deductions, reliefs and carry forward of losses.

XXIII. All the past direct tax or indirect tax and/or any other Taxes/Dues return/ Form of period prior to the sanction date shall be deemed to be filed within time limit specified under relevant acts and Corporate debtor shall not considered for any disallowance of expenses, addition to income, penalty, Interest, charges, fine etc. with respect to the same. Also, any past Return/Form or any other document which was submitted pertaining to the period prior to the effective date, to the relevant authority regarding Direct Tax or Indirect Taxes or any other Taxes/ Dues, shall not be considered for any penalty or disallowances of expenses or addition to income or disallowances of losses, interest, charges, fine, etc. for any reason by the Relevant Authority.

XXIV. According to the information provided to the Resolution Applicant the losses as per income tax are mentioned in the balance sheet /information memorandum of the CD. The approval of Resolution Plan by Adjudicating Authority shall be deemed to be approval to: a) Treat the accumulated losses and unabsorbed depreciation as stated above to be the loss of the Corporate Debtor for the year in which the approval of the Resolution Plan is received by the Resolution Applicant. Hence carried forward to 8 years will be from the year in which Resolution Plan is approved. b) Exempt the Resolution Applicant and Corporate debtor form all the requirements/conditions prescribe for carry forward & set off accumulated losses and unabsorbed depreciation under any, applicable acts & laws including but not limited to section 47,72,724,73,79,80, or any other section of the Income Tax Act. c) Treat any write-offs made in the books of accounts as a deduction/expense in year of such write-off. d) Exemption from obligation to pay taxes pursuant to section 115 JB of the Income Tax Act, 1961 till the time all the carry forward losses are set off. e) Any capital gain on sale of fixed assets to pay Secured Financial Creditors will not be liable to Income Tax Act, 1961.

XXV. It is specifically mentioned that any present or future Cases/Notices/Proceedings/Assessment/Demands /Litigations/Orders/Penalties/Fines etc. with respect to the period prior to the sanction date, shall have no adverse effect on the Corporate Debtor. The said adverse effects shall include but not to be limited to any adverse impact on the accumulated losses, Unabsorbed Depreciation or Properties of the Corporate Debtor.

XXVI. There shall be a waiver of ROC fees/Stamp duty fees, MOA/ADA registration charges, etc. incidental to increase in the share capital of the Corporate Debtor and issue of the share.

XXVII. As the corporate debtor is having accumulated losses, accumulated depreciation, expenses/deductions that can be claimed in future. It may also be having other tax benefits, deductions etc. which will result in tax implications to the various parties to the Resolution Plan, the National Company Law Tribunal/Adjudicating Authority should explicitly and adequately consider the tax implication of such transactions while sanctioning the arrangement/Resolution Plan with respect to the transactions conducted by the said parties, as far as they relate to any action relation to this Resolution Plan. The NCLT/Adjudicating Authority may send notice to any authorities or any other person it deems fit.

XXVIII. The Corporate Debtor's major shareholding was held by promotors (Individual / HUF). The Resolution Applicant and Corporate Debtor shall not be liable towards any claims or obligation (whether admitted or not, ascertain or unascertained, disclosed or undisclosed, due or contingent, asserted or unasserted, crystalized or uncrystallized, known or unknown, secured or unsecured, disputed or undisputed, present or future) towards or relating to any local or foreign party including promotors for any matter including those in relation to any undertakings or guarantees issued by the Corporate Debtor in any manner whatsoever.

XXIX. Resolution Applicant and Corporate Debtor shall not be liable towards any defaults/obligations towards RBI, FEMA etc. with regards to anything related to the prior to the sanction date or with regards to any actions taken as proposed in the Resolution Plan.

XXX. With effect from the sanction date, the Resolution Applicant shall be entitled to review, revisit and modify all existing contracts entered into by the Corporate Debtor prior to the sanction date. The corporate debtor shall have no liability or obligations to pay the relevant counterparty to such contracts any sums payable for period prior to the sanction date, nor shall the Resolution Applicant and/or the corporate debtor be liable to pay any damages to the relevant counterparty and all claims made against the corporate debtor by counterparties to such contracts/arrangements/purchase order/work orders in relation to period up to the sanction date shall stand settled and/or extinguished by virtue of the order of the Adjudicating Authority approving this Resolution Applicant and/or the corporate debtor shall at no point of time to be, directly or Indirectly, held responsible or liable in relation thereto.

XXXI. Accordingly, upon the Resolution Plan being approved by the Adjudicating Authority, the action undertaken by the Resolution Professional and the Corporate Debtor pursuant to be implementation of the resolution plan shall be deemed to be exempt from any tax applicability, tax obligations, conditions requirements etc. under various applicable acts & laws, including but not limited to General Anti-Avoidance Rules(GAAR), section 47,508, 50CA, 56, 68-690, 72, 724, 73, 79, 80, 115J8 and 1150-0 and other sections of the Income Tax Act, 1961, the Central Goods & Service Act, 2017 (as amended from time to time), Customs, Value Added Tax, the provisions of Indian Stamp Act, 1889 (as amended from time to time), laws relating to payment of stamp duty applicable in any state etc. Also, exemption to various rules including but not limited to rule 110, 110A, 11UAA, 11UAB, 11UAD, 11UAE, 1108, 11UC under the Income Tax rules with respect to issue of shares and transfer of shares at fair market value shall be deemed to be given.

XXXII. The corporate debtor shall not require to make any separate application before NCLT for reduction of share capital and the approval of the resolution plan, by AA shall be treated as if the necessary approvals required to have been obtained under the companies Act, including consent of shareholders or creditors of corporate debtor for capital reduction and all the formalities for capital reduction under the companies act shall be deemed to have been obtained and duly complied with and the Corporate Debtor shall not be required to add the words "and reduced" as suffix to its name. The provisions of section 66 of the Companies Act, 2013 shall be deemed to have been complied with by virtue of the order of the Adjudicating Authority sanctioning the Resolution Plan.

XXXIII. The approval of the resolution plan, by AA shall be shall constitute adequate approval for issuance of Equity Shares by the Corporate Debtor to the Resolution Applicant, in accordance with all provisions of Applicable Law. Accordingly, no further actions and requirements (including procedural requirements for issuance of equity shares prescribed under the Companies Act), approval, application or consent shall be necessary on the part of Corporate Debtor.

XXXIV. All business permits required by the corporate debtor to conducts its business and which have not been granted, cancelled, terminated, revoked, suspended or not renewed; shall be deemed to granted or reinstated, as the case may be, at no additional cost or burden or fulfilment of any condition to the resolution applicant and corporate debtor;

XXXV. The issue / reduction / cancellation/consolidation / allotment of equity shares/derivative equity share/preference shares/ warrants or debentures, increase/alteration in authorized share capital: amendment of the memorandum of the association and articles of association of the corporate debtor, appointment of statutory auditory, secretarial auditors, internal auditors, new directors on the board of the corporate debtor and implementation of various other actions and matter contemplated in the Resolution Plan, shall not require any other approvals by the Resolution Applicant or the corporate debtor, after approval of the Resolution Plan by the Adjudicating Authority.

XXXVI. The Adjudicating Authority shall have deemed to have directed that all the non-compliances under the Companies Act, 1956, RBI permission or the Companies Act, 2013, if any shall be regularized and all the fees, additional fees, interest, penalties etc, payable in relation to the such non-compliances stand waived off.

XXXVII. All power of attorney or authorities executed prior to the date of implementation of the Resolution Plan shall stand revoked, cancelled and shall be void.

XXXVIII. With regards to any other case with corporate debtor or on behalf of corporate debtor any third person or agent of corporate debtor has done on any party under any law for the time being in force shall be allowed to be continued, only to the extent the amount is recoverable from the other parties. Resolution Applicant or Corporate Debtor shall not be liable for payment of any amount whatsoever in respect of such cases.

XXXIX. Secured Financial creditors shall be deemed to have confirm that, on and from the effective date, all accounts of the corporate debtor shall stand regularized, and their assets clarification shall be "standard for the purpose of all applicable acts & laws.

XL. All notification with regards to default filed with Credit Information Bureau (India) Limited (CIBIL), any information utility, RBI or any other regulatory authority shall be withdrawn by the respective Financial Creditors.

XLI. On the approval of Resolution Plan by Adjudicating Authority, any pending cases, u/s 138 of N.I. Act, 1881, in the name of the corporate debtor and its director shall stand withdrawn and the name of corporate debtor and its directors shall be removed from all future proceedings under section 138 of N. 1. Act, 1881.

XLII. ROC, Ministry of Corporate Affairs, The Collector of Stamps, Revenue Department, Government of Maharashtra or any other relevant authority shall be deemed to have exempted the Resolution Applicant, Corporate Debtor and other stakeholders in this Resolution Plan, from the levy of stamp duty, any other duty, fees or any other charges applicable in relation to this Resolution Plan and its implementation, including any stamp duty, any other duty, and fees or any other charges applicable on the transfer of immovable properties and assignment of guarantees etc.

XLIII. Waiver or reduction in amount payable to financial creditors, operational creditors, share capital and other parties as per final Resolution Plan may result in booking of income which can be subject to normal tax and/or minimum alternate tax as per Income Tax Act. No addition to total income or disallowance of any deduction/expenses/losses shall be made to the Resolution Applicant or Corporate Debtor with respect to treatment done as envisaged in Resolution Plan.

XLIV. Approval of the Resolution Plan by the Adjudicating Authority should be deemed to be considered as permission to treat the same as not liable to tax and the same should not be considered in total income as per Income Tax including for MAT purpose.

XLV. Licenses/Approvals/Contractual Rights and Benefits: For the avoidance of the doubt, it is hereby clarified that all consents, licenses, approvals, rights, entitlement, benefits and privileges whether under law, contract, lease or licenses, granted in favor of the corporate debtor or to which the corporate debtor is entitled or accustomed to, which have expired as of effective date, shall be deemed to continue without disruption for the benefit of the corporate debtor for a period of 2 years or until renewed by the relevant authorities, whichever is later. Without any liability for the non-compliances during the time specified above, the Resolution Applicant undertakes to cause the corporate debtor to expeditiously identify such expired consents, licenses, approval, rights, entitlements, benefits and privileges whether under law, contract, lease or licenses, granted in favor of the corporate debtor or to which the corporate debtor is entitled or accustomed to, evaluate the steps required to address the same and takes steps to remedy the same to the extent practically possible.

XLVI. All inquiries, investigations and proceeding (including before the BIFR), whether civil or criminal, notices, assessment, cause of action, suits, claims, disputes, litigations, arbitrations or other judicial, regulatory or administrative proceedings against, or in relation to, or in connection with corporate debtor or the affairs of the corporate debtor having any adverse effect on the Resolution Applicant or the corporate debtor, whether pending or threatened, present or future, (including without limitation, any investigation, actions, proceedings, prosecutions, whether civil or criminal, by authorities including but not limited to the Enforcement Directorate, Central Bureau of Investigation, the Enforcement Directorate Stock Exchange, Securities and exchange Board of Indian or any other regulatory, investigating or enforcement agency), in relation to any period prior to the closing date or arising on the account of the acquisition of control by the Resolution Applicant over the corporate debtor pursuant to this Resolution Plan, shall stand withdrawn or dismissed and all liabilities or obligations in relation thereto, whether or not set out in the balance sheet of the corporate debtor or the profit and loss account statement of the corporate debtor, will be deemed to be have been written off in full and permanently extinguished and the Resolution Applicant or corporate debtor shall at no point of time be, directly or indirectly held responsible or liable in relation thereto not withstanding any adverse order that may be passed in respect of the same by any authority prior to or after the closing date. Upon approval of this Resolution Plan by NCLT, all new inquires, investigations, whether civil or criminal, notices, assessments, suits, claims, disputes, litigations, arbitration or other judicial, regulatory or administrative proceedings having any adverse effect on the Resolution Applicant or corporate debtor will be deemed to be barred and will not be initiated or admitted against the corporate debtor in relation to any period prior to the sanction date.

“39.

If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term “assets” under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word 'assets’, while Section 20(1) uses the word ’property’ together with the word ‘value’. Sections 18 and 25 do not use the expression ‘property’. Another important aspect is that Under Section 25(2)(b) of IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Section 25(1) and 25(2)(b) reads as follows:

25. Duties of resolution professional –

(1)

It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor.

(2)

For the purposes of Sub-section (1), the resolution professional shall undertake the following actions:

(a)

(b)

represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings.

This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5).

40.

Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.”

On the Extinguishment of Claims:

“Once a resolution plan is duly approved by the Adjudicating Authority Under Sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.”

“61.

All these details are required to be contained in the information memorandum so that the resolution applicant is aware, as to what are the liabilities, that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the Corporate Debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the Adjudicating Authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in Subsection (2) of Section 30 is, that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is, that he should start with fresh slate on the basis of the resolution plan approved.”

62.

This aspect has been aptly explained by this Court in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra).

“107.

For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count.”

On Guarantors:

“The Resolution Plan does not absolve the personal guarantors from their guarantee. The law well settled by the Hon’ble Supreme Court in the matter of “Lalit Kumar Jain vs. Union of India & Ors. – (2021) 9 SCC 321), that by approval of resolution plan the guarantees are not ipso facto discharged.”

On Inquiries, Litigations, Investigations, and Proceedings:

“67.

Thus, Section 32A broadly leads to:

a. Extinguishment of the criminal liability of the corporate debtor, if the control of the corporate debtor goes in the hands of the new management which is different from the original old management.

b. The prosecution in relation to "every person who was a "designated partner" as defined in Clause (j) of Section 2 of the Limited Liability Partnership Act 2008 (6 of 2009), or an "officer who is in default", as defined in Clause (60) of Section 2 of the Companies Act. 2013 (18 of 2013), or was in any manner in charge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence" shall be proceeded and the law will take it’s own course. Only the corporate debtor (with new management) as held in Para 42 of P. Mohanraj will be safeguarded.

c. If the old management takes over the corporate debtor (for MSME Section 29A does not apply (see 240A), hence for MSME old management can takeover) the corporate debtor itself is also not safeguarded from prosecution Under Section 138 or any other offences.”

ORDER: