In a recent landmark judgment, Hon’ble Supreme Court of India addressed the complexities surrounding the admission of claims during the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC). The Court upheld the order of NCLAT, reaffirming the critical importance of adhering to IBC’s time-bound procedures. The case deals with whether a claim arising from an arbitral award, which was still under appeal, could be admitted after the approval of a resolution plan by the Committee of Creditors (CoC). The Court further held that once a resolution plan is sanctioned, it cannot be revisited or revised, thereby ensuring the finality and integrity of the CIRP.
The present case arises from a land development agreement, entered into by the appellant creditor and the corporate debtor which led to arbitration and an award against the corporate debtor. The corporate debtor challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but the challenge was rejected. Following this, the corporate debtor appealed this decision under Section 37 of the Arbitration Act. During this period, CIRP was initiated against the corporate debtor, and the Resolution Professional (RP) invited claims, formed the Committee of Creditors (CoC), and secured approval for a resolution plan. During this period, CIRP was initiated against the corporate debtor and the Resolution Professional (RP) invited claims formed the Committee of Creditors (CoC), and secured approval for a resolution plan.The appellant later submitted a claim based on the arbitral award, but the RP rejected the claim, it for being filed after the 90-day deadline and after CoC had already approved a resolution plan.
The appellant, dissatisfied with the rejection of their claim, filed an application under Section 60(5) of the IBC. The NCLT agreed that the RP should not have dismissed the claims and that it should be reflected in the corporate debtor’s financial records. RP appealed to National Company Law Appellate Tribunal (NCLAT), arguing that unsettled claims should not affect a resolution plan post-approval, citing Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta. The NCLAT overturned the adjudicating authority’s decision. The appellant then approached the Supreme Court, which was asked to decide if a claim arising from an ongoing arbitration appeal could be admitted after the resolution plan's approval.
The Hon’ble Supreme Court determined that the RP had made all reasonable efforts to obtain the corporate debtor’s records under Section 19 of the Insolvency and Bankruptcy Code (IBC) and emphasized that the IBC are time-bound with limited scope for extensions. It also noted that a public announcement of insolvency serves as notice for claim. The Hon’ble Supreme Court clarified that the resolution plan, once approved, cannot be indefinitely revised cannot be indefinitely revised, and upheld the NCLAT's decision.
RPS Infrastructure Ltd. v. Mukul Kumar.
2023 SCC OnLine SC 1147
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