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Synopsis

The Supreme Court recently observed that there is no doubt that even if any stakeholder is not a party to the proceedings before the NCLT, and such stakeholder does not raise his claim before the Interim Resolution Professional/Resolution Professional, the Resolution Plan as approved by the NCLT would still be binding on him.

A bench of Justices B R Gavai and Augustine George Masih held the acts of the Assistant Commissioner, Commercial Tax Department, Raipur-II, Raipur, Chhattisgarh; Additional Revenue Collector, Commercial Tax Office, Circle-7, Raipur, Government of Chhattisgarh; and Assistant Commissioner, Commercial Taxes, Division-II, Raipur, as contemptuous in nature. The officers had raised various demand notices against applicant JSW Steel Ltd, after it took over the management of M/s Monnet Ispat and Energy Ltd, upon emerging as the successful resolution applicant in the proceedings initiated under the Insolvency and Bankruptcy Code.

In the case, the court noted that in spite of a public notice, neither the State of Chhattisgarh nor its authorities raised any claim before the Committee of Creditors.

"When the law laid down by this court in the case of Ghanshyam Mishra case is clear and unambiguous and specifically when the petitioner’s own case was part of the batch which is specifically dealt with by this court, the respondents/alleged contemnors ought not to have proceeded further with the recovery proceedings and ought to have dropped them forthwith. The continuation of such proceedings despite the judgment and order of this court being pointed out to their notice is nothing but contemptuous in nature," the bench said.

The court, however, decided not to proceed against the respondents/contemnors, holding that they were entitled to the benefit of the doubt.

It accepted the unconditional apology tendered by them and quashed the demand notices for being illegal.

The contempt petition was filed by the petitioner M/s JSW Ispat Special Products Limited (now M/s JSW Steel Limited) under Article 129 read with Article 142 of the Constitution and Section 2(b) of the Contempt of Courts Act, 1971. The plea alleged wilful disobedience of the judgment of April 13, 2021, passed by the top court and other connected matters titled as “Ghanshyam Mishra and Sons Private Limited Vs Edelweiss Asset Reconstruction Company Limited and others” by the alleged contemnors or respondents.

The applicant company contended that the act of the respondents in initiating proceedings for the dues not part of the Resolution Plan was, on the face of it, contemptuous in nature and in violation of the law laid down by the top court in the case of Ghanshyam Mishra.

It said that though the company had informed the contemnors/respondents about the judgment, they had chosen to proceed further with the recovery proceedings in wilful disobedience of the orders of this court. It submitted that once the Resolution Plan is approved by the Adjudicating Authority, the successful resolution applicant starts running the business from a “clean slate”.

The alleged contemnors, however, submitted that they were responsible government officers and law-abiding citizens, and that the demand notices were issued in good faith and not to undermine the dignity of the court in any manner. There had been no intention on the part of the alleged contemnors to disobey or disregard the orders passed by the top court.

Their counsel also said Ghanshyam Mishra was not applicable in the present case, inasmuch as neither the State of Chhattisgarh nor any of its authorities were made parties in the insolvency proceedings before the NCLT. They also argued that the NCLT could not have passed an order that ignored all the Government dues, including the indirect taxes which were billed and collected by the Debtor Company.

After hearing the counsel, the court said that though the judgment was titled as “Ghanshyam Mishra and Sons Private Limited through the Authorized Signatory versus Edelweiss Asset Reconstruction Company Limited through the Director & Ors”, the court was seized of a batch of cases, and the case of the present petitioner was very much up for consideration in the said batch.

"This court in unequivocal terms held that all such claims which are not a part of the 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," the bench said.

The court further held that the 2019 amendment to Section 31 of the Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the Code has come into effect. The court clearly held that all the dues, including the statutory dues owed to the Central Government, any State Government, or any local authority, if not part of the resolution plan, shall stand extinguished, and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued, the bench pointed out.

The court also said that even much prior to Ghanshyam Mishra, a three-judge bench in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory Vs Satish Kumar Gupta and others (2020) held that 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 the amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor.

It could thus be seen that in view of the clear pronouncement of law by the apex court, all the dues of any of the stakeholders, including the statutory dues owed to the Central Government, any State Government, or any local authority, which were not part of the Resolution Plan, stood extinguished from the date on which the Resolution Plan stood approved, the bench said.

"Undoubtedly, in the present case, in spite of public notice, neither the State of Chhattisgarh nor its authorities raised any claim before the CoC," the court noted.

In that view of the matter, the bench said, "We are of the considered view that the case of the present petitioner is specifically covered by the judgment of this court in the case of Ghanshyam Mishra, which judgment was brought to the notice of the respondents/authorities, the respondents/authorities could not have proceeded with the recovery proceedings."

The bench said it had no hesitation in holding that the demands raised by the respondents/authorities for a period prior to the date on which the NCLT approved the Resolution Plan were totally contemptuous in nature. The respondents could not have raised the said demands inasmuch as they are not part of the Resolution Plan, it held.

The court finally disposed of the contempt petition, accepting the unconditional apology tendered by the contemnors.

Case Title: M/s JSW Steel Ltd Vs Pratishtha Thakur Haritwal & Ors