Delhi High Court containing bench Chief Justice Manmohan And Justice Tushar Rao Gedela He reiterated that following the approval of the Resolution Plan by the NCLT, all previous claims against the Corporate Debtor are disposed of under the “clean slate” theory. The court stated: “According to the theory in question, the successful Resolution Applicant is allowed to continue reviving the “continuing concern” in order to gain a new breath or a new lease of life, and no surprise claims are made or raised in this regard. It would be a waste to revive and reboot the Corporate Debtor.”. The court noted that the appellant allowed the claim to be closed without objection or objection. He also stated: The mere fact that waiver was not allowed by the NCLT while approving the Resolution Plan will not, ipso facto, resurrect the right to claim..

Quick Facts:

The defendant OCL Iron and Steel Ltd for the development of Ardhagram coal mine. A Coal Mine Development and Production Agreement was signed between the appellant (Appointed Authority, Ministry of Coal) on 2.03.2015. The Coal Mine Agreement provided for the forfeiture of the Performance Bank Guarantee (“PBG”) in the event of termination of the Agreement by the Defendant.

On 31.12.2021, the appellant terminated the contract due to the Respondent’s failure to renew the PBG. The Resolution Professional appealed to the NCLT for this termination, but the appeal was rejected. However, the NCLAT issued an interim order providing for reinstatement of the stay upon termination.

On 20.09.2021, the Cuttack Bench of the NCLT initiated a Corporate Insolvency Resolution Process (CIRP) against the respondent. The Resolution Professional rejected the appellant’s Financial Creditor claim regarding the PBG amount because it did not disclose a “financial liability” under Section 3(31) of the Insolvency and Bankruptcy Code, 2016 (IBC).

NCLT approved the Resolution Plan dated 27.05.2022 of the successful Resolution Applicant under Section 31(1) of the IBC on 20.03.2023. After the approval, the defendant applied to bid for the Lalgarh South coal mine. In a letter dated 22.05.2024, the appellant prohibited the respondent from participating in potential coal mine tenders until the outstanding dues are paid.

The defendant filed a written petition to object to this decision. The basis of this challenge was that the defendant, having gone through CIRP, should not be held liable for past dues mentioned in the Resolution Plan. In the decision dated 26.07.2024, the Single Judge annulled the appellant’s decision dated 22.05.2024 and banned the defendant from participating in coal mine tenders until the outstanding dues are paid. It held that the defendant could not be held liable for terminated obligations and that under the IBC plan the defendant was entitled to proceed on a ‘clean slate’ basis.

The appellant filed an appeal under Article X of the Letters Patent Act, 1866, challenging the order dated 26.07.2017. 2024 allowed the filing of a writ petition in favor of the defendant.

Discussions:

Appellant’s allegations:

• The appellant’s claim of Rs.92.25 crore is still a valid claim and has never been rejected or decided by any authority.
• Returning the request cannot mean rejection of the request on the grounds that the objector is not a “Financial Creditor” and must resubmit/resubmit the request in an appropriate format.
• The NCLT approved the Resolution Plan while rejecting the respondent’s request to waive the appellant’s claims. The NCLT’s acceptance meant that the appellant’s claims were not waived or disposed of under the Resolution Plan.
• Even if it is deemed prohibited, only the right to enforce the claim can terminate, not the claim itself. This may affect the participant’s eligibility for future auctions pursuant to the clause in the bidding document requiring “payment of past debts”.
• Trust given Swiss Ribbons Pvt. Ltd. / Union of IndiaDeciding that the Resolution Expert does not have jurisdiction and Greater Noida Industrial Development Authority – Prabhjit Singh SoniWhere was it made?Once the allegation is presented with the evidence, it cannot have been overlooked simply because it was in a different form. …the form to submit a request is a guide. The important thing is that the claim is supported by evidence..”

Defendant’s Claims:

• The request made by the appellant in the capacity of ‘Financial Creditor’ had already been rejected in the notification dated 6.01.2022. Despite being given the opportunity to re-submit his claim to the Resolution Expert via contact on 7.01.2022, the appellant did not take advantage of this. Therefore, the appellant is no longer allowed to bring a dead claim.
• Once the resolution plan was approved, the appellant failed to argue that the amount claimed was still due and payable.
• The appellant’s allegations are contrary to the “clean slate” principle. Trust given Ghanashyam Mishra & Sons Private Limited and Edelweiss Asset Reconstruction Co. Ltd. & Ors. Arguing that the approved Resolution Plan entitles the Resolution Applicant to operate the Corporate Debtor as a “going concern” free from the burden of past obligations contained in the Resolution Plan. Therefore, the appellant cannot impose any impediment on the Respondent’s participation in potential coal mine tenders.

Observations:

The court noted that the appellant did not re-file/re-submit the claim nor object to the approval of the Resolution Plan by the NCLT on March 20.03.2023. To trust Ghanashyam Mishra & Sons Private LimitedThe Court observed: “It is a trite statement that once the Resolution Plan is formally approved by the NCLT, other remaining claims etc. will be deemed to be disposed of.”

The court noted that the appellant allowed the motion to be dismissed without any objection or objection. it was The mere fact that waiver was not allowed by the NCLT while approving the Resolution Plan will not, ipso facto, resurrect the right to claim.. It also held that the appellant’s right to claim would expressly terminate upon approval of the Resolution Plan.

the court, the case Ganashyam MishrA. He introduced the “clean page” theory/principle. “According to the theory in question, the successful Resolution Applicant is allowed to continue reviving the “continuing concern” in order to gain a new breath or a new lease of life, and no surprise claims are made or raised in this regard. Reviving and rebooting Corporate Debtor would be a waste.” was stated. Having regard to the clearly expressed principle, the Court found that there was no reason to interfere with the impugned decision.

Court of this ratio Swiss Ribbons unenforceable as the appellant has not taken any steps to challenge the Resolution Plan. The court noted: “After the request is returned, there is no substantive request to be included in the Resolution Plan if the request is not resubmitted.Therefore, the absence of a claim revealed this rate. Greater Noida Industrial Development Authority not applicable to the case.

The court noted that the appellant chose not to seek remedies for the claim. He therefore rejected the objection.

Case Title: Union of India and OCL Iron and Steel Limited

Case Number: LPA 964/2024, CAV 485/2024 and CM APPLICATION 56652-55/2024

For the Appellant: Mr. Kirtiman Singh, CGSC, Mr. Waize Ali Noor, Mr. Maulik Khurana, Mr. Varun Pratap Singh and Mr. Ranjeev Khatani along with Advocates.

For the defendant: Mr. Sandeep Sethi, Senior Advocate, along with Mr. Divyakant Lohoti, Mr. Kartik Lohoti, Ms. Anushka Awasthi, Ms. Riya Kumari, Ms. Praveena Bisht, Ms. Vindhya Mehra, Mr. Samridhi Bhat and Mr. Adith Menon, Advocates.

Decision Date: 22.10.2024

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