# Electrosteel Steel Limited (Now M/s ESL Steel Limited) v. Ispat Carrier Private Limited

- **Citation:** 2025 INSC 525
- **Court:** Supreme Court of India
- **Decided:** 2025-04-21
- **Case number:** Civil Appeal No. 2896 of 2024
- **Bench:** Abhay S. Oka, Ujjal Bhuyan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/electrosteel-steel-limited-now-m-s-esl-steel-limited-v-ispat-carrier-private-38234
- **Pages:** 25

## Headnote

Whether upon approval of the resolution plan by the NCLT, the claim
of the respondent being outside the purview of the resolution plan
stood extinguished; whether the arbitral award dated 06.07.2018
was capable of being executed.
Headnotes†
Code of Civil Procedure, 1908 - s.47 - Arbitration and
Conciliation Act, 1996 - s.34 - Insolvency and Bankruptcy
Code, 2016 - s.31 - Micro, Small and Medium Enterprises
Development Act, 2006 - Respondent filed claim petitions
against the appellant before the Facilitation Council under
the provisions of MSME Act - On 07.06.2017, arbitral
proceedings commenced - On 27.06.2017, financial creditors
of appellant invoked s.7 of IBC before the NCLT - NCLT
imposed moratorium and an interim resolution professional
was appointed - Therefore, arbitral proceedings were kept in
abeyance - Respondent filed its claim before the resolution
professional - Ultimately resolution plan was approved by
NCLT settling all the claims of operational creditors at nil
value - No appeal was preferred by the respondent - On
lifting of moratorium, Facilitation Council resumed the arbitral
proceedings - An award passed on 06.07.2018 against the
appellant - Appellant did not challenge the award u/s.34 of
the 1996 Act - Respondent instituted execution proceeding -
At the stage of execution, appellant filed petition contending
that arbitral award was nullity and not executable as claim
of respondent was settled at nil - Petition was dismissed
and the Executing Court by order dated 03.03.2023 directed
to comply with award dated 06.07.2018 - The said order was
* Author
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[2025] 4 S.C.R.
Supreme Court Reports
challenged by the appellant by filing writ petition before the
High Court, which was dismissed - Correctness:
Held: High Court is correct in answering the issue that a plea
of nullity qua an arbitral award can be raised in a proceeding
u/s.47 CPC but such a challenge would lie within a very narrow
compass - However, objection to execution of an award u/s.47
CPC is not dependent or contingent upon filing a petition u/s.34
of the 1996 Act - High Court was not justified in taking the view
that since the appellant did not file a petition u/s.34 of the 1996
Act, therefore, it was precluded from filing an application before
the Executing Court to declare the award as void and hence nonexecutable - In so far the other issues framed by the High Court
are concerned, it is by now well settled that once a resolution plan
is duly approved by the adjudicating authority u/s.31(1), all claims
which are not part of the resolution plan shall stand extinguished
and no person will be entitled to initiate or continue any proceeding
in respect to a claim which is not part of the resolution plan - In so
far the resolution plan is concerned, the resolution professional, the
committee of creditors and the adjudicating authority noted about
the claim lodged by the respondent in the arbitration proceeding -
However, the respondent was not included in the top 30 operational
creditors whose claims were settled at nil - If the claims of the top
30 operational creditors were settled at nil, it goes without saying
that the claim of the respondent could not be placed higher than
the said top 30 operational creditors - Moreover, the resolution plan
itself provides that all claims covered by any suit, cause of action,
arbitration etc. shall be settled at nil - Therefore, it is crystal clear
that in so far claim of the respondent is concerned, the same would
be treated as nil at par with the claims of the top 30 operational
creditors - Claim of the respondent stood extinguished - Therefore,
the Facilitation Council did not have the jurisdiction to arbitrate on
the said claim - Since the award was passed without jurisdiction,
the same could be assailed in a proceeding u/s.47 CPC - The
award dated 06.07.2018 is incapable of being executed - Impugned
order of the High Court is set aside. [Paras 47, 49, 50, 50.1, 52]
Words and Phrases - Lifting of Moratoriu

## Text

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[2025] 4 S.C.R. 1373 : 2025 INSC 525
Electrosteel Steel Limited
(Now M/s ESL Steel Limited)
v.
Ispat Carrier Private Limited
(Civil Appeal No. 2896 of 2024)
21 April 2025
[Abhay S. Oka and Ujjal Bhuyan,* JJ.]
Issue for Consideration
Whether upon approval of the resolution plan by the NCLT, the claim
of the respondent being outside the purview of the resolution plan
stood extinguished; whether the arbitral award dated 06.07.2018
was capable of being executed.
Headnotes†
Code of Civil Procedure, 1908 - s.47 - Arbitration and
Conciliation Act, 1996 - s.34 - Insolvency and Bankruptcy
Code, 2016 - s.31 - Micro, Small and Medium Enterprises
Development Act, 2006 - Respondent filed claim petitions
against the appellant before the Facilitation Council under
the provisions of MSME Act - On 07.06.2017, arbitral
proceedings commenced - On 27.06.2017, financial creditors
of appellant invoked s.7 of IBC before the NCLT - NCLT
imposed moratorium and an interim resolution professional
was appointed - Therefore, arbitral proceedings were kept in
abeyance - Respondent filed its claim before the resolution
professional - Ultimately resolution plan was approved by
NCLT settling all the claims of operational creditors at nil
value - No appeal was preferred by the respondent - On
lifting of moratorium, Facilitation Council resumed the arbitral
proceedings - An award passed on 06.07.2018 against the
appellant - Appellant did not challenge the award u/s.34 of
the 1996 Act - Respondent instituted execution proceeding -
At the stage of execution, appellant filed petition contending
that arbitral award was nullity and not executable as claim
of respondent was settled at nil - Petition was dismissed
and the Executing Court by order dated 03.03.2023 directed
to comply with award dated 06.07.2018 - The said order was
* Author
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[2025] 4 S.C.R.
Supreme Court Reports
challenged by the appellant by filing writ petition before the
High Court, which was dismissed - Correctness:
Held: High Court is correct in answering the issue that a plea
of nullity qua an arbitral award can be raised in a proceeding
u/s.47 CPC but such a challenge would lie within a very narrow
compass - However, objection to execution of an award u/s.47
CPC is not dependent or contingent upon filing a petition u/s.34
of the 1996 Act - High Court was not justified in taking the view
that since the appellant did not file a petition u/s.34 of the 1996
Act, therefore, it was precluded from filing an application before
the Executing Court to declare the award as void and hence nonexecutable - In so far the other issues framed by the High Court
are concerned, it is by now well settled that once a resolution plan
is duly approved by the adjudicating authority u/s.31(1), all claims
which are not part of the resolution plan shall stand extinguished
and no person will be entitled to initiate or continue any proceeding
in respect to a claim which is not part of the resolution plan - In so
far the resolution plan is concerned, the resolution professional, the
committee of creditors and the adjudicating authority noted about
the claim lodged by the respondent in the arbitration proceeding -
However, the respondent was not included in the top 30 operational
creditors whose claims were settled at nil - If the claims of the top
30 operational creditors were settled at nil, it goes without saying
that the claim of the respondent could not be placed higher than
the said top 30 operational creditors - Moreover, the resolution plan
itself provides that all claims covered by any suit, cause of action,
arbitration etc. shall be settled at nil - Therefore, it is crystal clear
that in so far claim of the respondent is concerned, the same would
be treated as nil at par with the claims of the top 30 operational
creditors - Claim of the respondent stood extinguished - Therefore,
the Facilitation Council did not have the jurisdiction to arbitrate on
the said claim - Since the award was passed without jurisdiction,
the same could be assailed in a proceeding u/s.47 CPC - The
award dated 06.07.2018 is incapable of being executed - Impugned
order of the High Court is set aside. [Paras 47, 49, 50, 50.1, 52]
Words and Phrases - Lifting of Moratorium - Meaning of:
Held: Lifting of the moratorium does not mean that the claim of
the respondent would stand revived notwithstanding approval of
the resolution plan by the adjudicating authority - Moratorium is
intended to ensure that no further demands are raised or adjudicated
[2025] 4 S.C.R.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
upon during the corporate insolvency resolution process so that
the process can be proceeded with and concluded without further
complications. [Para 50.1]
Insolvency and Bankruptcy Code, 2016 - ss.30, 31, 32, 238 -
Finality and binding value of Resolution Plan - Discussed.
[Paras 25-33]
Case Law Cited
Ajay Kumar Radheshyam Goenka v. Tourism Finance Corporation
of India Ltd. [2023] 4 SCR 986 : (2023) 10 SCC 545; Essar Steel
India Ltd. Committee of Creditors v. Satish Kumar Gupta [2019] 16
SCR 275 : (2020) 8 SCC 531; Ghanshyam Mishra & Sons (P) Ltd. v.
Edelweiss Asset Reconstruction Co. Ltd. [2021] 13 SCR 737 :
(2021) 9 SCC 657; Ruchi Soya Industries Ltd. v. Union of India
(2022) 6 SCC 343; RPS Infrastructure Ltd. v. Mukul Kumar [2023]
12 SCR 150 : (2023) 10 SCC 718; Adani Power Ltd. v. Shapoorji
Pallonji & Co. Pvt. Ltd, Civil Appeal No. 1741 of 2023; Sarwan
Kumar v. Madam Lal Aggarwal [2003] 1 SCR 918 : (2003) 4 SCC
147; M/s. JSW Steel Ltd. v. Pratishtha Thakur Haritwal, 2025 INSC
401; Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman [1971]
1 SCR 66 : (1970) 1 SCC 670 - referred to.
List of Acts
Micro, Small and Medium Enterprises Development Act, 2006;
Insolvency and Bankruptcy Code, 2016; Arbitration and Conciliation
Act, 1996; Civil Procedure Code, 1908; Companies Act, 2013.
List of Keywords
Section 7 of Insolvency and Bankruptcy Code, 2016; Section 31
of Insolvency and Bankruptcy Code, 2016; Moratorium; Arbitration;
Facilitation Council; Arbitral award; Section 47 of CPC; Execution
proceedings; Resolution plan; Operational creditors; Claim
extinguishment; Jurisdiction; Plea of nullity qua an arbitral award
raised in execution proceeding; Lifting of moratorium.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2896 of 2024
From the Judgment and Order dated 17.07.2023 of the High Court
of Jharkhand at Ranchi in CMP No. 376 of 2023
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Appearances for Parties
Advs. for the Appellant:
Gopal Jain, Sr. Adv., Ms. Anusuya Sadhu Sinha, Siddharth Naidu,
M/s. KSN & Co.
Advs. for the Respondent:
Rajshekhar Rao, Sr. Adv., Sameer Kumar, Shahrukh Ahmad,
Ms. Somi Sharma, Mandeep Baisala.
Judgment / Order of the Supreme Court
Judgment
Ujjal Bhuyan, J.
This appeal by special leave is directed against the judgment and
order dated 17.07.2023 passed by the High Court of Jharkhand at
Ranchi in CMP No. 376 of 2023 filed by the appellant.
2.
Appellant had filed CMP No. 376 of 2023 before the High Court
of Jharkhand at Ranchi (briefly 'the High Court' hereinafter) under
Article 227 of the Constitution of India assailing the order dated
03.03.2023 passed by the learned Presiding Officer, Commercial
Court/District Judge-1, Bokaro in Commercial Execution Case No.
21 of 2022 (Execution Case No. 77 of 2018). It may be mentioned
that by the aforesaid order dated 03.03.2023, learned Presiding
Officer, Commercial Court/District Judge-1, Bokaro (referred to
hereinafter as 'the Executing Court') had dismissed the application
dated 14.05.2019 filed by the judgment debtor (appellant), further
directing the judgment debtor (appellant) to comply with the award
dated 06.07.2018 passed by the West Bengal Micro, Small and
Medium Facilitation Council, Kolkata within fifteen days of the order.
3.
Relevant facts may be briefly noted.
4.
On 02.12.2014 and 20.12.2014, respondent filed claim petitions before
the West Bengal Micro, Small and Medium Facilitation Council (briefly
'the Facilitation Council' hereinafter) for a total principal outstanding
amount of Rs. 1,59,09,214.00 which were registered as Case No.
330/2014 and Case No. 331/2014. In Case No. 330/2014, the claim
amount was Rs. 1,36,69,981.33, whereas in Case No. 331/2014 the
claim amount was Rs. 22,39,233.00, thus the total amount being
[2025] 4 S.C.R.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
Rs. 1,59,09,214.00. The claims were made under the provisions of
the Micro, Small and Medium Enterprises Development Act, 2006
(hereinafter referred to as 'the MSME Act').
5.
As per the requirement of the MSME Act, conciliation proceedings
were initiated but attempt for conciliation failed. Thereafter, the
arbitration proceedings were commenced on 07.06.2017.
6.
On 27.06.2017, the financial creditors of the appellant invoked Section
7 of the Insolvency and Bankruptcy Code, 2016 ('IBC' hereinafter)
before the National Company Law Tribunal, Kolkata Bench (NCLT)
which was registered as C.P. No.(IB) 361/KB/2017.
7.
On 21.07.2017, NCLT imposed moratorium and an interim resolution
professional was appointed.
8.
On 24.07.2017, the interim resolution professional issued a public
announcement calling upon all the creditors to submit their claims
before him.
9.
In view of the moratorium declared by the NCLT, arbitral proceedings
before the Facilitation Council were kept in abeyance.
10. Respondent filed its claim before the resolution professional, who
partly admitted the claim of the respondent.
11. On 29.03.2018, a resolution plan was submitted by Vedanta Limited
before the NCLT wherein all the claims of operational creditors were
settled at nil value.
12. However, claim of the respondent was not included in the resolution
plan as approved by the committee of creditors. Ultimately, the
resolution plan was approved by NCLT on 17.04.2018 under Section
31 of the IBC on and from which date the moratorium period came
to an end.
13. In the order dated 17.04.2018, NCLT declared that the claims of all
the operational creditors were settled at nil. No appeal was preferred
by the respondent. However, the aforesaid order of the NCLT dated
17.04.2018 was challenged before the National Company Law
Appellate Tribunal, New Delhi (NCLAT) in Company Appeal (AT)
(Insolvency) No.175 of 2018 by some of the operational creditors.
But the same was dismissed on 10.08.2018. Other creditors
also approached NCLAT in Company Appeal (AT) (Insolvency)
No.265/2018 and in analogous appeals. Specific ground taken was
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that in the resolution plan, the resolution applicant had not taken
proper care of the operational creditors. These appeals were also
dismissed by the NCLAT vide the order dated 20.08.2018. The
matter was carried forward to this Court in Civil Appeal No. 1133 of
2019. However, this Court dismissed the said appeal vide the order
dated 27.11.2019.
14. It appears that on lifting of the moratorium, Facilitation Council
resumed arbitral proceedings. Appellant did not contest the arbitral
proceedings. Ultimately, an award was passed on 06.07.2018. As
per the award, the Facilitation Council directed the appellant to pay
a sum of Rs.1,59,09,214.00 along with interest to the respondent in
terms of Section 16 of the MSME Act.
15. Appellant did not challenge the award dated 06.07.2018 under
Section 34 of the Arbitration and Conciliation Act, 1996 (briefly 'the
1996 Act' hereinafter).
16. Respondent instituted execution proceeding which was initially
registered as Execution Case No.77 of 2018 and thereafter as
Commercial Execution Case No.21 of 2022 before the Executing
Court. At the stage of execution of the award, appellant filed a
petition dated 14.05.2019 contending that the arbitral award was
a nullity and hence not executable as the claim of the respondent
was already settled at nil as per the resolution plan and, therefore,
nothing was payable to the respondent.
17. Executing Court by the order dated 03.03.2023 dismissed the petition
of the appellant and directed it to comply with the award dated
06.07.2018 within fifteen days.
18. As noted above, this came to be challenged by the appellant
before the High Court by filing a petition under Article 227 of the
Constitution of India. High Court framed the following questions
for consideration:
a. The arbitral award having not been challenged under
Section 34 of the Act of 1996, whether the objection to
execution of the arbitral award referrable to Section 47 of
the Civil Procedure Code, 1908 (CPC) was maintainable
by alleging that the arbitral award itself was a nullity and
hence non-executable?
[2025] 4 S.C.R.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
b. Whether the arbitral award in the present case could
be assailed as a nullity and hence non-executable within
the permissible grounds of raising such a plea?
c. Irrespective of maintainability of the objection to the
arbitral award under Section 47 of the CPC, whether on
facts, the Facilitation Council lost its jurisdiction to proceed
and pronounce the arbitral award in view of the insolvency
resolution plan of the petitioner which was duly approved
under Section 31 of the IBC?
19. Insofar the first question is concerned, High Court opined that the
plea of nullity qua an arbitral award can be raised in an execution
proceeding under Section 47 of the CPC. However, the scope of
interference would be very narrow. As regards the second question,
High Court rejected the contention of the appellant that since the
award suffered from patent or inherent lack of jurisdiction and therefore
was a nullity, it can be questioned at the stage of execution without
challenging the award under Section 34 of the 1996 Act. High Court
answered the third question by holding that the Facilitation Council did
not lose its jurisdiction to procced and pronounce the arbitral award
notwithstanding approval of the resolution plan by the NCLT under
Section 31 of IBC. Reasoning given by the High Court is that the
arbitral proceedings were initiated prior to the insolvency resolution
date, kept suspended during the moratorium period and resumed
after lifting of the moratorium; the approved resolution plan simply
determined the claim of the respondent as nil. Accordingly, vide the
impugned judgment and order High Court dismissed the petition
filed by the appellant under Article 227 of the Constitution of India.
20. Hence, the present appeal.
21. On 04.08.2023 notice was issued in the related SLP (C)
No.15823/2023. It was submitted on behalf of the respondent that
a sum of Rs.15,48,70,890.00 was withdrawn but gave an undertaking
to deposit the said amount. This Court directed the respondent to
deposit the said amount with the Executing Court with further direction
to the Executing Court to invest the said amount in an interest bearing
fixed deposit until further orders. In the hearing held on 20.02.2024,
leave was granted.
22. Learned senior counsel for the appellant submits that the High Court
had erroneously held that the resolution plan did not determine the
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claim of the respondent at nil and, therefore, the Facilitation Council
had the jurisdiction to decide on the claim of the respondent.
22.1. He submits that the High Court had misread and misinterpreted
the resolution plan which would be evident from a perusal of
the relevant paragraphs of the resolution plan. Respondent had
submitted its claim as an operational creditor to the resolution
professional. Such claim was the same claim which formed
the subject matter of the proceedings before the Facilitation
Council. Resolution applicant had submitted a resolution plan
in respect of the appellant (corporate debtor) in accordance
with the provisions of Section 30 of the IBC to enable the
appellant to continue as a going concern. A reading of the
relevant paragraphs of the resolution plan i.e. paragraphs
3.2(v), 3.4(ii) and 3.8(i) would indicate that the claims of the
operational creditors including the debt of the respondent
were settled at nil and, therefore, they were not entitled to
any payment.
22.2. On 17.04.2018, NCLT approved the resolution plan under
Section 31 of the IBC. Paragraph 50 of the order dated
17.04.2018 specifically recorded that the claims of all the
operational creditors were settled at nil. This Court in Civil
Appeal No. 1133 of 2019 after going through the resolution
plan had observed that there was nil payment to be made to all
the operational creditors as per the resolution plan submitted
and approved.
22.3. Learned senior counsel submits that on 17.04.2018 when
the NCLT had approved the resolution plan, claims of the
operational creditors were settled at nil. This became binding
on the respondent and all other authorities as per Section
31(1) of the IBC. In this connection, learned senior counsel
has referred to and relied upon the decision of this Court
in Ajay Kumar Radheshyam Goenka Vs. Tourism Finance
Corporation of India Ltd.1 In the said decision, this Court had
made it abundantly clear that the creditor has no option but
to join the process under the IBC. Once the plan is approved,
it would bind everyone under the sun. He contended that
1
(2023) 10 SCC 545
[2025] 4 S.C.R.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
the respondent had submitted its claim before the resolution
professional but the same was not included in the resolution
plan as was approved by the committee of creditors and then
by the adjudicating authority i.e. NCLT which became binding
on the respondent. Even if the respondent had not submitted
its claim before the resolution professional, the approved
resolution plan would still have been binding on the respondent.
22.4. He, therefore, submits that on approval of the resolution plan
by the NCLT, claim of the respondent stood extinguished.
Thus, respondent had no claim against the appellant (corporate
debtor) in law. Respondent was also estopped from pursuing
its claim before the Facilitation Council and also from seeking
execution of the award after approval of the resolution plan.
22.5. After adverting to the objectives of the IBC, learned senior
counsel submits that the appellant (corporate debtor) has
been given a fresh and clean slate upon approval of the
resolution plan. The same cannot be allowed to be defeated or
frustrated by raising claims relatable to the period covered by
the corporate insolvency resolution process. In this connection,
learned senior counsel has placed reliance on the following
decisions:
(i)
Essar Steel India Ltd. Committee of Creditors
Vs. Satish Kumar Gupta2
(ii)
Ghanshyam Mishra & Sons (P) Ltd. Vs.
Edelweiss Asset Reconstruction Co. Ltd.3
(iii) Ruchi Soya Industries Ltd. Vs. Union of India4
(iv) RPS Infrastructure Ltd. Vs. Mukul Kumar5
22.6. On the basis of the above decisions, learned senior counsel
submits that it would lead to an absurd situation if the
respondent and other operational creditors are permitted to
pursue their individual claims even after the corporate debtor
2
(2020) 8 SCC 531
3
(2021) 9 SCC 657
4
(2022) 6 SCC 343
5
(2023) 10 SCC 718
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goes through a successful corporate insolvency resolution
process (CIRP) where the claims of the operational creditors
were settled at nil in the resolution plan which was approved
by the committee of creditors and finally by the adjudicating
authority (NCLT). In such a case, the corporate debtor would
once again have to struggle to sustain itself as a going concern
to satisfy such claims. Thus, the object or the purport of IBC
would be defeated.
22.7. Adverting to a decision of this Court in Adani Power Ltd. Vs.
Shapoorji Pallonji & Co. Pvt. Ltd.6, learned senior counsel
submits that this Court has held that the resolution plan, as
approved, is binding on all and cannot be made subject matter
of arbitration or any other proceedings. Once the resolution
plan is approved, the resolution applicant cannot be settled with
any liability except what is mentioned in the resolution plan.
22.8. Learned senior counsel further submits that the resolution
plan or the terms thereof could have been challenged by the
respondent in the manner provided under Section 32 read with
Section 61(3) of the IBC. Further, Section 63 of the IBC makes
it abundantly clear that no civil court or authority shall have
jurisdiction to entertain any suit or proceedings in respect of
any matter over which NCLT or NCLAT has jurisdiction under
the IBC and that a civil court would not have any jurisdiction.
22.9. He submits that respondent had accepted the resolution plan
as approved and did not prefer any challenge thereto or the
order of the NCLT approving the resolution plan. On the other
hand, some operational creditors challenged the order dated
17.04.2018 passed by the NCLT approving the resolution plan.
However, those challenges were dismissed by the NCLAT.
When the matter reached this Court in Civil Appeal No. 1133 of
2019, this Court vide the order dated 27.11.2019 had clarified
that implementation of the resolution plan was not stayed while
dismissing the appeal.
22.10. Thus, the Facilitation Council lacked jurisdiction in respect
of the claim of the respondent which was part of the subject
6
Civil Appeal No. 1741 of 2023
[2025] 4 S.C.R.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
matter of the resolution plan. Facilitation Council could not
have continued with the arbitration proceedings and could
not have passed the award in view of Section 63 read with
Section 238 of the IBC. Therefore, learned senior counsel
would submit that the award passed by the Facilitation Council
is a nullity and non est in the eye of law. This award has been
passed in respect of a claim which stood extinguished and
did not exist in law.
22.11. Learned senior counsel submits that an award can be
challenged in an execution proceeding on the ground of it
being a nullity. In the instant case, Facilitation Council lacked
jurisdiction to pass the award. Even if the appellant had not
challenged the award under Section 34 of the 1996 Act, the
issue of nullity could still be raised at the stage of execution.
In this connection, learned senior counsel has referred to
a decision of this Court in Sarwan Kumar Vs. Madam Lal
Aggarwal7. In the circumstances, learned senior counsel
submits that appellant was well within its right to object to
execution of the award by contending that the award itself
is a nullity since the Facilitation Council inherently lacked
jurisdiction to arbitrate on the claim of the respondent post
approval of the resolution plan.
22.12. In view of the above, learned senior counsel for the appellant
submits that the execution petition filed by the respondent for
execution of the award ought to have been dismissed by the
Executing Court. High Court committed a manifest error in
declining to entertain the objections filed by the appellant to
execution of the award. That being the position, impugned
order of the High Court is liable to be set aside, so also the
execution proceedings.
23. Learned senior counsel for the respondent on the other hand supports
the impugned order passed by the High Court.
23.1. He submits that the corporate debtor (appellant) which was
being managed by the resolution professional, had knowledge
of the arbitral award. As a matter of fact, appellant had taken
7
(2003) 4 SCC 147
1384
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shelter of the arbitral award to get the revision petition filed by
the respondent before the Calcutta High Court disposed of.
The revision petition was filed against an order passed under
Section 14 of the 1996 Act. It was submitted before the High
Court that an arbitral award was passed by the Facilitation
Council and on the basis of such submission, Calcutta High
Court had disposed of the aforesaid proceedings observing
that Section 14 proceedings had been rendered infructuous
leaving the partes to avail their remedies in accordance with law.
23.2. Learned counsel submits that upon approval of the resolution
plan, the proceedings which were stayed by the Facilitation
Council in view of the moratorium, did not automatically
get terminated. On the contrary those stood revived. He
submits that operational creditors whose claims were pending
adjudication at the time of initiation of the corporate insolvency
resolution process, formed a different class. Proceedings
initiated by them would continue post lifting of moratorium for
the purpose of quantification of their claims.
23.3. It is evident from the order passed by the Calcutta High Court
that the appellant was aware of the arbitral award. Appellant
did not challenge the award despite liberty granted by the High
Court. Without challenging the award under Section 34 of the
1996 Act, it was not open to the appellant to challenge the
same in a proceeding under Section 47 of the CPC.
23.4. Learned senior counsel for the respondent distinguished
the case of Ghanshyam Mishra (supra) by contending that
the said judgment was rendered in a distinguishable factual
situation where the creditor had failed to lodge its claim
upon public announcement by the resolution professional.
Therefore, this Court held that such a creditor cannot file
its claim thereafter and such claim gets extinguished. This
judgment does not deal with claims filed before the interim
resolution professional or resolution professional and not
included in the resolution plan. High Court had noticed this
fact and has rightly observed that since the respondent does
not fall in the category of operational creditors whose claims
were rendered nil, there was no occasion for the respondent
to challenge the resolution plan.
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
23.5. Learned counsel submits that there is no inconsistency between
IBC and the MSME Act. Therefore, High Court rightly did not
examine the plea of inconsistency.
23.6. He has referred to various provisions of the IBC as well as
to the decision of this Court in Ghanshyam Mishra (supra)
and submits that imposition of moratorium and consequential
approval of resolution plan does not terminate or put an end to
pending proceedings but those were merely stayed. Legislature
has not provided that upon approval of a resolution plan, all
pending proceedings would get extinguished. Therefore, post
expiry of the moratorium period, pending proceedings such
as arbitral proceedings would stand revived and taken to their
logical conclusion.
23.7. Learned senior counsel submits that in the present case,
respondent had lodged its claim before the interim resolution
professional and had also informed about the pendency of
proceedings before the Facilitation Council. Interim resolution
professional had published an information memorandum on
20.10.2017 mentioning therein a list of claimants which did not
include operational creditors whose claims were sub-judiced
before different judicial fora. Validity of such claims would
be decided after the judicial proceedings were complete. He
submits that after lifting of moratorium, notices were duly issued
to the appellant by the Facilitation Council but the appellant
decided not to appear and contest the proceedings. After the
award was passed, appellant did not challenge the same under
Section 34 of the 1996 Act. Having not challenged the award in
the forum designated by law, he could not have challenged the
same by filing objections to the arbitral award in a proceeding
under Section 47 of the CPC. Learned counsel asserts that
Section 34 of the 1996 Act is the only acknowledged remedy
available to challenge an award. Appellant had the opportunity
to assail the award under Section 34 of the 1996 Act but he did
not do so. Therefore, filing of application to declare the award a
nullity in execution proceedings instituted by the respondent for
execution of the award is a clear abuse of the process of law
and was rightly rejected by the Executing Court which decision
has been upheld by the High Court. Learned counsel further
submits that since the claim of the respondent was pending
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before the Facilitation Council and in view of the information
memorandum issued by the interim resolution professional,
there was no need for the respondent to have challenged the
resolution plan. Therefore, the High Court was fully justified in
rejecting the petition filed by the appellant under Article 227
of the Constitution of India. The appeal is devoid of any merit
and should, therefore, be dismissed.
24. Submissions made by learned counsel for the parties have received
the due consideration of the Court.
25. At the outset, let us examine a few relevant provisions of the IBC.
Section 30 provides for submission of resolution plan. As per subsection (1), a resolution applicant may submit a resolution plan
alongwith an affidavit stating that he is eligible under Section 29A to
the resolution professional prepared on the basis of the information
memorandum in terms of Section 29. Sub-section (2) says that the
resolution professional shall examine each resolution plan received by
him to confirm that such resolution plan complies with the requirement
of clauses (a) to (f) of the said sub-section. Thereafter the resolution
professional is required under sub-section (3) to present the resolution
plans which are in conformity with the requirements of sub-section (2)
to the committee of creditors for its approval. Sub-section (4) mandates
that the committee of creditors may approve a resolution plan by
vote of not less than 66 percent of the voting share of the financial
creditors after considering its feasibility and viability. The resolution
applicant may also attend such meeting of the committee of creditors
though it shall not have the right to vote unless it is also a financial
creditor (sub-section (5)). Once the resolution plan is approved by
the committee of creditors, the resolution professional shall submit
the same to the adjudicating authority in terms of sub-section (6).
26. Section 31 deals with approval of resolution plan. As per
sub-section (1), if the adjudicating authority is satisfied that the
resolution plan as approved by the committee of creditors meets
the requirement of sub-section (2) of Section 30, it shall by order
approve the resolution plan. Once the resolution plan is approved
by the adjudicating authority, it shall be binding on the corporate
debtor and its employees, members, creditors including the central
government, any state government or any local authority to whom
a debt including statutory dues are owed, guarantors and other
stakeholders involved in the resolution plan. However, before passing
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Ispat Carrier Private Limited
an order of approval, the adjudicating authority has to satisfy itself
that the resolution plan has provisions for its effective implementation.
Under sub-section (2), if the adjudicating authority is satisfied that
the resolution plan does not conform to the requirements referred to
in sub-section (1), it may by an order reject the resolution plan. Subsection (3) provides that once the resolution plan is approved under
sub-section (1), the moratorium order passed by the adjudicating
authority under Section 14 shall cease to have effect.
27. Under Section 32, any appeal from an order approving the resolution
plan shall be in the manner and on the grounds laid down in subsection (3) of Section 61. Section 61 provides for appeals and
appellate authority. Sub-section (1) says that any person aggrieved
by an order of the adjudicating authority may prefer an appeal to
the National Company Law Tribunal (NCLT) within thirty days as
provided in sub-section (2). Be it stated that National Company Law
Tribunal (NCLT) constituted under Section 408 of the Companies Act,
2013 is the adjudicating authority as defined in Section 5(1) of IBC.
Sub-section (3) deals with an appeal against an order approving a
resolution plan under Section 31. It says that such an appeal can
be filed on the following grounds:
(i)
the approved resolution plan is in contravention of the
provisions of any law for the time being in force;
(ii)
there has been material irregularity in exercise of the
powers by the resolution professional during the corporate
insolvency resolution period;
(iii) the debts owed to operational creditors of the corporate
debtor have not been provided for in the resolution plan
in the manner specified by the Insolvency and Bankruptcy
Board of India established under Section 188(1);
(iv) the insolvency resolution process costs have not been
provided for repayment in priority to all other debts; or
(v)
the resolution plan does not comply with any other criteria
specified by the Insolvency and Bankruptcy Board of India.
28. Section 238 of IBC clarifies that provisions of IBC shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or any instrument having effect
by virtue of any such law.
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29. In Essar Steel India Ltd. (supra), a three-Judge Bench of this Court
examined amongst others the role of resolution applicants, resolution
professionals and the committee of creditors constituted under the
IBC as well as the jurisdiction of NCLT and NCLAT qua resolution
plans approved by the committee of creditors. After an elaborate
and exhaustive analysis of various provisions of the IBC, the Bench
concluded that a successful resolution applicant cannot suddenly
be faced with 'undecided' claims after the resolution plan submitted
by him has been accepted. This would amount to a hydra head
popping up which would throw into uncertainty amounts payable
by a prospective resolution applicant. 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 corporate debtor.
Paragraph 107 of the said decision reads as under:
107. For the same reason, the impugned NCLAT judgment
[Standard Chartered Bank v. Satish Kumar Gupta, 2019
SCC OnLine NCLAT 388] 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.
30. An important question arose for consideration in Ghanshyam Mishra
(supra). Again a three-Judge Bench of this Court examined a question
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Electrosteel Steel Limited (Now M/s ESL Steel Limited) v.
Ispat Carrier Private Limited
as to whether any creditor including the central government, state
government or any local authority is bound by the resolution plan
once it is approved by the adjudicating authority under sub-section
(1) of Section 31 of IBC? Corollary to the above question was the
issue as to whether after approval of the resolution plan by the
adjudicating authority, a creditor including the central government,
state government or any local authority is entitled to initiate any
proceeding for recovery of any of the dues from the corporate
debtor which are not a part of the resolution plan approved by the
adjudicating authority. In that case, the Bench concluded by holding
that 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 the
resolution plan by the adjudicating authority, 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 proceeding in
respect to a claim which is not part of the resolution plan. The Bench
declared that all dues including 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 proceeding
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. Paragraph 102 of the aforesaid decision reads thus:
102 In the result, we answer the questions framed by us
as under:
102.1. That 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 the resolution plan, shall
stand extinguished and no person will be entitled to initiate
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or continue any proceedings in respect to a claim, which
is not part of the resolution plan.
*
*
*
*
*
*
*
102.3. Consequently 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.
31. In Ruchi Soya Industries Ltd. (supra), a two-Judge Bench of this
Court referred to the decision in Ghanshyam Mishra (supra) and
thereafter declared that on the date on which the resolution plan
was approved by the NCLT, all claims stood frozen and no claim,
which is not a part of the resolution plan, would survive.
32. A three-Judge Bench of this Court in Ajay Kumar Radheshyam
Goenka (supra) held that a creditor has no option but to join the
process under the IBC. Once the plan is approved, it would bind
everyone under the sun. The making of a claim under the IBC
and accepting the same and not making any claim will not make
any difference in the light of Section 31 of IBC. Both the situations
will lead to Section 31 and the finality and binding value of the
resolution plan. Paragraph 62 of the said decision is extracted
hereunder:
62. Thus, from the aforesaid, it is evident that the creditor
has no option but to join the process under the IBC.
Once the plan is approved, it would bind everyone under
the sun.