# GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS

- **Citation:** [2021] 13 S.C.R. 737
- **Court:** Supreme Court of India
- **Decided:** 2021-04-13
- **Case number:** Civil Appeal No. 8129 of 2019
- **Bench:** R. F. Nariman, B. R. Gavai, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ghanashyam-mishra-and-sons-private-limited-through-the-authorized-signatory-v-35292
- **Pages:** 86

## Headnote

Insolvency and Bankruptcy Code, 2016
s. 31 - Approval of resolution plan - Corporate Insolvency
Resolution Process - Resolution plan - Extent and scope of, after
approval - Held: Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of s. 31, the claims as
provided in the resolution plan shall stand frozen and would 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 would be entitled to initiate or continue
any proceedings in respect to a claim, which is not part of the
resolution plan - Dominant purposes of the I&B Code is, revival of
the Corporate Debtor and to make it a running concern - Legislative
intent behind this is, to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with any surprise
claims - Insolvency and Bankruptcy board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 - rr.
13 and 14.
s. 31 - Amendment to s. 31 by s. 7 of Act 26 of 2019 - Nature
of, clarificatory/declaratory or substantive in nature - Held: 2019
Amendment to s. 31 of the Code is clarificatory and declaratory in
nature and thus, would be effective from the date on which I&B
Code came into effect.
s. 31 - Approval of resolution plan by the Adjudicating
Authority - Entitlement of creditor including the Central Government,
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[2021] 13 S.C.R.
State Government or any local authority, to initiate any proceedings
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 - Held: 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 u/
s. 31 could be continued.
Allowing the appeals and the writ petition, the Court
HELD: 1. Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of Section 31 of the
Insolvency and Bankruptcy Code, 2016, 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; that 2019 amendment to Section 31 of the I&B
Code is clarificatory and declaratory in nature and therefore will
be effective from the date on which I&B Code has come into
effect; and 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. [Para 95]
[805-D-H; 806-A]
2.1 It could thus be seen, that one of the dominant objects
of Insolvency and Bankruptcy Code, 2016 is to see to it, that an
attempt has to be made to revive the Corporate Debtor and make
it a running concern. For that, a resolution applicant has to prepare
a resolution plan on the basis of the Information Memorandum.
The Information Memorandum, which is required to be prepared
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## Text

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[2021] 13 S.C.R. 737
737
GHANASHYAM MISHRA AND SONS PRIVATE LIMITED
THROUGH THE AUTHORIZED SIGNATORY
v.
EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED
THROUGH THE DIRECTOR & ORS.
(Civil Appeal No. 8129 of 2019)
APRIL 13, 2021
[R. F. NARIMAN, B. R. GAVAI AND HRISHIKESH ROY, JJ.]
Insolvency and Bankruptcy Code, 2016
s. 31 - Approval of resolution plan - Corporate Insolvency
Resolution Process - Resolution plan - Extent and scope of, after
approval - Held: Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of s. 31, the claims as
provided in the resolution plan shall stand frozen and would 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 would be entitled to initiate or continue
any proceedings in respect to a claim, which is not part of the
resolution plan - Dominant purposes of the I&B Code is, revival of
the Corporate Debtor and to make it a running concern - Legislative
intent behind this is, to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with any surprise
claims - Insolvency and Bankruptcy board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 - rr.
13 and 14.
s. 31 - Amendment to s. 31 by s. 7 of Act 26 of 2019 - Nature
of, clarificatory/declaratory or substantive in nature - Held: 2019
Amendment to s. 31 of the Code is clarificatory and declaratory in
nature and thus, would be effective from the date on which I&B
Code came into effect.
s. 31 - Approval of resolution plan by the Adjudicating
Authority - Entitlement of creditor including the Central Government,
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
State Government or any local authority, to initiate any proceedings
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 - Held: 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 u/
s. 31 could be continued.
Allowing the appeals and the writ petition, the Court
HELD: 1. Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of Section 31 of the
Insolvency and Bankruptcy Code, 2016, 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; that 2019 amendment to Section 31 of the I&B
Code is clarificatory and declaratory in nature and therefore will
be effective from the date on which I&B Code has come into
effect; and 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. [Para 95]
[805-D-H; 806-A]
2.1 It could thus be seen, that one of the dominant objects
of Insolvency and Bankruptcy Code, 2016 is to see to it, that an
attempt has to be made to revive the Corporate Debtor and make
it a running concern. For that, a resolution applicant has to prepare
a resolution plan on the basis of the Information Memorandum.
The Information Memorandum, which is required to be prepared
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in accordance with Section 29 of I&B Code along with Regulation
36 of the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016,
is required to contain various details, which have been gathered
by RP after receipt of various claims in response to the statutorily
mandated public notice. The resolution plan is required to provide
for the payment of insolvency resolution process costs,
management of the affairs of the Corporate Debtor after approval
of the resolution plan; the implementation and supervision of the
resolution plan. It is only after the Adjudicating Authority satisfies
itself, that the plan as approved by CoC with the requisite voting
share of financial creditors meets the requirement as referred to
in sub-section (2) of Section 30, grants its approval to it. It is only
thereafter, that the said plan is binding on the Corporate Debtor
as well as its employees, members, creditors, guarantors and
other stakeholders involved in the resolution Plan. The
moratorium order passed by the Adjudicating Authority under
Section 14 shall cease to operate, once the Adjudicating Authority
approves the resolution plan. The scheme of I&B Code therefore
is, to make an attempt, by divesting the erstwhile management
of its powers and vesting it in a professional agency, to continue
the business of the Corporate Debtor as a going concern until a
resolution plan is drawn up. Once the resolution plan is approved,
the management is handed over under the plan to the successful
applicant so that the Corporate Debtor is able to pay back its
debts and get back on its feet. [Para 54][771-G-H; 772-A-E]
2.2 It could be seen, that the legislature has given
paramount importance to the commercial wisdom of CoC and the
scope of judicial review by Adjudicating Authority is limited to
the extent provided under Section 31 of I&B Code and of the
Appellate Authority is limited to the extent provided under subsection (3) of Section 61 of the I&B Code, is no more res integra.
[Para 57][781-F-G]
2.3 Bare reading of Section 31 of the I&B Code would also
make it abundantly clear, that once the resolution plan is approved
by the Adjudicating Authority, after it is satisfied, that the
resolution plan as approved by CoC meets the requirements as
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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referred to in sub-section (2) of Section 30, it shall be binding on
the Corporate Debtor and its employees, members, creditors,
guarantors and other stakeholders. Such a provision is
necessitated since one of the dominant purposes of the I&B Code
is, revival of the Corporate Debtor and to make it a running
concern. [Para 58][781-G-H; 782-A]
2.4 The resolution plan submitted by successful resolution
applicant is required to contain various provisions, viz., provision
for payment of insolvency resolution process costs, provision for
payment of debts of operational creditors, which shall not be less
than the amount to be paid to such creditors in the event of
liquidation of the Corporate Debtor under section 53; or the
amount that would have been paid to such creditors, if the amount
to be distributed under the resolution plan had been distributed
in accordance with the order of priority in sub-section (1) of section
53, whichever is higher. The resolution plan is also required to
provide for the payment of debts of financial creditors, who do
not vote in favour of the resolution plan, which also shall not be
less than the amount to be paid to such creditors in accordance
with sub-section (1) of section 53 in the event of a liquidation of
the Corporate Debtor. Explanation 1 to clause (b) of sub-section
(2) of Section 30 of the I&B Code clarifies for the removal of
doubts, that a distribution in accordance with the provisions of
the said clause shall be fair and equitable to such creditors. The
resolution plan is also required to provide for the management
of the affairs of the Corporate Debtor after approval of the
resolution plan and also the implementation and supervision of
the resolution plan. Clause (e) of sub-section (2) of Section 30 of
I&B Code also casts a duty on RP to examine, that the resolution
plan does not contravene any of the provisions of the law for the
time being in force. [Para 59][782-B-E]
2.5 Perusal of Section 29 of the I&B Code read with
Regulation 36 of the Regulations would reveal, that it requires
RP to prepare an information memorandum containing various
details of the Corporate Debtor so that the resolution applicant
submitting a plan is aware of the assets and liabilities of the
Corporate Debtor, including the details about the creditors and
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the amounts claimed by them. It is also required to contain the
details of guarantees that have been given in relation to the debts
of the corporate debtor by other persons. The details with regard
to all material litigation and an ongoing investigation or proceeding
initiated by Government and statutory authorities are also
required to be contained in the information memorandum. So also
the details regarding the number of workers and employees and
liabilities of the Corporate Debtor towards them are required to
be contained in the information memorandum. [Para 60]
[782-F-H]
2.6 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 stake-holders 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 sub-section (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. [Para 61][783-A-C]
2.7 As such, with respect to the proceedings, which arise
after 16.8.2019, there will be no difficulty. After the amendment,
any debt in respect of the payment of dues arising under any law
for the time being in force including the ones owed to the Central
Government, any State Government or any local authority, which
does not form a part of the approved resolution plan, shall stand
extinguished. [Para 67][784-E-F]
2.8 If it is held, that the amendment is declaratory or
clarificatory in nature, it will have to be held, that such an
amendment is retrospective in nature and exists on the statute
book since inception. However, if the answer is otherwise, the
amendment will have to be held to be prospective in nature, having
force from the date on which the amendment is effected in the
statute. [Para 69][784-G-H; 785-A]
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
2.9 Perusal of the "Statement of Objects and Reasons" of
the Insolvency and Bankruptcy Code (Amendment) Bill, 2019SOR would reveal, that one of the prime objects of I&B Code
was to provide for implementation of insolvency resolution process
in a time bound manner for maximisation of value of assets in
order to balance the interests of all stakeholders. However, it
was noticed, that in some cases there was extensive litigation
causing undue delays resultantly hampering the value
maximisation. It was also found necessary to ensure, that all
creditors are treated fairly. It was therefore in view of the various
difficulties faced and in order to fill the critical gaps in the
corporate insolvency framework, it was necessary to amend
certain provisions of the I&B Code. Clause (f) of para 3 of the
SOR of the Insolvency and Bankruptcy Code (Amendment) Bill,
2019 would amply make it clear, that the legislative intent in
amending sub-section (1) of Section 31 of I&B Code was to clarify,
that the resolution plan approved by the Adjudicating Authority
shall also be binding on the Central Government, any State
Government or any local authority to whom a debt is owed in
respect of payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are
owed, including tax authorities. [Para 71][786-D-G]
2.10 It could be seen, that in the speech the Hon'ble
Finance Minister has categorically stated, that Section 238
provides that I&B Code will prevail in case of inconsistency
between two laws. She also stated, that there was question about
indemnity for successful resolution applicant and that the
amendment was clearly making it binding on the Government.
She stated, that the Government will not make any further claim
after resolution plan is approved. So, that is going to be a major
sense of assurance for the people who are using the resolution
plan. She has categorically stated, that she would want all the
Hon'ble Members to recognize this message and communicate
further that I&B Code gives that comfort to all new bidders. They
need not be scared that the taxman will come after them for the
faults of the earlier promoters. She further states, that once the
resolution plan is accepted, the earlier promoters will be dealt
with as individuals for their criminality but not the new bidder
who is trying to restore the company. It could thus be seen, that
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the speech made by Hon'ble Finance Minister while explaining
the amendment could be referred to for ascertaining what was
the reason for moving the Bill. The speech can be used for finding
out: what were the circumstances in which the amendment was
carried out; what was the mischief for which the unamended
section did not provide; and what was sought to be remedied by
amended enactment. [Paras 73, 76][787-E-H; 789-B-C]
2.11 It is clear, that the mischief, which was noticed prior
to amendment of Section 31 of I&B Code was, that though the
legislative intent was to extinguish all such debts owed to the
Central Government, any State Government or any local authority,
including the tax authorities once an approval was granted to the
resolution plan by NCLT; on account of there being some
ambiguity, the State/Central Government authorities continued
with the proceedings in respect of the debts owed to them. In
order to remedy the said mischief, the legislature thought it
appropriate to clarify the position, that once such a resolution
plan was approved by the Adjudicating Authority, all such claims/
dues owed to the State/Central Government or any local authority
including tax authorities, which were not part of the resolution
plan shall stand extinguished. [Para 77][789-D-E]
2.12 The faulty drafting in the provision was capable of being
interpreted, that the legislative embargo imposed on a person
from procreating and giving birth to a third child in the context of
holding the office of a member of a municipality remained in
operation for a period of one year only and thereafter it was lifted.
It could be interpreted, that on the date on which Section 13-A
was brought on the statute book i.e. dated 5.4.1994, even if a
person became disqualified, the disqualification ceased to operate
and he became qualified once again to contest the election and
hold the office of member of a municipality on the expiry of one
year from 5-4-1994. After realizing the error, Section 13-A came
to be amended. It could thus be seen, that what is material is, to
ascertain the legislative intent. If legislature by an amendment
supplies an obvious omission in a former statute or explains a
former statute, the subsequent statute has a relation back to the
time when the prior Act was passed. [Paras 80, 82][793-E-F;
798-D]
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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2.13 One of the principal objects of I&B Code is, providing
for revival of the Corporate Debtor and to make it a going concern.
I&B Code is a complete Code in itself. Upon admission of petition
under Section 7, there are various important duties and functions
entrusted to RP and CoC. RP is required to issue a publication
inviting claims from all the stakeholders. He is required to collate
the said information and submit necessary details in the
information memorandum. The resolution applicants submit their
plans on the basis of the details provided in the information
memorandum. The resolution plans undergo deep scrutiny by
RP as well as CoC. In the negotiations that may be held between
CoC and the resolution applicant, various modifications may be
made so as to ensure, that while paying part of the dues of financial
creditors as well as operational creditors and other stakeholders,
the Corporate Debtor is revived and is made an on-going concern.
After CoC approves the plan, the Adjudicating Authority is
required to arrive at a subjective satisfaction, that the plan
conforms to the requirements as are provided in sub-section (2)
of Section 30 of the I&B Code. Only thereafter, the Adjudicating
Authority can grant its approval to the plan. It is at this stage,
that the plan becomes binding on Corporate Debtor, its
employees, members, creditors, guarantors and other
stakeholders involved in the resolution Plan. The legislative
intent behind this is, to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with any surprise
claims. If that is permitted, the very calculations on the basis of
which the resolution applicant submits its plans, would go haywire
and the plan would be unworkable. [Para 86][802-F-H; 803-A-C]
2.14 The word "other stakeholders" would squarely cover
the Central Government, any State Government or any local
authorities. The legislature, noticing that on account of obvious
omission, certain tax authorities were not abiding by the mandate
of I&B Code and continuing with the proceedings, has brought
out the 2019 amendment so as to cure the said mischief. Thus,
the 2019 amendment is declaratory and clarificatory in nature
and therefore retrospective in operation. "Creditor" therefore
has been defined to mean 'any person to whom a debt is owed
and includes a financial creditor, an operational creditor, a secured
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creditor, an unsecured creditor and a decree-holder'.
"Operational creditor" has been defined to mean a person to
whom an operational debt is owed and includes any person to
whom such debt has been legally assigned or transferred.
"Operational debt" has been defined to mean a claim in respect
of the provision of goods or services including employment or a
debt in respect of the payment of dues arising under any law for
the time being in force and payable to the Central Government,
any State Government or any local authority. [Paras 87, 90]
[803-C-D; 804-A-C]
2.15 It is a cardinal principle of law, that a statute has to be
read as a whole. Harmonious construction of sub-section (10) of
Section 3 of the I&B Code read with sub-sections (20) and (21)
of Section 5 thereof would reveal, that even a claim in respect of
dues arising under any law for the time being in force and payable
to the Central Government, any State Government or any local
authority would come within the ambit of 'operational debt'. The
Central Government, any State Government or any local authority
to whom an operational debt is owed would come within the ambit
of 'operational creditor' as defined under sub-section (20) of
Section 5 of the I&B Code. Consequently, a person to whom a
debt is owed would be covered by the definition of 'creditor' as
defined under sub-section (10) of Section 3 of the I&B Code. As
such, even without the 2019 amendment, the Central
Government, any State Government or any local authority to whom
a debt is owed, including the statutory dues, would be covered
by the term 'creditor' and in any case, by the term 'other
stakeholders' as provided in sub-section (1) of Section 31 of the
I&B Code. The said provisions leave no manner of doubt to hold,
that the 2019 amendment is declaratory and clarificatory in nature.
Even if 2019 amendment was not effected, still in light of the
view taken by us, the Central Government, any State Government
or any local authority would be bound by the resolution plan, once
it is approved by the Adjudicating Authority (i.e. NCLT). [Paras
91 and 94][804-C-F; 805-B-C]
3.1 As regards CA No.8129 of 2019, vide the impugned
judgment and order dated 23.4.2019, NCLAT found, that as no
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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[2021] 13 S.C.R.
ground was made out in terms of Section 61(3) of I&B Code, no
relief could be granted in the appeals. The observations by
NCLAT are beyond the scope of the powers available with NCLAT
under sub-section (3) of s. 61 of I & B Code. [Paras 109 and
110][810-C-D; 811-C-D]
3.2 NCLAT categorically found that no ground as is available
under sub-section (3) of Section 61 of I&B Code has been made
out and has also categorically found, that the resolution plan
submitted by GMSPL was a better offer than the other two
resolution applicants, including EARC and that the Adjudicating
Authority has rightly approved the resolution plan of GMSPL.
After coming to such finding, the only option available with
NCLAT was to dismiss the appeals. The observations made, if
permitted to remain, would totally frustrate the object of I&B
Code of revival of a Corporate Debtor and to resurrect it as a
going concern. The successful resolution applicant cannot be flung
with surprise claims which are not part of the resolution plan.Thus,
it is thus clear, that according to the resolution plan submitted by
EARC itself, had it been a successful applicant, then in that event,
the claims made by it would have been irrevocably waived and
permanently extinguished and written off in full with effect from
the Effective Date. Had the resolution plan of EARC been
approved, then all such debts would have stood extinguished
without any further act or deed and approval of the said plan by
NCLT would have been a sufficient notice required to be given
to any person for such matter. Undisputedly, the resolution plan
submitted by EARC was on the basis of the information
memorandum submitted by RP wherein, it was specifically
clarified, that the claims of EARC were not admitted by RP. It is
thus clear, that EARC is trying to blow hot and cold at the same
time. According to it, had its resolution plan been approved by
CoC and NCLT, then the claims, which are now insisted by EARC
would have stood extinguished. However, on its failure to become
a successful resolution applicant and approval of other applicant
as a successful resolution applicant, its claim would survive. A
party cannot be permitted to apply two different yardsticks. [Paras
111 and 114][811-D-F; 813-D-G]
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3.3 In the instant case, the claim of EARC was rejected on
22.1.2018. Instead of challenging the said rejection, EARC
participated in the proceedings and was one of the resolution
applicants. Not only that, in the first round, it was a successful
bidder being ranked H1 bidder. However, since in the
negotiations it failed to satisfy CoC, fresh bids were invited from
the resolution applicants, which had submitted their EOI. In the
12th meeting of CoC held on 25.4.2018, the resolution plan of
GMSPL was approved by 89.23% of the voting shares. Only
thereafter, EARC filed two applications; one challenging the
approval of resolution plan of GMSPL by CoC and another
challenging rejection of its claims by RP/CoC. It could thus be
clearly seen, that EARC was taking chances. After rejection of
its claim, it did not choose to challenge the same by an application
under Section 60(5) but waited till the decision of CoC. During
this period, it was actually pursuing its resolution plan. Only after
its resolution plan was not approved and the resolution plan of
GMSPL was approved, it filed the aforesaid two applications.
Apart from that, as already observed in the resolution plan of
EARC itself, it has provided for extinguishment of all claims not
forming part of resolution plan. [Paras 120-121][815-B-E]
3.4 Even otherwise, if for the sake of argument, it is held,
that EARC was entitled to be treated as a 'financial creditor' and
entitled for a participation in CoC, still its share was about 9%
and as such, the resolution plan of GMSPL would have been
passed by a majority of 80%, which is much above the statutory
requirement. Therefore, the observation made by NCLAT giving
liberty to EARC to take recourse to such proceedings as available
in law for raising its claims is totally unsustainable. [Paras 122,
123][815-F-G]
3.5 Insofar as, the observation made with regard to claim
of the Jharkhand Government is concerned, it is to be noted,
that the State of Jharkhand has not even appealed against the
order passed by NCLT. Insofar as, the claims of Labour and
Workmen are concerned, RP has specifically stated before
NCLAT, that whatever claims were received from the workmen
were duly considered in the resolution plan. Despite that,
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
A
B
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D
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[2021] 13 S.C.R.
observing that a liberty is available to the workmen to raise their
claims before a Civil Court or Labour Court, is totally in conflict
with the provisions of I&B Code. The same would equally apply
to the observation made in the appeal of DS, claiming to be
'operational creditor'. Therefore, the appeal is allowed by
expunging the paragraphs nos. 28, 42, 43, 51 and 52 from the
judgment of NCLAT dated 23.4.2019. The judgment and order
passed by NCLT dated 22.6.2018 is upheld. [Paras 124 and
125][815-G-H; 816-A-C]
3.6 2019 amendment to Section 31 of I&B Code is
clarificatory and declaratory in nature and therefore will have a
retrospective operation. As such, when the resolution plan is
approved by NCLT, the claims, which are not part of the resolution
plan, shall stand extinguished and the proceedings related thereto
shall stand terminated. Since the subject matter of the petition
are the proceedings, which relate to the claims of the respondents
prior to the approval of the plan, same cannot be continued.
Equally the claims, which are not part of the resolution plan, shall
stand extinguished. [Para 130][818-C-D]
4. In CA arising out of SLP 11232 of 2020, relegating the
appellant to the alternative remedy would serve no purpose. A
party cannot be made to run from one forum to another forum in
respect of the proceedings and the claims, which are not
permissible in law.The impugned judgment and order passed by
the High Court is quashed and set aside. The respondents are
not entitled to recover any claims or claim any debts owed to
them from the Corporate Debtor accruing prior to the transfer
date. [Paras 131, 132][818-E-F]
5. In ordinary course, WP (C) 117 of 2020 would not have
entertained such a petition directly under Article 32 of the
Constitution. However, a question of law, which arises for
consideration in the instant petition has been considered in this
batch of matters. In that view of the matter, it would not be in the
interest of justice to non-suit the instant petitioner, when the
question of law have been specifically decided, which would govern
the present case also. The respondents are not entitled to recover
any claims or claim any debts owed to them from the Corporate
Debtor accruing prior to the transfer date. [Paras 139, 140]
[820-A-C]
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6.1 As regards CA arising out of SLP (C) 7147-50 of 2020,
it is found that the finding of the High Court, that the dues owed
to the State Government and Central Government would not
come within the definition of 'operational debt', is incorrect in
law. So also the finding, that since the order of NCLT is prior to
the date on which Section 31(1) of I&B Code was amended, the
provisions of Section 31 would not be applicable, also cannot stand.
[Para 144][821-A-B]
6.2 The High Court erred in holding, that the AppellantCompany does not have locus to file the writ petitions inasmuch
as, the management has been taken over by V Co. The resolution
plan is in respect of the Corporate Debtor and the successful
resolution applicant only takes over the management of the
Corporate Debtor in accordance with the resolution plan. The
resolution applicant steps into the shoes of the Corporate Debtor.
As such, the finding in this respect would also not be sustainable
in law. [Para 145][821-B-D]
6.3 It was submitted that RP/CoC had acted in a fraudulent
manner; and that though a notice inviting claim was required to
be published in local newspapers where the registered office of
the Corporate Debtor was situated, the notice was published in
the newspaper of Kolkata edition. As per Regulation 6(2)(b) of
the 2016 Regulations, the said notice is required to be published
in one English and one regional language newspaper with wide
circulation at the location of the registered office and corporate
office of the Corporate Debtor. Perusal of the record would reveal,
that the notice was published in Business Standard and Ananda
Bazar Patrika newspapers of the Kolkata edition, which have wide
circulation in Ranchi. The corporate office of the Corporate
Debtor is at Kolkata whereas its registered office is at Ranchi.
In any case, it is to be noticed, that the Forest Department of the
State Government had filed intervention application before NCLT
as well as NCLAT. When one of the wings of the State
Government has approached NCLT and NCLAT, it is difficult to
believe, that other organ of the State was not aware about the
said proceedings. [Para 146][821-D-G]
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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D
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
6.4 The submission that finding with regard to noncompliance of Section 13 is not challenged by the ES Company,
is also incorrect, inasmuch as, ES Company has raised the specific
ground in Grounds 'U' to ' AA' to that effect in the appeal memo.
[Para 147][821-G-H]
6.5 The impugned judgment and order of the High Court is
quashed and set aside. The respondents are not entitled to
recover any claims or claim any debts owed to them from the
Corporate Debtor accruing prior to the transfer date. [Paras 148149][822-A-B]
Committee of Creditors of Essar Steel India Limited
Through Authorized Signatory v. Satish Kumar Gupta
and Others (2020) 8 SCC 531 : [2019] 16 SCR 275;
K. Shashidhar vs. Indian Overseas Bank and Others
(2019) 12 SCC 150 : [2019] 3 SCR 845; Maharashtra
Seamless Limited vs. Padmanabhan Venkatesh and
others (2020) 11 SCC 467; Karad Urban Cooperative
Bank Ltd. vs. Swwapnil Bhingardevay & Ors. (2020) 9
SCC 729; Kalpraj Dharamshi and Another vs. Kotak
Investment Advisors Limited and Another 2021 SCC
OnLine SC 204; Banarasi and Another v. Ram Phal
(2003) 9 SCC 606 : [2003] 2 SCR 22; State Bank of
India vs. V. Ramakrishnan and Another (2018) 17 SCC
394 : [2018] 10 SCR 974; B.K. Educational Services
Private Limited v. Parag Gupta and Associates (2019)
11 SCC 633 : [2018] 12 SCR 794; Innoventive
Industries Ltd. vs. ICICI Bank & Anr (2018) 1 SCC
407 : [2017] 8 SCR 33; Pr. Commissioner of Income
Tax vs. Monnet Ispat and Energy Ltd. 2018 (18) SCC
786; K.P. Varghese v. Income Tax Officer, Ernakulam
and Another (1981) 4 SCC 173 : [1982] 1 SCR 629;
Union of India and others vs. Martin Lottery Agencies
Ltd. (2009) 12 SCC 209 : [2009] 7 SCR 946; Zile Singh
vs. State of Haryana and others (2004) 8 SCC 1 : [2004]
5 Suppl. SCR 272; Commissioner of Income Tax I,
Ahmedabad vs. Gold Coin Health Food Private Limited
(2008) 9 SCC 622 : [2008] 12 SCR 179; State Bank of
A
B
C
D
E
F
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India vs. V. Ramakrishnan and another (2018) 17 SCC
394 : [2018] 10 SCR 974; Akshay Jhunjhunwala &
Anr. vs. Union of India through the Ministry of Corporate
Affairs & Ors. 2018 SCC OnLine Cal. 142; Export
Import Bank of India vs. Resolution Professional JEKPL
Private Limited Company Appeal (AT) (Insolvency)
No. 304 of 2017; Babu Ram Prakash Chandra
Maheshwari vs. Antarim Zilla Parishad Muzaffar Nagar
[1969] 1 SCR 518; Whirlpool Corporation vs. Registrar
of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 :
[1998] 2 Suppl. SCR 359; Nivedita Sharma vs. Cellular
Operators Association of India & Ors. (2011) 14 SCC
337; Embassy Property Developments Pvt. Ltd. vs. State
of Karnataka and Others (2020) 13 SCC 308 - referred
to.
Justice G.P. Singh treatise on "The principles of
Statutory Interpretation", 14th Edition - referred to.
Case Law Reference
[2019] 16 SCR 275
referred to
Para 25
[2019] 3 SCR 845
referred to
Para 31
(2020) 11 SCC 467
referred to
Para 31
(2020) 9 SCC 729
referred to
Para 31
[2003] 2 SCR 22
referred to
Para 33
[2018] 10 SCR 974
referred to
Para 35
[2018] 12 SCR 794
referred to
Para 35
[2017] 8 SCR 33
referred to
Para 49
2018 (18) SCC 786
referred to
Para 64
[1982] 1 SCR 629
referred to
Para 74
[2009] 7 SCR 946
referred to
Para75
[2004] 5 Suppl. SCR 272
referred to
Para 79
[2008] 12 SCR 179
referred to
Para 83
[2018] 10 SCR 974
referred to
Para 84
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
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[2021] 13 S.C.R.
[1969] 1 SCR 518
referred to
Para 129
[1998] 2 Suppl. SCR 359
referred to
Para 129
(2011) 14 SCC 337
referred to
Para 129
(2020) 13 SCC 308
referred to
Para 129
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
No. 8129 of 2019.
From the Judgment and Order dated 23.04.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No. 437 of 2018.
With
Civil appeal No. 1554 of 2021, Writ Petition (Civil) No.1177 of
2020 and Civil Appeal Nos. 1550-1553 of 2021.
Dr. Abhishek Manu Singhvi, Neeraj Kishan Kaul, Gopal Jain,
Jaideep Gupta, Sr. Advs., Mahesh Agarwal, Himanshu Satija, Arshit
Anand, Divyang Chandiramani, Rohan Talwar, Ankur Saigal, Amit
Bhandari, Yojit Mehra, Deepak Joshi, E.C. Agrawala, Ms. Shruti Jose,
Ms. Anne Mathew, Amit Kumar Mishra, Siddharth Sharma, Shashank
Gautam, Shashank Manish, Arvind Thapliyal, Manik Ahluwalia, Ms. Nidhi
Sahay, Yash Kumar, Advs. for the Appellant.
V. Shekhar, S. Guru Krishna Kumar, Sr. Advs., Bhakti Vardhan
Singh, Ms. Sheetal Rajpoot, Rajiv Shankar Dvivedi, Kumar Anurag Singh,
Saurabh Jain, Zain Khan, Shwetank Singh, Ms. Aastha Shreshta, Ms.
Tulika Mukherjee, Prashant Bhushan, Sanjay Bhatt, Sumit Nagpal, Pranav
Prashant, Ms. Akansha Srivastava, Rabin Majumder, Mohammed Akhil,
Rupesh Kumar, Ms. Seema Bengani, B. Krishna Prasad, B.V. Balaram
Das, M.K. Maroria, Sandeep Bajaj, Soayib Qureshi, Ms. Aditi Pundhir,
Ms. Sangya Gupta, Raj Kumar Mehta, Ms. Himanshi Andley, C.K. Rai,
Buddy A Ranganadhan, A.V. Rangam, Advs. for the Respondents.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of
2020 and 7147-7150 of 2020.
2. The short but important questions, that arise for consideration
in this batch of matters, are as under:-
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(i)
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 an
adjudicating authority under sub-section (1) of Section 31
of the Insolvency and Bankruptcy Code, 2016 (hereinafter
referred to as 'I&B Code')?
(ii)
As to whether the amendment to Section 31 by Section 7
of Act 26 of 2019 is clarificatory/declaratory or substantive
in nature?
(iii)
As to whether after approval of resolution plan by the
Adjudicating Authority a creditor including the Central
Government, State Government or any local authority is
entitled to initiate any proceedings 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?
3. We will first refer to the facts in each of these matters.
CIVIL APPEAL NO.8129 OF 2019 [GHANASHYAM
MISHRA AND SONS PRIVATE LIMITED Vs. EDELWEISS
ASSET RECONSTRUCTION COMPANY LIMITED &
OTHERS]
4. Orissa Manganese & Minerals Limited (hereinafter referred
to as "Corporate Debtor" or "OMML") was engaged in the business of
mining iron ore, graphite, manganese ore and agglomerating iron fines
into pellets through its facilities in Orissa and Jharkhand. The Corporate
Insolvency Resolution Process (hereinafter referred to as "CIRP") was
initiated in respect of the Corporate Debtor by an application under
Section 7 of I&B Code filed by the State Bank of India (hereinafter
referred to as "SBI") before the National Company Law Tribunal, Kolkata
Bench, Kolkata (hereinafter referred to as "NCLT").
5. Vide order dated 3.8.2017, Company Petition (I.B.) No. 371/
KB/2017 filed by SBI was admitted. Shri Sumit Binani was appointed as
Interim Resolution Professional (hereinafter referred to as "IRP"). Upon
admission of the said Company Petition, CIRP was initiated with effect
from 3.8.2017. The appointment of IRP was confirmed by the Committee
of Creditors (hereinafter referred to as "CoC") in their meeting held on
4.9.2017. The Resolution Professional (hereinafter referred to as "RP")
GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
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[2021] 13 S.C.R.
continued with the resolution process by inviting Expression of Interest
(hereinafter referred to as "EOI") and applications for resolution plan in
accordance with the provisions of the I&B Code and the Regulations
framed thereunder. The initial period of CIRP of 180 days expired on
29.1.2018. At the request of CoC, RP moved an application for extension
of CIRP period, which came to be extended by 90 days i.e. till 29.4.2018.
6. In response to the invitation, three Resolution Plans were
received by RP each from, Edelweiss Asset Reconstruction Company
Limited (hereinafter referred to as "EARC"), respondent No.1 herein,
Orissa Mining Private Limited (hereinafter referred to as "OMPL")
and Ghanashyam Mishra & Sons Private Limited (hereinafter referred
to as "GMSPL"), the appellant herein, respectively. In the 8th meeting of
the CoC held on 14.3.2018, EARC was declared as H1 Bidder. However,
EARC failed to satisfy CoC in the negotiations and as such, the resolution
plan submitted by EARC came to be rejected in the 9th meeting of CoC
held on 31.3.2018.
7. CoC thereafter proceeded for negotiations with the H2 Bidder
i.e. GMSPL. However, the resolution plan of GMSPL was also found to
be unacceptable to CoC and therefore, in its 10th meeting held on 3.4.2018,
it decided to annul the existing process and initiate a fresh process for
invitation of Resolution Plan only from the applicants, which had earlier
submitted their EOI. Accordingly, a communication was sent to the
applicants, which had submitted their EOI.