No Illegality in NCLT’s Order Approving RP where Appellant’s Claim was Based on Pending Arbitration: NCLAT

Case Details: Shapporji Pallonji and Co. (P.) Ltd. v. Kobra West Power Company Ltd. - [2023] 149 taxmann.com 199 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Anant Bijay Singh, Judicial Member & Ms Shreesha Merla, Technical Member
  • Abhijeet Sinha, Mrs Sonali Jaitley Bakshi, Jaiyesh Bakshi, Chirag Sharma, Siddharth Dey, Ms Rashmi Gogoi, Ms Sakshi Tibrewal, Ms Mayuri Shukla & Saikat Sarkar, Advs. for the Appellant.
  • P. Nagesh, Sr. Adv., Himanshu Satija, Mahesh Agarwal, Shivam Shukla, Arshit Anand, Manmeet Singh, Anurah Robin Frey, Ms Pallavi Pratap & Akshay Singh, Advs. for the Respondent.

Facts of the Case

In the instant case, the CIRP was initiated by the corporate debtor invoking section 10 of the IBC. Consequently, the Resolution Professional (RP) was appointed, who invited claims from the creditors of the corporate debtor.

Later, the appellant (i.e., operational creditor) submitted its claim arising from an arbitration proceeding that was pending between the appellant and the corporate debtor prior to the initiation of the CIRP. The status of claims was uploaded on the website of the corporate debtor by the RP.

Further, the resolution plan submitted by the Successful Resolution Applicant (SRA) was filed by the RP before the Adjudicating Authority (NCLT) and the same was approved vide the impugned order.

The appellant challenging the impugned order contended that the RP did not inform him in writing regarding the rejection of his claim. However, the RP had only put the same on the website of the corporate debtor and orally communicated it to the appellant after the approval of the resolution plan.

The appellant also contended that the RP did not have adjudicatory powers to reject the claim on the grounds of pendency of arbitration proceedings.

NCLAT Held

The NCLAT observed that since the arbitration proceedings were pending prior to the invocation of section 10 proceedings and there was no contingent liability or any other provisions made in the resolution plan subject to the result of arbitration proceedings, liberty was to be given to the appellant to pursue all contentions in the pending arbitration proceedings and the same was to be decided on its own merit.

The NCLAT held that there was no illegality in the order of the NCLT to approve the resolution plan and there was no reason to set aside the resolution plan except for observing that RP ought not to have made a contingent provision with respect to the appellant, which would be subject to arbitration proceedings.

List of Cases Reviewed

• • Abhijt Guhathakurtha v. Kobra West Power Company Ltd. [2019] 108 taxmann.com 323 (NCLT – Ahd.) (para 20) affirmed.

List of Cases Referred to

• • Prasad Gempex v. Star Agro Marin Exports (P.) Ltd. [2019] 107 taxmann.com 46 (NCLAT) (para 3)
  • Standard Chartered Bank v. Satish Kumar [2019] 107 taxmann.com 110/154 SCL 584 (NCLAT) (para 3)
  • Fourth Dimension Solutions v. Ricoh India Ltd. [Civil Appeal No. 5908 of 2021, dated 21-1-2022] (para 4)
  • Ghanshyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL 237 (SC) (para 6)
  • Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC) (para 6)
  • Dy. Commissioner of Customs DEEC (Monitoring Cell) v. Vandana Garg [2021] 123 taxmann.com 84/163 SCL 475 (NCLAT) (para 6)
  • Harish Polymer Product v. George Samuel [Comp. App. (AT) (Ins.) No. 420 of 2021, dated 18-6-2021] (para 6)
  • Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 (SC) (para 7)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 12)
  • K. Shashidhar v. Indian Overseas Bank [2019] 102 taxmann.com 139/152 SCL 312 (SC) (para 14)
  • Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh [2020] 113 taxmann.com 421/158 SCL 567 (SC) (para 14)
  • Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [2021] 125 taxmann.com 194/166 SCL 583 (SC) (para 14).