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

GHANASHYAM MISHRA AND SONS PRIVATE LIMITEDTHROUGH THE AUTHORIZED SIGNATORY

EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITEDTHROUGH 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 InsolvencyResolution Process – Resolution plan – Extent and scope of, afterapproval – Held: Once resolution plan is duly approved by theAdjudicating Authority under sub-section (1) of s. 31, the claims asprovided in the resolution plan shall stand frozen and would bebinding on the Corporate Debtor and its employees, members,creditors, including the Central Government, any State Governmentor any local authority, guarantors and other stakeholders – On thedate of approval of resolution plan by the Adjudicating Authority,all such claims, which are not part of resolution plan, shall standextinguished and no person would be entitled to initiate or continueany proceedings in respect to claim, which is not part of theresolution plan – Dominant purposes of the I&B Code is, revival ofthe Corporate Debtor and to make it running concern – Legislativeintent behind this is, to freeze all the claims so that the resolutionapplicant starts on clean slate and is not flung with any surpriseclaims – Insolvency and Bankruptcy board of India (InsolvencyResolution Process for Corporate Persons) Regulations, 2016 – rr.13 and 14.

s. 31 – Amendment to s. 31 by s. 7 of Act 26 of 2019 – Natureof, clarificatory/declaratory or substantive in nature – Held: 2019Amendment to s. 31 of the Code is clarificatory and declaratory innature and thus, would be effective from the date on which I&BCode came into effect.

s. 31 – Approval of resolution plan by the AdjudicatingAuthority – Entitlement of creditor including the Central Government,

738SUPREME COURT REPORTS

AState Government or any local authority, to initiate any proceedingsfor recovery of any of the dues from the Corporate Debtor, whichare not part of the Resolution Plan approved by the adjudicatingauthority – Held: All the dues including the statutory dues owed tothe Central Government, any State Government or any localauthority, if not part of the resolution plan, shall stand extinguishedBand no proceedings in respect of such dues for the period prior tothe date on which the Adjudicating Authority grants its approval u/s. 31 could be continued.

Allowing the appeals and the writ petition, the Court

CHELD: 1. Once resolution plan is duly approved by theAdjudicating Authority under sub-section (1) of Section 31 of theInsolvency and Bankruptcy Code, 2016, the claims as providedin the resolution plan shall stand frozen and will be binding onthe Corporate Debtor and its employees, members, creditors,including the Central Government, any State Government or anyDlocal authority, guarantors and other stakeholders. On the dateof approval of resolution plan by the Adjudicating Authority, allsuch claims, which are not part of resolution plan, shall standextinguished and no person will be entitled to initiate or continueany proceedings in respect to claim, which is not part of theEresolution plan; that 2019 amendment to Section 31 of the I&BCode is clarificatory and declaratory in nature and therefore willbe effective from the date on which I&B Code has come intoeffect; and consequently all the dues including the statutory duesowed to the Central Government, any State Government or anylocal authority, if not part of the resolution plan, shall standFextinguished and no proceedings in respect of such dues for theperiod prior to the date on which the Adjudicating Authority grantsits 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 objectsGof Insolvency and Bankruptcy Code, 2016 is to see to it, that anattempt has to be made to revive the Corporate Debtor and makeit running concern. For that, resolution applicant has to preparea resolution plan on the basis of the Information Memorandum.The Information Memorandum, which is required to be preparedH

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

in accordance with Section 29 of I&B Code along with Regulation36 of the Insolvency and Bankruptcy Board of India (InsolvencyResolution Process for Corporate Persons) Regulations, 2016,is required to contain various details, which have been gatheredby RP after receipt of various claims in response to the statutorilymandated public notice. The resolution plan is required to providefor the payment of insolvency resolution process costs,management of the affairs of the Corporate Debtor after approvalof the resolution plan; the implementation and supervision of theresolution plan. It is only after the Adjudicating Authority satisfiesitself, that the plan as approved by CoC with the requisite votingshare of financial creditors meets the requirement as referred toin sub-section (2) of Section 30, grants its approval to it. It is onlythereafter, that the said plan is binding on the Corporate Debtoras well as its employees, members, creditors, guarantors andother stakeholders involved in the resolution Plan. Themoratorium order passed by the Adjudicating Authority underSection 14 shall cease to operate, once the Adjudicating Authorityapproves the resolution plan. The scheme of I&B Code thereforeis, to make an attempt, by divesting the erstwhile managementof its powers and vesting it in professional agency, to continuethe business of the Corporate Debtor as going concern until aresolution plan is drawn up. Once the resolution plan is approved,the management is handed over under the plan to the successfulapplicant so that the Corporate Debtor is able to pay back itsdebts and get back on its feet. [Para 54][771-G-H; 772-A-E]

2.2 It could be seen, that the legislature has givenparamount importance to the commercial wisdom of CoC and thescope of judicial review by Adjudicating Authority is limited tothe extent provided under Section 31 of I&B Code and of theAppellate Authority is limited to the extent provided under sub-section (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 alsomake it abundantly clear, that once the resolution plan is approvedby the Adjudicating Authority, after it is satisfied, that theresolution plan as approved by CoC meets the requirements as

Areferred to in sub-section (2) of Section 30, it shall be binding onthe Corporate Debtor and its employees, members, creditors,guarantors and other stakeholders. Such provision isnecessitated since one of the dominant purposes of the I&B Codeis, revival of the Corporate Debtor and to make it runningconcern. [Para 58][781-G-H; 782-A]

2.4 The resolution plan submitted by successful resolutionapplicant is required to contain various provisions, viz., provisionfor payment of insolvency resolution process costs, provision forpayment of debts of operational creditors, which shall not be lessthan the amount to be paid to such creditors in the event ofCliquidation of the Corporate Debtor under section 53; or theamount that would have been paid to such creditors, if the amountto be distributed under the resolution plan had been distributedin accordance with the order of priority in sub-section (1) of section53, whichever is higher. The resolution plan is also required toDprovide for the payment of debts of financial creditors, who donot vote in favour of the resolution plan, which also shall not beless than the amount to be paid to such creditors in accordancewith sub-section (1) of section 53 in the event of liquidation ofthe Corporate Debtor. Explanation 1 to clause (b) of sub-section(2) of Section 30 of the I&B Code clarifies for the removal ofEdoubts, that distribution in accordance with the provisions ofthe said clause shall be fair and equitable to such creditors. Theresolution plan is also required to provide for the managementof the affairs of the Corporate Debtor after approval of theresolution plan and also the implementation and supervision ofFthe resolution plan. Clause (e) of sub-section (2) of Section 30 ofI&B Code also casts duty on RP to examine, that the resolutionplan does not contravene any of the provisions of the law for thetime being in force. [Para 59][782-B-E]

2.5 Perusal of Section 29 of the I&B Code read withGRegulation 36 of the Regulations would reveal, that it requiresRP to prepare an information memorandum containing variousdetails of the Corporate Debtor so that the resolution applicantsubmitting plan is aware of the assets and liabilities of theCorporate Debtor, including the details about the creditors and

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

the amounts claimed by them. It is also required to contain thedetails of guarantees that have been given in relation to the debtsof the corporate debtor by other persons. The details with regardto all material litigation and an ongoing investigation or proceedinginitiated by Government and statutory authorities are alsorequired to be contained in the information memorandum. So alsothe details regarding the number of workers and employees andliabilities of the Corporate Debtor towards them are required tobe contained in the information memorandum. [Para 60][782-F-H]

2.6 All these details are required to be contained in theinformation memorandum so that the resolution applicant is aware,as to what are the liabilities, that he may have to face and providefor plan, which apart from satisfying part of such liabilitieswould also ensure, that the Corporate Debtor is revived and madea running establishment. The legislative intent of making theresolution plan binding on all the stake-holders after it gets theseal of approval from the Adjudicating Authority upon itssatisfaction, that the resolution plan approved by CoC meets therequirement as referred to in sub-section (2) of Section 30 is,that after the approval of the resolution plan, no surprise claimsshould be flung on the successful resolution applicant. Thedominant purpose is, that he should start with fresh slate on thebasis of the resolution plan approved. [Para 61][783-A-C]2.7 As such, with respect to the proceedings, which ariseafter 16.8.2019, there will be no difficulty. After the amendment,any debt in respect of the payment of dues arising under any lawfor the time being in force including the ones owed to the CentralGovernment, any State Government or any local authority, whichdoes not form part of the approved resolution plan, shall standextinguished. [Para 67][784-E-F]

2.8 If it is held, that the amendment is declaratory orclarificatory in nature, it will have to be held, that such anamendment is retrospective in nature and exists on the statutebook since inception. However, if the answer is otherwise, theamendment will have to be held to be prospective in nature, havingforce from the date on which the amendment is effected in thestatute. [Para 69][784-G-H; 785-A]

A2.9 Perusal of the “Statement of Objects and Reasons” ofthe Insolvency and Bankruptcy Code (Amendment) Bill, 2019-SOR would reveal, that one of the prime objects of I&B Codewas to provide for implementation of insolvency resolution processin time bound manner for maximisation of value of assets inorder to balance the interests of all stakeholders. However, itBwas noticed, that in some cases there was extensive litigationcausing undue delays resultantly hampering the valuemaximisation. It was also found necessary to ensure, that allcreditors are treated fairly. It was therefore in view of the variousdifficulties faced and in order to fill the critical gaps in theCcorporate insolvency framework, it was necessary to amendcertain provisions of the I&B Code. Clause (f) of para 3 of theSOR of the Insolvency and Bankruptcy Code (Amendment) Bill,2019 would amply make it clear, that the legislative intent inamending sub-section (1) of Section 31 of I&B Code was to clarify,that the resolution plan approved by the Adjudicating AuthorityDshall also be binding on the Central Government, any StateGovernment or any local authority to whom debt is owed inrespect of payment of dues arising under any law for the timebeing in force, such as authorities to whom statutory dues areowed, including tax authorities. [Para 71][786-D-G]

E2.10 It could be seen, that in the speech the Hon’bleFinance Minister has categorically stated, that Section 238provides that I&B Code will prevail in case of inconsistencybetween two laws. She also stated, that there was question aboutindemnity for successful resolution applicant and that theFamendment was clearly making it binding on the Government.She stated, that the Government will not make any further claimafter resolution plan is approved. So, that is going to be majorsense of assurance for the people who are using the resolutionplan. She has categorically stated, that she would want all theHon’ble Members to recognize this message and communicateGfurther that I&B Code gives that comfort to all new bidders. Theyneed not be scared that the taxman will come after them for thefaults of the earlier promoters. She further states, that once theresolution plan is accepted, the earlier promoters will be dealtwith as individuals for their criminality but not the new bidderHwho is trying to restore the company. It could thus be seen, that

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

the speech made by Hon’ble Finance Minister while explainingthe amendment could be referred to for ascertaining what wasthe reason for moving the Bill. The speech can be used for findingout: what were the circumstances in which the amendment wascarried out; what was the mischief for which the unamendedsection did not provide; and what was sought to be remedied byamended enactment. [Paras 73, 76][787-E-H; 789-B-C]

2.11 It is clear, that the mischief, which was noticed priorto amendment of Section 31 of I&B Code was, that though thelegislative intent was to extinguish all such debts owed to theCentral Government, any State Government or any local authority,including the tax authorities once an approval was granted to theresolution plan by NCLT; on account of there being someambiguity, the State/Central Government authorities continuedwith the proceedings in respect of the debts owed to them. Inorder to remedy the said mischief, the legislature thought itappropriate to clarify the position, that once such resolutionplan was approved by the Adjudicating Authority, all such claims/dues owed to the State/Central Government or any local authorityincluding tax authorities, which were not part of the resolutionplan shall stand extinguished. [Para 77][789-D-E]

2.12 The faulty drafting in the provision was capable of beinginterpreted, that the legislative embargo imposed on personfrom procreating and giving birth to third child in the context ofholding the office of member of municipality remained inoperation for period of one year only and thereafter it was lifted.It could be interpreted, that on the date on which Section 13-Awas brought on the statute book i.e. dated 5.4.1994, even if aperson became disqualified, the disqualification ceased to operateand he became qualified once again to contest the election andhold the office of member of municipality on the expiry of oneyear from 5-4-1994. After realizing the error, Section 13-A cameto be amended. It could thus be seen, that what is material is, toascertain the legislative intent. If legislature by an amendmentsupplies an obvious omission in former statute or explains aformer statute, the subsequent statute has relation back to thetime when the prior Act was passed. [Paras 80, 82][793-E-F;798-D]

A2.13 One of the principal objects of I&B Code is, providingfor revival of the Corporate Debtor and to make it going concern.I&B Code is complete Code in itself. Upon admission of petitionunder Section 7, there are various important duties and functionsentrusted to RP and CoC. RP is required to issue publicationinviting claims from all the stakeholders. He is required to collateBthe said information and submit necessary details in theinformation memorandum. The resolution applicants submit theirplans on the basis of the details provided in the informationmemorandum. The resolution plans undergo deep scrutiny byRP as well as CoC. In the negotiations that may be held betweenCCoC and the resolution applicant, various modifications may bemade so as to ensure, that while paying part of the dues of financialcreditors 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 isrequired to arrive at subjective satisfaction, that the planDconforms to the requirements as are provided in sub-section (2)of Section 30 of the I&B Code. Only thereafter, the AdjudicatingAuthority can grant its approval to the plan. It is at this stage,that the plan becomes binding on Corporate Debtor, itsemployees, members, creditors, guarantors and otherEstakeholders involved in the resolution Plan. The legislativeintent behind this is, to freeze all the claims so that the resolutionapplicant starts on clean slate and is not flung with any surpriseclaims. If that is permitted, the very calculations on the basis ofwhich the resolution applicant submits its plans, would go haywireand the plan would be unworkable. [Para 86][802-F-H; 803-A-C]F2.14 The word “other stakeholders” would squarely coverthe Central Government, any State Government or any localauthorities. The legislature, noticing that on account of obviousomission, certain tax authorities were not abiding by the mandateof I&B Code and continuing with the proceedings, has broughtGout the 2019 amendment so as to cure the said mischief. Thus,the 2019 amendment is declaratory and clarificatory in natureand therefore retrospective in operation. “Creditor” thereforehas been defined to mean ‘any person to whom debt is owedand includes financial creditor, an operational creditor, secured

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

creditor, an unsecured creditor and decree-holder’.“Operational creditor” has been defined to mean person towhom an operational debt is owed and includes any person towhom such debt has been legally assigned or transferred.“Operational debt” has been defined to mean claim in respectof the provision of goods or services including employment or adebt in respect of the payment of dues arising under any law forthe 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 cardinal principle of law, that statute has to beread as whole. Harmonious construction of sub-section (10) ofSection 3 of the I&B Code read with sub-sections (20) and (21)of Section 5 thereof would reveal, that even claim in respect ofdues arising under any law for the time being in force and payableto the Central Government, any State Government or any localauthority would come within the ambit of ‘operational debt’. TheCentral Government, any State Government or any local authorityto whom an operational debt is owed would come within the ambitof ‘operational creditor’ as defined under sub-section (20) ofSection 5 of the I&B Code. Consequently, person to whom adebt is owed would be covered by the definition of ‘creditor’ asdefined under sub-section (10) of Section 3 of the I&B Code. Assuch, even without the 2019 amendment, the CentralGovernment, any State Government or any local authority to whoma debt is owed, including the statutory dues, would be coveredby the term ‘creditor’ and in any case, by the term ‘otherstakeholders’ as provided in sub-section (1) of Section 31 of theI&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 theview taken by us, the Central Government, any State Governmentor any local authority would be bound by the resolution plan, onceit is approved by the Adjudicating Authority (i.e. NCLT). [Paras91 and 94][804-C-F; 805-B-C]

3.1 As regards CA No.8129 of 2019, vide the impugnedjudgment and order dated 23.4.2019, NCLAT found, that as no

Aground was made out in terms of Section 61(3) of I&B Code, norelief could be granted in the appeals. The observations byNCLAT are beyond the scope of the powers available with NCLATunder sub-section (3) of s. 61 of I & Code. [Paras 109 and110][810-C-D; 811-C-D]

B3.2 NCLAT categorically found that no ground as is availableunder sub-section (3) of Section 61 of I&B Code has been madeout and has also categorically found, that the resolution plansubmitted by GMSPL was better offer than the other tworesolution applicants, including EARC and that the AdjudicatingAuthority has rightly approved the resolution plan of GMSPL.CAfter coming to such finding, the only option available withNCLAT was to dismiss the appeals. The observations made, ifpermitted to remain, would totally frustrate the object of I&BCode of revival of Corporate Debtor and to resurrect it as agoing concern. The successful resolution applicant cannot be flungDwith surprise claims which are not part of the resolution plan.Thus,it is thus clear, that according to the resolution plan submitted byEARC itself, had it been successful applicant, then in that event,the claims made by it would have been irrevocably waived andpermanently extinguished and written off in full with effect fromthe Effective Date. Had the resolution plan of EARC beenEapproved, then all such debts would have stood extinguishedwithout any further act or deed and approval of the said plan byNCLT would have been sufficient notice required to be givento any person for such matter. Undisputedly, the resolution plansubmitted by EARC was on the basis of the informationFmemorandum submitted by RP wherein, it was specificallyclarified, that the claims of EARC were not admitted by RP. It isthus clear, that EARC is trying to blow hot and cold at the sametime. According to it, had its resolution plan been approved byCoC and NCLT, then the claims, which are now insisted by EARCwould have stood extinguished. However, on its failure to becomeGa successful resolution applicant and approval of other applicantas successful resolution applicant, its claim would survive. Aparty cannot be permitted to apply two different yardsticks. [Paras111 and 114][811-D-F; 813-D-G]

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

3.3 In the instant case, the claim of EARC was rejected on22.1.2018. Instead of challenging the said rejection, EARCparticipated in the proceedings and was one of the resolutionapplicants. Not only that, in the first round, it was successfulbidder being ranked H1 bidder. However, since in thenegotiations it failed to satisfy CoC, fresh bids were invited fromthe resolution applicants, which had submitted their EOI. In the12th meeting of CoC held on 25.4.2018, the resolution plan ofGMSPL was approved by 89.23% of the voting shares. Onlythereafter, EARC filed two applications; one challenging theapproval of resolution plan of GMSPL by CoC and anotherchallenging rejection of its claims by RP/CoC. It could thus beclearly seen, that EARC was taking chances. After rejection ofits claim, it did not choose to challenge the same by an applicationunder Section 60(5) but waited till the decision of CoC. Duringthis period, it was actually pursuing its resolution plan. Only afterits resolution plan was not approved and the resolution plan ofGMSPL was approved, it filed the aforesaid two applications.Apart from that, as already observed in the resolution plan ofEARC itself, it has provided for extinguishment of all claims notforming 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 ‘financial creditor’ andentitled for participation in CoC, still its share was about 9%and as such, the resolution plan of GMSPL would have beenpassed by majority of 80%, which is much above the statutoryrequirement. Therefore, the observation made by NCLAT givingliberty to EARC to take recourse to such proceedings as availablein law for raising its claims is totally unsustainable. [Paras 122,123][815-F-G]

3.5 Insofar as, the observation made with regard to claimof the Jharkhand Government is concerned, it is to be noted,that the State of Jharkhand has not even appealed against theorder passed by NCLT. Insofar as, the claims of Labour andWorkmen are concerned, RP has specifically stated beforeNCLAT, that whatever claims were received from the workmenwere duly considered in the resolution plan. Despite that,

Aobserving that liberty is available to the workmen to raise theirclaims before Civil Court or Labour Court, is totally in conflictwith the provisions of I&B Code. The same would equally applyto the observation made in the appeal of DS, claiming to be‘operational creditor’. Therefore, the appeal is allowed byexpunging the paragraphs nos. 28, 42, 43, 51 and 52 from theBjudgment of NCLAT dated 23.4.2019. The judgment and orderpassed by NCLT dated 22.6.2018 is upheld. [Paras 124 and125][815-G-H; 816-A-C]3.6 2019 amendment to Section 31 of I&B Code isclarificatory and declaratory in nature and therefore will have aCretrospective operation. As such, when the resolution plan isapproved by NCLT, the claims, which are not part of the resolutionplan, shall stand extinguished and the proceedings related theretoshall stand terminated. Since the subject matter of the petitionare the proceedings, which relate to the claims of the respondents

Dprior to the approval of the plan, same cannot be continued.Equally the claims, which are not part of the resolution plan, shallstand extinguished. [Para 130][818-C-D]

4. In CA arising out of SLP 11232 of 2020, relegating theappellant to the alternative remedy would serve no purpose. Aparty cannot be made to run from one forum to another forum inErespect of the proceedings and the claims, which are notpermissible in law.The impugned judgment and order passed bythe High Court is quashed and set aside. The respondents arenot entitled to recover any claims or claim any debts owed tothem from the Corporate Debtor accruing prior to the transferFdate. [Paras 131, 132][818-E-F]

5. In ordinary course, WP (C) 117 of 2020 would not haveentertained such petition directly under Article 32 of theConstitution. However, question of law, which arises forconsideration in the instant petition has been considered in thisbatch of matters. In that view of the matter, it would not be in theGinterest of justice to non-suit the instant petitioner, when thequestion of law have been specifically decided, which would governthe present case also. The respondents are not entitled to recoverany claims or claim any debts owed to them from the CorporateDebtor accruing prior to the transfer date. [Paras 139, 140]H[820-A-C]

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

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 owedto the State Government and Central Government would notcome within the definition of ‘operational debt’, is incorrect inlaw. So also the finding, that since the order of NCLT is prior tothe date on which Section 31(1) of I&B Code was amended, theprovisions 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 Appellant-Company does not have locus to file the writ petitions inasmuchas, the management has been taken over by V Co. The resolutionplan is in respect of the Corporate Debtor and the successfulresolution applicant only takes over the management of theCorporate Debtor in accordance with the resolution plan. Theresolution applicant steps into the shoes of the Corporate Debtor.As such, the finding in this respect would also not be sustainablein law. [Para 145][821-B-D]

6.3 It was submitted that RP/CoC had acted in fraudulentmanner; and that though notice inviting claim was required tobe published in local newspapers where the registered office ofthe Corporate Debtor was situated, the notice was published inthe newspaper of Kolkata edition. As per Regulation 6(2)(b) ofthe 2016 Regulations, the said notice is required to be publishedin one English and one regional language newspaper with widecirculation at the location of the registered office and corporateoffice of the Corporate Debtor. Perusal of the record would reveal,that the notice was published in Business Standard and AnandaBazar Patrika newspapers of the Kolkata edition, which have widecirculation in Ranchi. The corporate office of the CorporateDebtor is at Kolkata whereas its registered office is at Ranchi.In any case, it is to be noticed, that the Forest Department of theState Government had filed intervention application before NCLTas well as NCLAT. When one of the wings of the StateGovernment has approached NCLT and NCLAT, it is difficult tobelieve, that other organ of the State was not aware about thesaid proceedings. [Para 146][821-D-G]

A6.4 The submission that finding with regard to non-compliance of Section 13 is not challenged by the ES Company,is also incorrect, inasmuch as, ES Company has raised the specificground 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 isquashed and set aside. The respondents are not entitled torecover any claims or claim any debts owed to them from theCorporate Debtor accruing prior to the transfer date. [Paras 148-149][822-A-B]

Committee of Creditors of Essar Steel India LimitedThrough Authorized Signatory v. Satish Kumar Guptaand 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; MaharashtraSeamless Limited vs. Padmanabhan Venkatesh andothers (2020) 11 SCC 467; Karad Urban CooperativeBank Ltd. vs. Swwapnil Bhingardevay & Ors. (2020) 9SCC 729; Kalpraj Dharamshi and Another vs. KotakInvestment Advisors Limited and Another 2021 SCCOnLine SC 204; Banarasi and Another v. Ram Phal(2003) 9 SCC 606 : [2003] 2 SCR 22; State Bank ofIndia vs. V. Ramakrishnan and Another (2018) 17 SCC394 : [2018] 10 SCR 974; B.K. Educational ServicesPrivate Limited v. Parag Gupta and Associates (2019)11 SCC 633 : [2018] 12 SCR 794; InnoventiveIndustries Ltd. vs. ICICI Bank & Anr (2018) 1 SCC407 : [2017] 8 SCR 33; Pr. Commissioner of IncomeTax vs. Monnet Ispat and Energy Ltd. 2018 (18) SCC786; K.P. Varghese v. Income Tax Officer, Ernakulamand Another (1981) 4 SCC 173 : [1982] 1 SCR 629;Union of India and others vs. Martin Lottery AgenciesLtd. (2009) 12 SCC 209 : [2009] 7 SCR 946; Zile Singhvs. 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

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR

India vs. V. Ramakrishnan and another (2018) 17 SCC394 : [2018] 10 SCR 974; Akshay Jhunjhunwala &Anr. vs. Union of India through the Ministry of CorporateAffairs & Ors. 2018 SCC OnLine Cal. 142; ExportImport Bank of India vs. Resolution Professional JEKPLPrivate Limited Company Appeal (AT) (Insolvency)No. 304 of 2017; Babu Ram Prakash ChandraMaheshwari vs. Antarim Zilla Parishad Muzaffar Nagar[1969] 1 SCR 518; Whirlpool Corporation vs. Registrarof Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 :[1998] 2 Suppl. SCR 359; Nivedita Sharma vs. CellularOperators Association of India & Ors. (2011) 14 SCC337; Embassy Property Developments Pvt. Ltd. vs. Stateof Karnataka and Others (2020) 13 SCC 308 – referredto.

Justice G.P. Singh treatise on “The principles ofStatutory Interpretation”, 14th Edition – referred to.

[2021] 13 S.C.R.

BCIVIL APPELLATE/ORIGINAL JURISDICTION: Civil AppealNo. 8129 of 2019.

From the Judgment and Order dated 23.04.2019 of the NationalCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)(Insolvency) No. 437 of 2018.C

With

Civil appeal No. 1554 of 2021, Writ Petition (Civil) No.1177 of2020 and Civil Appeal Nos. 1550-1553 of 2021.

Dr. Abhishek Manu Singhvi, Neeraj Kishan Kaul, Gopal Jain,DJaideep Gupta, Sr. Advs., Mahesh Agarwal, Himanshu Satija, ArshitAnand, Divyang Chandiramani, Rohan Talwar, Ankur Saigal, AmitBhandari, Yojit Mehra, Deepak Joshi, E.C. Agrawala, Ms. Shruti Jose,Ms. Anne Mathew, Amit Kumar Mishra, Siddharth Sharma, ShashankGautam, Shashank Manish, Arvind Thapliyal, Manik Ahluwalia, Ms. NidhiSahay, Yash Kumar, Advs. for the Appellant.E

V. Shekhar, S. Guru Krishna Kumar, Sr. Advs., Bhakti VardhanSingh, 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, PranavPrashant, Ms. Akansha Srivastava, Rabin Majumder, Mohammed Akhil,FRupesh Kumar, Ms. Seema Bengani, B. Krishna Prasad, B.V. BalaramDas, M.K. Maroria, Sandeep Bajaj, Soayib Qureshi, Ms. Aditi Pundhir,Ms. Sangya Gupta, Raj Kumar Mehta, Ms. Himanshi Andley, C.K. Rai,Buddy Ranganadhan, A.V. Rangam, Advs. for the Respondents.

The Judgment of the Court was delivered byGB. R. GAVAI, J.

1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of2020 and 7147-7150 of 2020.

2. The short but important questions, that arise for considerationHin this batch of matters, are as under:-

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

(i)As to whether any creditor including the CentralGovernment, State Government or any local authority isbound by the Resolution Plan once it is approved by anadjudicating authority under sub-section (1) of Section 31of the Insolvency and Bankruptcy Code, 2016 (hereinafterreferred to as ‘I&B Code’)?

(ii)As to whether the amendment to Section 31 by Section 7of Act 26 of 2019 is clarificatory/declaratory or substantivein nature?

(iii)As to whether after approval of resolution plan by theAdjudicating Authority creditor including the CentralCGovernment, State Government or any local authority isentitled to initiate any proceedings for recovery of any ofthe dues from the Corporate Debtor, which are not partof the Resolution Plan approved by the adjudicatingauthority?

3. We will first refer to the facts in each of these matters.

CIVIL APPEAL NO.8129 OF 2019 [GHANASHYAMMISHRA AND SONS PRIVATE LIMITED Vs. EDELWEISSASSET RECONSTRUCTION COMPANY LIMITED &OTHERS]

4. Orissa Manganese & Minerals Limited (hereinafter referredto as “Corporate Debtor” or “OMML”) was engaged in the business ofmining iron ore, graphite, manganese ore and agglomerating iron finesinto pellets through its facilities in Orissa and Jharkhand. The CorporateInsolvency Resolution Process (hereinafter referred to as “CIRP”) wasinitiated in respect of the Corporate Debtor by an application underSection 7 of I&B Code filed by the State Bank of India (hereinafterreferred to as “SBI”) before the National Company Law Tribunal, KolkataBench, 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 asInterim Resolution Professional (hereinafter referred to as “IRP”). Uponadmission of the said Company Petition, CIRP was initiated with effectfrom 3.8.2017. The appointment of IRP was confirmed by the Committeeof Creditors (hereinafter referred to as “CoC”) in their meeting held on4.9.2017. The Resolution Professional (hereinafter referred to as “RP”)

Acontinued with the resolution process by inviting Expression of Interest(hereinafter referred to as “EOI”) and applications for resolution plan inaccordance with the provisions of the I&B Code and the Regulationsframed thereunder. The initial period of CIRP of 180 days expired on29.1.2018. At the request of CoC, RP moved an application for extensionof CIRP period, which came to be extended by 90 days i.e. till 29.4.2018.B

6. In response to the invitation, three Resolution Plans werereceived by RP each from, Edelweiss Asset Reconstruction CompanyLimited (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 referredCto as “GMSPL”), the appellant herein, respectively. In the 8[th] meeting ofthe 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 resolutionplan submitted by EARC came to be rejected in the 9[th] meeting of CoCheld on 31.3.2018.

7. CoC thereafter proceeded for negotiations with the H2 Bidderi.e. GMSPL. However, the resolution plan of GMSPL was also found tobe unacceptable to CoC and therefore, in its 10[th] meeting held on 3.4.2018,it decided to annul the existing process and initiate fresh process forinvitation of Resolution Plan only from the applicants, which had earlierEsubmitted their EOI. Accordingly, communication was sent to theapplicants, which had submitted their EOI. In response to the saidinvitation, three Resolution Plans were received each from GMSPL,EARC and Srei Infrastructure Finance Limited (hereinafter referred toas “SIFL”) respectively. These Resolution Plans were considered byCoC in its 11[th] meeting held on 13.4.2018. After evaluation of theFResolution Plans, CoC ranked GMSPL as the H1 bidder.

8. Further negotiations were held by CoC with GMSPL. Afterseveral rounds of negotiations, the Resolution Plan of GMSPL wasconsidered by CoC for its approval. In its 12[th] meeting held on 21.4.2018,CoC unanimously took decision to convene meeting of CoC onG25.4.2018 at 6 PM, for voting on the Resolution Plan proposed byGMSPL. After being satisfied, that the Resolution Plan submitted byGMSPL meets all the requirements under sub-section (2) of Section 30of the I&B Code, the same was placed before the Members of CoC forvoting, and the Resolution Plan came to be approved by more thanH89.23% of the voting share of financial creditors of the Corporate Debtor.

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

9. Accordingly, Company Application being C.A (IB) No. 402/KB/2018 came to be filed by RP for approval of the Resolution Plansubmitted by GMSPL. One application being C.A. (IB) No. 398/KB/2018 came to be filed by EARC-respondent No.1 herein, challengingthe approval of the Resolution Plan of GMSPL. One more applicationcame to be filed by EARC being C.A. (IB) No. 470/KB/2018 challengingthe decision of RP in not admitting its claim. The said application wasfiled, contending, that its claim stood on the strength of corporate guaranteeprovided by the Corporate Debtor against the take-out facility providedto Adhunik Power and Natural Resources Limited (hereinafter referredto as “APNRL”), being sister concern of the Corporate Debtor. It wascontended, that in not admitting the claim on the strength of corporateguarantee, RP violated Regulations 13 and 14 of the Insolvency andBankruptcy Board of India (Insolvency Resolution Process for CorporatePersons) Regulations, 2016 (hereinafter referred to as “the Regulations”).It was prayed in the application for direction to the successful resolutionapplicant i.e. GMSPL, to undertake to pay the full amount due and payableunder the said corporate guarantee and further to issue directions forprotecting the rights of the lenders of APNRL as pledgee. One moreApplication being C.A. (IB) No.509/KB/2018 was filed by the DistrictMining Officer, Department of Mining and Geology, Jharkhandchallenging non-admission of its claim to the tune of Rs.93,51,91,724/-and Rs.760.51 crore.

10. NCLT by an elaborate order dated 22.6.2018 approved theResolution Plan of GMSPL, which was duly approved by CoC by votingshare of more than 89.23%. Rest of the applications including the twofiled by EARC, the respondent No.1 herein, came to be rejected.

11. Being aggrieved by the order passed by NCLT, EARC preferredCompany Appeal being Company Appeal (AT) (Insolvency) Nos. 437/2018 and 444/2018 before the National Company Law Appellate Tribunal,New Delhi (hereinafter referred to as “NCLAT”). Company Appeal(AT) (Insolvency) No. 437/2018 was against the rejection of claims ofEARC as Financial Creditor and thereby its non-inclusion in CoC.Company Appeal (AT) (Insolvency) No. 444/2018 came to be filed withthe grievance, that RP and CoC had erroneously held, that the plan ofGMSPL was better than that of EARC. One more Company Appealbeing Company Appeal (AT) (Insolvency) No. 500/2018 came to befiled by Sundargarh Mines & Transport Workers Union (hereinafter

Areferred to as “SMTWU”) on behalf of the workmen of the CorporateDebtor. One another Company Appeal being Company Appeal (AT)(Insolvency) No.438/2018 came to be filed by one Deepak Singh, anemployee of APNRL, claiming dues of his salary.

12. By the impugned judgment and order dated 23.4.2019, NCLATBwhile holding, that RP was justified in not accepting the claim of EARCand that NCLT had rightly rejected the application filed by EARC,however, observed that the rejection of the claim for the purpose ofcollating and making it part of the Resolution Plan will not affect theright of EARC to invoke the Bank Guarantee against the CorporateDebtor, in case the principal borrower failed to pay the debt amount,Csince the moratorium period had come to an end. NCLAT on comparisonof the plans submitted by EARC and GMSPL further held, that theresolution plan submitted by GMSPL was better one than the onesubmitted by other applicants and there was no illegality in accepting theresolution plan of GMSPL.D13. Insofar as the Company Appeal (AT) (Insolvency) No. 500/2018 is concerned, the grievance was, that though there were around1,476 workmen, RP ignored their rightful wages, statutory dues and otherbenefits. NCLAT, in the said order, observed, that after the period ofmoratorium, it was open for the persons to move before civil court orEto move an application before the court of competent jurisdiction againstthe Corporate Debtor. NCLAT therefore observed, that the appellanttherein may move before the civil court or court of competent jurisdictionand may file an application before the Labour Court for appropriatereliefs in favour of the concerned workmen or against the CorporateDebtor, if they have actually worked and had not been taken care of inFthe Resolution Plan.

14. Insofar as Company Appeal (AT) (Insolvency) No. 438/2018is concerned, it was the claim of Deepak Singh, appellant therein, thathe had joined APNRL, the holding Company of the Corporate Debtor,as the President-Group Head HR from 2.6.2014 to 9.3.2015. It was hisGclaim, that he had an amount of Rs.17,03,000/- recoverable from thesaid APNRL and as such, was an Operational Creditor. It was submitted,that though the claim of the said appellant was valid, it was illegallyrejected by RP. NCLAT held, that insofar as the said appeal is concerned,no ground as is permissible under sub-section (3) of Section 61 of I&BHCode is made out and as such, relief could not be granted in the appeal.

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

However, it was observed, that the said order passed in the appeal wouldnot come in the way of appellant to move the appropriate forum forappropriate relief.

15. GMSPL, thus, aggrieved by the observations made by NCLATto the effect, that the claims of the parties, which are not included in theResolution Plan could be agitated by them before the other forums, haspreferred the present appeal.

CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE

PETITION (CIVIL) NO.11232 OF 2020[ULTRATECH NATHDWARA CEMENT LIMITED VS.STATE OF UTTAR PRADESH AND OTHERS

16. The appellant is wholly owned subsidiary of UltraTechCement Limited and is engaged in the business of manufacturing andmarketing of cement and allied products.

17. On 19.12.2015, the Additional Commissioner, Commercial Tax,Ghaziabad passed an order in the appeal preferred by M/s Binani CementLimited, thereby, allowing the appeal filed by Binani Cement and settingaside the order of imposition of fine of Rs.24,71,885/-. Vide anotherorder dated 22.12.2015, passed in the appeal filed by Binani Cement, theorder of imposition of fine of Rs.59,61,445/- also came to be set aside.Vide order dated 2.8.2017, the Deputy Commissioner, Commercial Tax,Division-10, Ghaziabad held, that Binani Cement was liable to pay EntryTax of Rs.40,47,344/- for the Assessment Year 2003-2004. By anotherorder dated 2.8.2017, the Deputy Commissioner, Commercial Tax,Division-10, Ghaziabad further held, that Binani Cement was liable topay Entry Tax of Rs.43,06,715/- for the Assessment Year 2004-2005.

18. Since the said Binani Cement was unable to pay the debt toBank of Baroda, the Bank of Baroda filed an application being C.A.(IB) No. 359/KB/2017 before NCLT, Kolkata Bench under Section 7 ofI&B Code. Vide order dated 25.7.2017, NCLT admitted the petition forinitiating the CIRP process. Vide the said order, NCLT also declaredmoratorium for the purposes referred to in Section 14 of I&B Code.

19. Vide communication dated 10.11.2017, the authorities wereinformed about the initiation of the CIRP. However, the authority by anendorsement made on the application of the appellant herein stated, thatthere was no stay granted by NCLT on tax assessment process. It was

DEF

Aobserved, that if there was any clear order passed by NCLT, the sameshould be produced or the Binani Cement should appear on the nextdate i.e. 27.11.2017 for hearing of tax assessment process.

20. On 28.7.2017, RP made public announcement inviting claimsfrom all the creditors of the Corporate Debtor, as is required under Section15 of I&B Code. The last date for submission of claims was 8.8.2017.BRP upon receipt of the claims maintained list of creditors alongside theamount claimed by them and the security interest. RP also invited EOI.In response, various entities including the present appellant submittedtheir EOI as well as resolution plans. CoC in its meeting dated 28.5.2018,unanimously approved the Resolution Plan submitted by the presentCappellant. Pursuant to the approval by CoC, NCLAT granted approvalto the Resolution Plan of appellant vide order dated 14.11.2018. Thesaid order came to be challenged before this Court in Civil Appeal No.10998/2018, which was dismissed by this Court vide order dated19.11.2018.

21. On 13.12.2018, the name of the Corporate Debtor was changedDto UltraTech Nathdwara Cement Limited from Binani Cement Limitedand the management of the Corporate Debtor was taken over byUltratech Cement Limited w.e.f. 20.11.2018. Thereafter, the appellantaddressed various communications to the tax authorities, who arerespondents herein informing them, that after the Resolution Plan wasEapproved by NCLT, all proceedings instituted against the CorporateDebtor, arising and pending before the transfer date shall standwithdrawn. It was also informed, that all the liabilities towards operationalcreditors shall be deemed to have been settled by discharge and paymentof the resolution amount by the Corporate Debtor. However, it wasinsisted by the tax authorities, that since there was no specific stay,Fproceedings could not be dropped. After various communicationsaddressed by the appellant to the Joint Commissioner, Commercial Tax(Corporate Circle), Ghaziabad dated 26.4.2019, the followingendorsements came to be made by the authority on 29.4.2019:-

“After consideration on application presented by you, it isGfound that, by Hon’ble NCLT/NCLAT after transfer, neitherstay is imposed on tax assessment nor on creation of demand.So the created demand is payable by you. If you are not agreewith it, preferring appeal before higher authority, present itscopy to us. Disposal is done of application presented by you.”

_______

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

22. The Commercial Tax Department of the State of Rajasthanfiled Civil Appeal No. 5889/2019 challenging the Resolution Plan.However, the said appeal came to be dismissed vide order of this Courtdated 26.7.2019. The appeals being Civil Appeal Nos. 630-634/2020were also preferred by the Commissioner of Central Excise, Goods andServices Tax, Jodhpur challenging the Resolution Plan. The same alsocame to be dismissed by this Court vide order dated 24.1.2020.

23. The appellant therefore filed Civil Miscellaneous Writ PetitionNo. 354/2020 before the High Court of Allahabad challenging the orderpassed by the Additional Commissioner Grade 2 (Appeal) dated 30.1.2020,to the effect, that the proceedings in the State of U.P. would remainunaffected irrespective of the approval of the Resolution Plan of theappellant by NCLT. The appellant also prayed for declaration, that allthe proceedings pending before different authorities stand abated in termsof the approval of the Resolution Plan by NCLT. prayer was alsomade for refund of Rs.248.92 lakhs deposited by the appellant underprotest and for return of the Bank Guarantee.24. The Division Bench of the Allahabad High Court vide orderdated 6.7.2020 observed, that the contention of the appellant with regardto the approval of the Resolution Plan by NCLT has been dealt with bythe Assessing Authority as well as by the Appellate Authority andtherefore, it was in the fitness of things that the appellant should avail ofthe alternative remedy of filing second appeal available under the VATAct. Being aggrieved by the same, the appellant has filed the presentappeal.

WRIT PETITION (CIVIL) NO. 1177 OF 2020 M/SMONNET ISPAT & ENERGY LIMITED AND ANOTHER VS.STATE OF ODISHA AND ANOTHER

25. The petitioner Company is Corporate Debtor in respect ofwhich CIRP proceedings commenced in July 2017 and ended in July2018, when NCLT approved the Resolution Plan submitted by aConsortium of Aion Investment Private Limited and JSW Steel Limited(“Aion-JSW” for short). Prior to approval by NCLT, CoC had grantedapproval to the said Resolution Plan by voting majority of 98.97%. It isthe contention of the petitioner, that in accordance with the provisions ofI&B Code, RP had made public announcement thereby, inviting claims

Afrom Creditors. Contending, that the demand notices issued by therespondents for recovery of Service Tax towards Royalty, DistrictMineral Foundation (“DMF” for short) and National Mineral ExplorationTrust (“NMET” for short) against the iron ore purchased by the petitionerCompany are contrary to the law laid down by this Court in the case ofCommittee of Creditors of Essar Steel India Limited ThroughBAuthorized Signatory v. Satish Kumar Gupta and Others[1], thepetitioner has directly approached this Court by filing writ petition underArticle 32 of the Constitution of India.

CIVIL APPEALS ARISING OUT OF SPECIAL LEAVEPETITION (CIVIL) NOS.7147-7150 OF 2020C[ELECTROSTEEL STEELS LIMITED, BOKARO,JHARKHAND VS. STATE OF JHARKHAND AND OTHERS]

26. The appellant is Corporate Debtor in respect of which theproceedings under Section 7 were initiated by the SBI. Vide order datedD21.7.2017 of NCLT, the application filed by SBI was admitted and Mr.Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP).In its meeting dated 21.8.2017, CoC approved the appointment of IRPas RP. In response to the invitation for submission of resolution plans,four applicants had submitted their Resolution Plans. CoC had approvedthe Resolution Plan of Vedanta Limited by 100% voting share. NCLTEvide order dated 17.4.2018 approved the Resolution Plan of VedantaLimited. The appeal being Company Appeal (AT) (Insolvency) No. 175/2018 filed by one Renaissance Steel India Private Limited challengingthe order of NCLT came to be dismissed by NCLAT vide order dated10.8.2018. Challenging the notices issued by the respondent StateFAuthorities and the order of SBI asking it to pay an amount ofRs.37,41,41,602/- on account of tax penalty due under the JharkhandVAT Act for the period 2011-12 and 2012-13, the appellant approachedthe High Court of Jharkhand. The appellant had also challenged theletter dated 22.11.2019 issued by State Tax Officer, Bokaro to depositthe amount of Rs.75,57,000/-. As in the other matters, it is contended byGthe appellant, that in view of Section 31 of I&B Code, since the claimmade by the respondent was not part of the Resolution Plan, it wouldget extinguished on the Resolution Plan being approved by NCLT. Thesaid writ petition came to be rejected by the High Court on the ground,

H1 (2020) 8 SCC 531

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

that the petitioner had no locus and that the Resolution Plan was notbinding on the State Government since it had not participated in theCIRP proceedings.

SUBMISSIONS IN CIVIL APPEAL NO.8129 OF 2019[Ghanashyam Mishra and Sons Private Limited vs. EdelweissAsset Reconstruction Company Limited & Others]

27. Dr. A.M. Singhvi, learned Senior Counsel appearing forGMSPL submitted, that as held by this Court in catena of decisions,the commercial wisdom of CoC in accepting or rejecting the ResolutionPlan is paramount. He submitted, that the interference would bewarranted within the limited parameters of judicial review that areavailable under the Statute. The learned Senior Counsel further submitted,that once the adjudicating authority approves the Resolution Plan, it shallbe binding on everyone including Corporate Debtor and its employees,Members, Creditors including the Central Government, any StateGovernment or any local authority, to whom debt is owed in respect ofthe payment of dues arising under any law for the time being in force,guarantors and other stake-holders, involved in the Resolution Plan. Hesubmitted, that once Resolution Plan is accepted, if any additional liabilityis thrust upon the Resolution Plan, the entire plan would becomeunworkable, resulting into the frustration of the very purpose of theenactment i.e. revival of the Corporate Debtor.

28. Dr. Singhvi further submitted, that perusal of the ResolutionPlan submitted by EARC and particularly Clause 2.1.3 thereof wouldreveal, that the said Plan also provides, that all the debts and all dues,liability or obligations other than the one, which are included in ResolutionPlan, shall be deemed to have been irrevocably waived and permanentlyextinguished and written off in full with effect from the effective date.He submitted that similar provision is also made in the Resolution Plansubmitted by GMSPL.

29. The learned Senior Counsel further submitted, that theResolution Plan submitted by GMSPL is for an amount of Rs.321.19crore. If additional liability of Rs.648.89 crore is saddled upon theresolution applicant, the total resolution plan itself would be unworkable.

30. Dr. Singhvi further submitted that NCLT has found the conductof EARC not to be bona fide. He submitted, that NCLT has categoricallyfound, that the application filed by EARC was deliberate attempt to

Astage manage an objection against the approval of Resolution Plansubmitted by an entity, other than it. He submitted, that as matter offact, NCLT has imposed costs of Rs. 1 lakh on EARC taking intoconsideration its conduct.

31. Dr. Singhvi relied upon the judgments of this Court in theBcases of K. Shashidhar vs. Indian Overseas Bank and Others[2],Committee of Creditors of Essar Steel India Limited throughAuthorised Signatory vs. Satish Kumar Gupta & Ors. (supra)Maharashtra Seamless Limited vs. Padmanabhan Venkatesh andothers[3], Karad Urban Cooperative Bank Ltd. vs. SwwapnilBhingardevay & Ors.[4]and Kalpraj Dharamshi and Another vs.CKotak Investment Advisors Limited and Another[5].

32. Mr. Prashant Bhushan, learned Counsel appearing on behalfof the EARC-respondent No.1 submitted, that by the impugned order,NCLAT has only reserved the right of EARC to invoke the CorporateGuarantee in its favour. He submitted, that on account of the erroneousDconduct of the proceedings by RP and CoC, EARC has been put in aprecarious condition. He submitted, that on one hand RP has notrecognized EARC as financial creditor thereby, depriving its nominationto CoC and participation in finalization of the proceedings. On the otherhand, denying EARC to encash its bank guarantee would leave EARCEhigh and dry. substantial claim of EARC would be rendered futile, inthe event the order passed by NCLT is to be maintained. He thereforesubmitted, that no interference is warranted in the appeal.33. In reply to the submissions of the appellant that EARC hasnot preferred an appeal against the order of NCLAT though its appealFwas disposed of is concerned, the learned Counsel relying on the judgmentof this Court in the case of Banarasi and Another v. Ram Phal[6]submitted, that since the findings recorded by NCLAT are in its favour,there was no occasion for it to prefer an appeal. He submitted, that inany event, it can raise the grounds insofar as the findings in the impugnedorder, which are adverse to EARC in addition to supporting the finalGjudgment in its favour.

2 (2019) 12 SCC 1503 (2020) 11 SCC 4674 (2020) 9 SCC 7295 2021 SCC OnLine SC 204H6 (2003) 9 SCC 606

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

34. Shri Neeraj Kishan Kaul, learned Senior Counsel appearingon behalf of the appellant submitted, that assuming without admittingthat EARC could be considered as the financial creditor, it could havehad voting right only to the extent of 9% and even in that eventuality,resolution plan of GMSPL would have been approved by CoC with themajority of more than 80%.

SUBMISSIONS IN CIVIL APPEAL ARISING OUT OFSPECIAL LEAVE PETITION (CIVIL) NO.11232 OF 2020[UltraTech Nathdwara Cement Limited v. State of Uttar Pradeshand Others]

35. Dr. Singhvi, learned Senior Counsel appearing on behalf ofthe appellant-UltraTech Nathdwara Cement Limited submitted, that aconjoint reading of sub-section (10) of Section 3 and sub-sections (20)and (21) of Section 5 would show, that even if there was no amendmentto Section 31 of I&B Code by the 2019 Amendment, still the CentralGovernment and any State Government or the local authorities werebound by the same and any statutory dues owed to them by the CorporateDebtor, which were not included in the resolution plan, shall standextinguished. He submitted, that the 2019 Amendment, which amendsSection 31 is clarificatory in nature and only declares and clarifies theposition of law, which has already been in existence i.e. the CentralGovernment, any State Government and local authorities are bound bythe CIRP. He submitted, that this Court in the cases of State Bank ofIndia vs. V. Ramakrishnan and Another[7]and B.K. EducationalServices Private Limited v. Parag Gupta and Associates[8] has heldthe amendment to certain provisions of the I&B Code to be clarificatoryin nature. The learned Senior Counsel submitted, that upon perusal ofthe provisions of the I&B Code, it is clear, that once NCLT grantsapproval to the Resolution Plan, all proceedings pending insofar as theCorporate Debtor is concerned, which are not included in the ResolutionPlan shall stand automatically stayed. He submitted, that perusal of thechart pertaining to the dues of the respondents, clearly reveal that all ofthe said dues are prior to the admission of the Company Petition filedunder Section 7 of I&B Code and therefore, the respondents are notentitled to continue the proceedings in respect thereof since the same donot form part of the approved resolution plan.

7 (2018) 17 SCC 394

8 (2019) 11 SCC 633

A36. He submitted, that the orders passed by NCLAT werechallenged before this Court by the Revenue Authorities of the RajasthanState as well as the Commissioner of Central Excise (GST), Jodhpurand this Court had refused to interfere with the order passed by NCLAT.It is submitted, that in this background, the authorities are totally unjustifiedin continuing the proceedings, which are undisputedly with respect toBthe dues prior to admission of the application under Section 7 of I&BCode, only on the ground, that there is no specific stay order passed byNCLT.37. He submitted, that the High Court has erred in refusing toentertain the writ petition of the appellant solely on the ground, that anCalternative remedy by way of second appeal was available to theappellant. He submitted, that in catena of judgments, this Court has held,that non-exercise of jurisdiction under Article 226, despite availability ofalternative remedy is rule of self-restraint and in the appropriate areascarved out by this Court, entertaining petition under Article 226, despiteDavailability of alternative remedy, would be permissible. He submitted,that applying the said principle, the proceedings before the authority sincestand prohibited in view of the provisions of the I&B Code, the HighCourt erred in refusing to entertain the petition.

38. The learned Senior Counsel further submitted, that despiteEthe pendency of the present appeal, the Joint Commissioner, CommercialTax, Ghaziabad has passed an Assessment Order dated 2.2.2021 for theperiod prior to admission of Section 7 petition, as such the appellant hasfiled IA No.26255/2021 challenging the said assessment order.

39. Dr. Singhvi further submitted, that though the respondentFauthorities were aware of the Resolution Proceedings, they had failed tosubmit any claim, in response to the public notices issued by RP.

40. Shri V. Shekhar, learned Senior Counsel appearing on behalfof the State Authorities justified the impugned order and prayed fordismissal of the appeal. He submitted, that the order passed by NCLTGwould not come in the way of adjudicatory proceedings, which werecontinued by the authorities under the provisions of the relevant Statutes.He submitted, that the assessment orders which were passed inaccordance with law were duly approved in appeal by the higher authorityand therefore, the High Court was justified in observing that the petitionwas not maintainable, in view of the availability of alternative remedy ofHfiling second appeal.

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

41. The learned Senior Counsel submitted, that the adjudicatoryauthorities acting under the relevant statutes being not part of CoC arenot bound by the decision of CoC, which is approved by NCLT. Hefurther submitted, that merely continuation of the adjudicatory proceedingscannot be part of coercive action.

42. Shri V. Shekhar submitted, that 2019 Amendment cannot besaid to be clarificatory in nature and as such, the proceedings, whichwere pending prior to the date of the amendment to Section 31, wouldnot be affected by the 2019 Amendment to Section 31. He thereforeprayed for dismissal of the appeal.

SUBMISSIONS IN WRIT PETITION (CIVIL) NO. 1177OF 2020 [M/s Monnet Ispat & Energy Limited and Another v.State of Odisha and Another]

43. Shri Kaul, learned Senior Counsel appearing on behalf of thewrit petitioner submitted, that in spite of clear legal position as enunciatedin various judgments of this Court, various authorities in different partsof the country are continuing with the proceedings in respect of statutorydues existing prior to the date of approval of resolution plan by NCLT.He submitted, that various High Courts have held, relying on the judgmentsof this Court, that statutory dues prior to the date of admission of Section7 application and which are not part of the Resolution Plan shall standextinguished and the proceedings in respect thereof would no moresurvive. However, in some States, the authorities of the State are floutingthe law and as such, the petitioner has approached this Court in itsextraordinary jurisdiction under Article 32 of the Constitution so thatthere is an authoritative pronouncement by this Court. He submitted,that the respondent authorities in the present case had failed to file theclaims in response to the statutory public notice issued by RP. The firstdemand by the authorities raised is only after the plan was approved byCoC on 9.4.2018. He also relied on the speech delivered by the Hon’bleFinance Minister in Rajya Sabha on 29.7.2019, to buttress his submissionsthat the 2019 Amendment of Section 31 of I&B Code is clarificatory innature.

SUBMISSIONS IN APPEALS ARISING OUT OFSPECIAL LEAVE PETITION (CIVIL) NOS.7147-7150 OF 2020[Electrosteel Steels Limited, Bokaro, Jharkhand vs. State ofJharkhand and Others]

DEF

A44. Dr. Singhvi submitted, that in the present matter though NCLThad approved the Resolution Plan on 17.4.2018 and NCLAT haddismissed the appeal on 10.8.2018, only thereafter on 17.8.2018, the re-assessment order came to be passed for the period 2012-13. Hesubmitted, that immediately after the appellant discovered about the saidorder, the same was challenged in writ petition. However, the HighBCourt has dismissed the petition on erroneous grounds. It is submitted,that one of the grounds on which the petition is dismissed is, that it is theVedanta Limited, which was an aggrieved party since it was ResolutionApplicant and as such, the petition at the behest of the present appellant,which was Corporate Debtor was not tenable. He submitted, that theCsecond ground on which the writ petition is dismissed is that the StateAuthorities had not participated in CIRP and the order passed by NCLTwas binding only on the parties, which have participated in the Resolutionprocess. He submitted, that both the grounds are erroneous inasmuchas, Vedanta Limited is successful Resolution Applicant. The Resolutionprocess is in respect of the present appellant-writ petitioner, which is theDCorporate Debtor and as such, the petition at the behest of the presentappellant was very much tenable in law. Insofar as the second ground ofthe High Court is concerned, he submitted, that if such view is accepted,it will frustrate the entire object of I&B Code and the revival of theDebtor Companies would be impossible if the successful resolutionEapplicants are sprung with the surprise debts, which are not part of theResolution Plan.45. Shri Gurukrishna Kumar, learned Senior Counsel appearingon behalf of the respondent submitted, that the entire process conductedby RP and CoC is fraudulent. He submitted, that in accordance withFSection 29 and specifically, clause of Regulation 36, RP was requiredto furnish the details of the material litigation and an ongoing investigationor proceedings initiated by Government and Statutory Authorities in theinformation memorandum. However, the Resolution Applicant hadfraudulently used I&B Code by suppressing the vital information withregard to the same and thereby, denying the legitimate dues of publicGexchequer.

46. Dr. Singhvi in rejoinder submitted, that it is respondent’s ownadmission that they have not participated in the proceedings conductedby RP, CoC, NCLT, NCLAT and even this Court. He submitted, thatwhen the other Departments/Ministries had participated in theH

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

proceedings and raised their claims, it does not lie in the mouth ofrespondents to say, that they were not aware about CIRP proceedings.

47. In the said appeal, an intervention application has also beenfiled on behalf of Tata Steel BSL Limited. It is contended in the interventionapplication, that though the resolution process in respect of intervener/applicant was complete, still the Revenue Authorities were continuingwith the proceedings with respect to the dues owed prior to the date ofapproval of resolution plan by NCLT. It is the submission of theintervener/applicant, that as such, legal position needs to be settled bythis Court and therefore the intervener/applicant has filed the presentintervention application. Shri Jaideep Gupta, learned Senior Counselappearing on behalf of the said intervenor - applicant has madesubmissions on similar lines as are advanced by Dr. Singhvi and ShriKaul, learned Senior Counsel appearing in the other matters.

CONSIDERATION

48. We have extensively heard the learned counsel appearing forthe parties in all the matters, perused the written submissions and materialson record.

49. The provisions of I&B Code have undergone scrutiny in variousjudgments of this Court. We would not like to burden the present judgmentwith the provisions of the statute, which have been duly reproduced andconsidered in the earlier judgments of this Court.

50. In the case of Innoventive Industries Ltd. vs. ICICI Bank& Anr.[9] after reproducing the ‘Statement of Objects and Reasons’ ofI&B Code in paragraph 12, this Court observed thus:

“13. One of the important objectives of the Code is to bringthe insolvency law in India under single unified umbrellawith the object of speeding up of the insolvency process.As per the data available with the World Bank in 2016, insolvencyresolution in India took 4.3 years on an average, which was muchhigher when compared with the United Kingdom (1 year), USA(1.5 years) and South Africa (2 years). The World Bank’s Easeof Doing Business Index, 2015, ranked India as country number135 out of 190 countries on the ease of resolving insolvency basedon various indicia.”

[emphasis supplied]

51. This Court thereafter in paragraph 16 reproduced the relevantparagraphs contained in the report of the Bankruptcy Law ReformsCommittee Report of 2015. Thereafter, this Court reproduced all therelevant provisions of I&B Code in paragraphs 18 to 26.

52. This Court in the case of Innoventive Industries Ltd. (supra)Bthereafter elaborately discussed the scheme of the various provisions ofthe I&B Code in paragraphs 27 to 32, which read thus:

“27. The scheme of the Code is to ensure that when defaulttakes place, in the sense that debt becomes due and is not paid,the insolvency resolution process begins. Default is defined inCSection 3(12) in very wide terms as meaning non-payment of adebt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For themeaning of “debt”, we have to go to Section 3(11), which in turntells us that debt means liability of obligation in respect of a“claim” and for the meaning of “claim”, we have to go back toDSection 3(6) which defines “claim” to mean right to paymenteven if it is disputed. The Code gets triggered the moment defaultis of rupees one lakh or more (Section 4). The corporate insolvencyresolution process may be triggered by the corporate debtor itselfor financial creditor or operational creditor. distinction is madeEby the Code between debts owed to financial creditors andoperational creditors. financial creditor has been defined underSection 5(7) as person to whom financial debt is owed and afinancial debt is defined in Section 5(8) to mean debt which isdisbursed against consideration for the time value of money. Asopposed to this, an operational creditor means person to whomFan operational debt is owed and an operational debt under Section5(21) means claim in respect of provision of goods or services.

28. When it comes to financial creditor triggering the process,Section 7 becomes relevant. Under the Explanation to Section7(1), default is in respect of financial debt owed to any financialcreditor of the corporate debtor — it need not be debt owed tothe applicant financial creditor. Under Section 7(2), an applicationis to be made under sub-section (1) in such form and manner as isprescribed, which takes us to the Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules, 2016. Under Rule4, the application is made by financial creditor in Form 1

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

accompanied by documents and records required therein. Form 1is detailed form in 5 parts, which requires particulars of theapplicant in Part I, particulars of the corporate debtor in Part II,particulars of the proposed interim resolution professional in PartIII, particulars of the financial debt in Part IV and documents,records and evidence of default in Part V. Under Rule 4(3), theapplicant is to dispatch copy of the application filed with theadjudicating authority by registered post or speed post to theregistered office of the corporate debtor. The speed, within whichthe adjudicating authority is to ascertain the existence of defaultfrom the records of the information utility or on the basis of evidencefurnished by the financial creditor, is important. This it must dowithin 14 days of the receipt of the application. It is at the stage ofSection 7(5), where the adjudicating authority is to be satisfiedthat default has occurred, that the corporate debtor is entitled topoint out that default has not occurred in the sense that the“debt”, which may also include disputed claim, is not due. Adebt may not be due if it is not payable in law or in fact. Themoment the adjudicating authority is satisfied that defaulthas occurred, the application must be admitted unless it isincomplete, in which case it may give notice to the applicantto rectify the defect within 7 days of receipt of notice fromthe adjudicating authority. Under sub-section (7), theadjudicating authority shall then communicate the order passed tothe financial creditor and corporate debtor within 7 days ofadmission or rejection of such application, as the case may be.

29. The scheme of Section 7 stands in contrast with the schemeunder Section 8 where an operational creditor is, on the occurrenceof default, to first deliver demand notice of the unpaid debt tothe operational debtor in the manner provided in Section 8(1) ofthe Code. Under Section 8(2), the corporate debtor can, within aperiod of 10 days of receipt of the demand notice or copy of theinvoice mentioned in sub-section (1), bring to the notice of theoperational creditor the existence of dispute or the record of thependency of suit or arbitration proceedings, which is pre-existing—i.e. before such notice or invoice was received by thecorporate debtor. The moment there is existence of such dispute,the operational creditor gets out of the clutches of the Code.

ABC

30. On the other hand, as we have seen, in the case of corporatedebtor who commits default of financial debt, the adjudicatingauthority has merely to see the records of the information utilityor other evidence produced by the financial creditor to satisfyitself that default has occurred. It is of no matter that the debt isdisputed so long as the debt is “due” i.e. payable unless interdictedby some law or has not yet become due in the sense that it ispayable at some future date. It is only when this is proved to thesatisfaction of the adjudicating authority that the adjudicatingauthority may reject an application and not otherwise.

31. The rest of the insolvency resolution process is also veryimportant. The entire process is to be completed within periodof 180 days from the date of admission of the application underSection 12 and can only be extended beyond 180 days for furtherperiod of not exceeding 90 days if the committee of creditors by avoting of 75% of voting shares so decides. It can be seen thattime is of essence in seeing whether the corporate body can beput back on its feet, so as to stave off liquidation.

32. As soon as the application is admitted, moratorium in termsof Section 14 of the Code is to be declared by the adjudicatingauthority and public announcement is made stating, inter alia,Ethe last date for submission of claims and the details of the interimresolution professional who shall be vested with the managementof the corporate debtor and be responsible for receiving claims.Under Section 17, the erstwhile management of the corporatedebtor is vested in an interim resolution professional who is atrained person registered under Chapter IV of the Code. ThisFinterim resolution professional is now to manage the operations ofthe corporate debtor as going concern under the directions of acommittee of creditors appointed under Section 21 of the Act.Decisions by this committee are to be taken by vote of not lessthan 75% of the voting share of the financial creditors. UnderGSection 28, resolution professional, who is none other than aninterim resolution professional who is appointed to carry out theresolution process, is then given wide powers to raise finances,create security interests, etc. subject to prior approval of thecommittee of creditors.”

53. After discussing the relevant provisions of I&B Code, thisCourt observed thus:

“33. Under Section 30, any person who is interested inputting the corporate body back on its feet may submit aresolution plan to the resolution professional, which isprepared on the basis of an information memorandum. Thisplan must provide for payment of insolvency resolutionprocess costs, management of the affairs of the corporatedebtor after approval of the plan, and implementation andsupervision of the plan. It is only when such plan is approvedby vote of not less than 75% of the voting share of thefinancial creditors and the adjudicating authority is satisfiedthat the plan, as approved, meets the statutoryrequirements mentioned in Section 30, that it ultimatelyapproves such plan, which is then binding on the corporatedebtor as well as its employees, members, creditors,guarantors and other stakeholders. Importantly, and this is amajor departure from previous legislation on the subject, themoment the adjudicating authority approves the resolution plan,the moratorium order passed by the authority under Section 14shall cease to have effect. The scheme of the Code, therefore,is to make an attempt, by divesting the erstwhilemanagement of its powers and vesting it in professionalagency, to continue the business of the corporate body as agoing concern until resolution plan is drawn up, in whichevent the management is handed over under the plan sothat the corporate body is able to pay back its debts andget back on its feet. All this is to be done within period of 6months with maximum extension of another 90 days or else thechopper comes down and the liquidation process begins.”

[emphasis supplied]

54. It could thus be seen, that one of the dominant objects of I&BCode is to see to it, that an attempt has to be made to revive the CorporateDebtor and make it running concern. For that, resolution applicanthas to prepare resolution plan on the basis of the InformationMemorandum. The Information Memorandum, which is required to beprepared in accordance with Section 29 of I&B Code along withRegulation 36 of the Regulations, is required to contain various details,

Awhich have been gathered by RP after receipt of various claims inresponse to the statutorily mandated public notice. The resolution plan isrequired to provide for the payment of insolvency resolution processcosts, management of the affairs of the Corporate Debtor after approvalof the resolution plan; the implementation and supervision of the resolutionplan. It is only after the Adjudicating Authority satisfies itself, that theBplan as approved by CoC with the requisite voting share of financialcreditors meets the requirement as referred to in sub-section (2) of Section30, grants its approval to it. It is only thereafter, that the said plan isbinding on the Corporate Debtor as well as its employees, members,creditors, guarantors and other stakeholders involved in the resolutionCPlan. The moratorium order passed by the Adjudicating Authority underSection 14 shall cease to operate, once the Adjudicating Authorityapproves the resolution plan. The scheme of I&B Code therefore is, tomake an attempt, by divesting the erstwhile management of its powersand vesting it in professional agency, to continue the business of theCorporate Debtor as going concern until resolution plan is drawn up.DOnce the resolution plan is approved, the management is handed overunder the plan to the successful applicant so that the Corporate Debtoris able to pay back its debts and get back on its feet.

55. This Court recently in the case of Kalpraj Dharamshi andanother vs.Kotak Investment Advisors Ltd. and another (supra) has,Ein detail, considered the provisions of Sections 30 and 31 of I&B Code,the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 andthe judgments of this Court in the case K. Sashidhar (supra), Committeeof Creditors of Essar Steel India Limited through AuthorisedSignatory vs. Satish Kumar Gupta & Ors. (supra) and MaharashtraFSeamless Limited vs. Padmanabhan Venkatesh and others (supra)and observed thus:

“139. It is thus clear, that the Committee was of the view, thatfor deciding key economic question in the bankruptcy process,the only one correct forum for evaluating such possibilities, andGmaking decision was, creditors committee, wherein all financialcreditors have votes in proportion to the magnitude of debt thatthey hold. The BLRC has observed, that laws in India in the pasthave brought arms of the Government (legislature, executive orjudiciary) into the question of bankruptcy process. This has beenstrictly avoided by the Committee and it has been provided, thatH

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

the decision with regard to appropriate disposition of defaultingfirm, which is business decision, should only be made by thecreditors. It has been observed, that the evaluation of proposalsto keep the entity as going concern, including decisions aboutthe sale of business or units, restructuring of debt, etc., are requiredto be taken by the Committee of the Financial Creditors. It hasbeen provided, that the choice of the solution to keep the entity asa going concern will be voted upon by CoC and there are noconstraints on the proposals that the resolution professional canpresent to CoC. The requirements, that the resolution professionalneeds to confirm to the Adjudicator, are:

(i)that the solution must explicitly require the repaymentof any interim finance and costs of the insolvencyresolution process will be paid in priority to otherpayments;

(ii)that the plan must explicitly include payment to allcreditors not on the creditors committee, within areasonable period after the solution is implemented; andlastly

(iii)the plan should comply with existing laws governing theactions of the entity while implementing the solutions.

140. The Committee also expressed the opinion, that there shouldbe freedom permitted to the overall market, to propose solutionson keeping the entity as going concern. The Committee opined,that the details as to how the insolvency is to be resolved or as tohow the entity is to be revived, or the debt is to be restructuredwill not be provided in the I&B Code but such decision willcome from the deliberations of CoC in response to the solutionsproposed by the market.

141. This Court in the case of K. Sashidhar (supra) observedthus:

“32. Having heard the learned counsel for the parties, the mootquestion is about the sequel of the approval of the resolutionplan by CoC of the respective corporate debtor, namely,KS&PIPL and IIL, by vote of less than seventy-five percent of voting share of the financial creditors; and about thecorrectness of the view taken by NCLAT that the percentage

of voting share of the financial creditors specified in Section30(4) of the I&B Code is mandatory. Further, is it open tothe adjudicating authority/appellate authority to reckon anyother factor other than specified in Sections 30(2) or 61(3)of the I&B Code as the case may be which, according tothe resolution applicant and the stakeholders supportingthe resolution plan, may be relevant?”

(emphasis supplied)

142. After considering the judgment of this Court in the caseof Arcelormittal India Private Limited v. Satish KumarGupta[46] and the relevant provisions of the I&B Code, this courtfurther observed in K. Sashidhar (supra) thus:

“52. As aforesaid, upon receipt of “rejected” resolution planthe adjudicating authority (NCLT) is not expected to do anythingmore; but is obligated to initiate liquidation process under Section33(1) of the I&B Code. The legislature has not endowed theadjudicating authority (NCLT) with the jurisdiction or authorityto analyse or evaluate the commercial decision of CoC muchless to enquire into the justness of the rejection of the resolutionplan by the dissenting financial creditors. From the legislativehistory and the background in which the I&B Code has beenenacted, it is noticed that completely new approach has beenadopted for speeding up the recovery of the debt due from thedefaulting companies. In the new approach, there is calmperiod followed by swift resolution process to be completedwithin 270 days (outer limit) failing which, initiation of liquidationprocess has been made inevitable and mandatory. In the earlierregime, the corporate debtor could indefinitely continue to enjoythe protection given under Section 22 of the Sick IndustrialCompanies Act, 1985 or under other such enactments whichhas now been forsaken. Besides, the commercial wisdom ofCoC has been given paramount status without any judicialintervention, for ensuring completion of the statedprocesses within the timelines prescribed by the I&B Code.There is an intrinsic assumption that financial creditorsare fully informed about the viability of the corporate debtorand feasibility of the proposed resolution plan. They acton the basis of thorough examination of the proposed

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

resolution plan and assessment made by their team ofexperts. The opinion on the subject-matter expressed bythem after due deliberations in CoC meetings throughvoting, as per voting shares, is collective businessdecision. The legislature, consciously, has not provided anyground to challenge the “commercial wisdom” of theindividual financial creditors or their collective decisionbefore the adjudicating authority. That is made non-justiciable.”

(emphasis supplied)

143. This Court has held, that it is not open to the AdjudicatingAuthority or Appellate Authority to reckon any other factor otherthan specified in Sections 30(2) or 61(3) of the I&B Code. It hasfurther been held, that the commercial wisdom of CoC has beengiven paramount status without any judicial intervention forensuring completion of the stated processes within the timelinesprescribed by the I&B Code. This Court thus, in unequivocal terms,held, that there is an intrinsic assumption, that financial creditorsare fully informed about the viability of the corporate debtor andfeasibility of the proposed resolution plan. They act on the basisof thorough examination of the proposed resolution plan andassessment made by their team of experts. It has been held, thatthe opinion expressed by CoC after due deliberations in themeetings through voting, as per voting shares, is collectivebusiness decision. It has been held, that the legislature hasconsciously not provided any ground to challenge the “commercialwisdom” of the individual financial creditors or their collectivedecision before the Adjudicating Authority and that the decisionof CoC’s ‘commercial wisdom’ is made non-justiciable.

144. This Court in Committee of Creditors of Essar Steel IndiaLimited through Authorised Signatory (supra) after referringto the judgment of this Court in the case of K. Sashidhar (supra)observed thus:

“64. Thus, what is left to the majority decision of theCommittee of Creditors is the “feasibility and viability” of aresolution plan, which obviously takes into account all aspectsof the plan, including the manner of distribution of funds amongthe various classes of creditors. As an example, take the case

of resolution plan which does not provide for payment ofelectricity dues. It is certainly open to the Committee of Creditorsto suggest modification to the prospective resolution applicantto the effect that such dues ought to be paid in full, so that thecarrying on of the business of the corporate debtor does notbecome impossible for want of most basic and essentialelement for the carrying on of such business, namely, electricity.This may, in turn, be accepted by the resolution applicant witha consequent modification as to distribution of funds, paymentbeing provided to certain type of operational creditor, namely,the electricity distribution company, out of upfront paymentoffered by the proposed resolution applicant which may alsoresult in consequent reduction of amounts payable to otherfinancial and operational creditors. What is important is thatit is the commercial wisdom of this majority of creditorswhich is to determine, through negotiation with theprospective resolution applicant, as to how and in whatmanner the corporate resolution process is to take place.”

(emphasis supplied)

145. This Court held, that what is left to the majority decision ofCoC is the “feasibility and viability” of resolution plan, which isrequired to take into account all aspects of the plan, including themanner of distribution of funds among the various classes ofcreditors. It has further been held, that CoC is entitled to suggesta modification to the prospective resolution applicant, so thatcarrying on the business of the Corporate Debtor does not becomeimpossible, which suggestion may, in turn, be accepted by theresolution applicant with consequent modification as todistribution of funds, etc. It has been held, that what is importantis, the commercial wisdom of the majority of creditors, which is todetermine, through negotiation with the prospective resolutionapplicant, as to how and in what manner the corporate resolutionprocess is to take place.

146. The view taken in the case of K. Sashidhar (supra)and Committee of Creditors of Essar Steel India Limitedthrough Authorised Signatory (supra) has been reiterated byanother three Judges Bench of this Court in the caseof Maharashtra Seamless Limited (supra).

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

147. In all the aforesaid three judgments of this Court, the scopeof jurisdiction of the Adjudicating Authority (NCLT) and theAppellate Authority (NCLAT) has also been elaboratelyconsidered. It will be relevant to refer to paragraph 55 of thejudgment in the case of K. Sashidhar (supra), which reads thus:

“55. Whereas, the discretion of the adjudicating authority(NCLT) is circumscribed by Section 31 limited to scrutiny ofthe resolution plan “as approved” by the requisite per cent ofvoting share of financial creditors. Even in that enquiry, thegrounds on which the adjudicating authority can reject theresolution plan is in reference to matters specified in Section30(2), when the resolution plan does not conform to the statedrequirements. Reverting to Section 30(2), the enquiry to bedone is in respect of whether the resolution plan provides : (i)the payment of insolvency resolution process costs in specifiedmanner in priority to the repayment of other debts of thecorporate debtor, (ii) the repayment of the debts of operationalcreditors in prescribed manner, (iii) the management of theaffairs of the corporate debtor, (iv) the implementation andsupervision of the resolution plan, (v) does not contravene anyof the provisions of the law for the time being in force, (vi)conforms to such other requirements as may be specified bythe Board. The Board referred to is established under Section188 of the I&B Code. The powers and functions of the Boardhave been delineated in Section 196 of the I&B Code. Noneof the specified functions of the Board, directly or indirectly,pertain to regulating the manner in which the financial creditorsought to or ought not to exercise their commercial wisdomduring the voting on the resolution plan under Section 30(4) ofthe I&B Code. The subjective satisfaction of the financialcreditors at the time of voting is bound to be mixed baggageof variety of factors. To wit, the feasibility and viability of the

proposed resolution plan and including their perceptions aboutthe general capability of the resolution applicant to translatethe projected plan into reality. The resolution applicant mayhave given projections backed by normative data but still in theopinion of the dissenting financial creditors, it would not befree from being speculative. These aspects are completelywithin the domain of the financial creditors who are called

upon to vote on the resolution plan under Section 30(4) of theI&B Code.”

148. It has been held, that in an enquiry under Section 31, thelimited enquiry that the Adjudicating Authority is permitted is, asto whether the resolution plan provides:

(i) the payment of insolvency resolution process costs in specifiedmanner in priority to the repayment of other debts of the corporatedebtor,

(ii) the repayment of the debts of operational creditors inprescribed manner,

(iii) the management of the affairs of the corporate debtor,

(iv) the implementation and supervision of the resolution plan,

(v) the plan does not contravene any of the provisions of the lawfor the time being in force,

(vi) conforms to such other requirements as may be specified bythe Board.

149. It will be further relevant to refer to the following observationsof this Court in K. Sashidhar (supra):

57. …Indubitably, the remedy of appeal including the width ofjurisdiction of the appellate authority and the grounds of appeal,is creature of statute. The provisions investing jurisdictionand authority in NCLT or NCLAT as noticed earlier, havenot made the commercial decision exercised by CoC of notapproving the resolution plan or rejecting the same,justiciable. This position is reinforced from the limitedgrounds specified for instituting an appeal that too againstan order “approving resolution plan” under Section 31.First, that the approved resolution plan is in contravention ofthe provisions of any law for the time being in force. Second,there has been material irregularity in exercise of powers “bythe resolution professional” during the corporate insolvencyresolution period. Third, the debts owed to operational creditorshave not been provided for in the resolution plan in theprescribed manner. Fourth, the insolvency resolution plan costshave not been provided for repayment in priority to all other

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

debts. Fifth, the resolution plan does not comply with any othercriteria specified by the Board. Significantly, the matters orgrounds—be it under Section 30(2) or under Section 61(3) ofthe I&B Code —are regarding testing the validity of the“approved” resolution plan by CoC; and not for approving theresolution plan which has been disapproved or deemed to havebeen rejected by CoC in exercise of its business decision.”

[emphasis supplied]

150. It will therefore be clear, that this Court, in unequivocal terms,held, that the appeal is creature of statute and that the statutehas not invested jurisdiction and authority either with NCLT orNCLAT, to review the commercial decision exercised by CoC ofapproving the resolution plan or rejecting the same.

151. The position is clarified by the following observations inparagraph 59 of the judgment in the case of K. Sashidhar (supra),which reads thus:

“59. In our view, neither the adjudicating authority (NCLT)nor the appellate authority (NCLAT) has been endowed withthe jurisdiction to reverse the commercial wisdom of thedissenting financial creditors and that too on the specious groundthat it is only an opinion of the minority financial creditors…..”

152. This Court in Committee of Creditors of Essar Steel IndiaLimited through Authorised Signatory (supra) after reproducingcertain paragraphs in K. Sashidhar (supra) observed thus:

“Thus, it is clear that the limited judicial review available, whichcan in no circumstance trespass upon business decision ofthe majority of the Committee of Creditors, has to be withinthe four corners of Section 30(2) of the Code, insofar as theAdjudicating Authority is concerned, and Section 32 read withSection 61(3) of the Code, insofar as the Appellate Tribunal isconcerned, the parameters of such review having been clearlylaid down in K. Sashidhar”

153. It can thus be seen, that this Court has clarified, that thelimited judicial review, which is available, can in no circumstancetrespass upon business decision arrived at by the majority ofCoC.

154. In the case of Maharashtra Seamless Limited (supra),NCLT had approved the plan of appellant therein with regard toCIRP of United Seamless Tubulaar (P) Ltd. In appeal, NCLATdirected, that the appellant therein should increase upfront paymentto Rs. 597.54 crore to the “financial creditors”, “operationalcreditors” and other creditors by paying an additional amount ofRs. 120.54 crore. NCLAT further directed, that in the event the“resolution applicant” failed to undertake the payment of additionalamount of Rs. 120.54 crore in addition to Rs. 477 crore and depositthe said amount in escrow account within 30 days, the order ofapproval of the ‘resolution plan’ was to be treated to be set aside.While allowing the appeal and setting aside the directions ofNCLAT, this Court observed thus:

“30. The appellate authority has, in our opinion, proceeded onequitable perception rather than commercial wisdom. On theface of it, release of assets at value 20% below its liquidationvalue arrived at by the valuers seems inequitable. Here, wefeel the Court ought to cede ground to the commercial wisdomof the creditors rather than assess the resolution plan on thebasis of quantitative analysis. Such is the scheme of the Code.Section 31(1) of the Code lays down in clear terms that forfinal approval of resolution plan, the adjudicating authorityhas to be satisfied that the requirement of sub-section (2) ofSection 30 of the Code has been complied with. The proviso toSection 31(1) of the Code stipulates the other point on whichan adjudicating authority has to be satisfied. That factor is thatthe resolution plan has provisions for its implementation. Thescope of interference by the adjudicating authority in limitedjudicial review has been laid down in Essar Steel [Essar SteelIndia Ltd. Committee of Creditors v. Satish KumarGupta, (2020) 8 SCC 531], the relevant passage (para 54) ofwhich we have reproduced in earlier part of this judgment.The case of MSL in their appeal is that they want to run thecompany and infuse more funds. In such circumstances, wedo not think the appellate authority ought to have interferedwith the order of the adjudicating authority in directing thesuccessful resolution applicant to enhance their fund inflowupfront.”

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

155. This Court observed, that the Court ought to cede ground tothe commercial wisdom of the creditors rather than assess theresolution plan on the basis of quantitative analysis. This Courtclearly held, that the appellate authority ought not to have interferedwith the order of the adjudicating authority by directing thesuccessful resolution applicant to enhance their fund inflow upfront.

156. It would thus be clear, that the legislative scheme, asinterpreted by various decisions of this Court, is unambiguous.The commercial wisdom of CoC is not to be interfered with,excepting the limited scope as provided under Sections 30 and 31of the I&B Code.”

56. Another three Judges Bench of this Court in the case of KaradUrban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors.(supra), taking similar view, has observed thus:

“14. The principles laid down in the aforesaid decisions, makeone thing very clear. If all the factors that need to be taken intoaccount for determining whether or not the corporate debtor canbe kept running as going concern have been placed before theCommittee of Creditors and CoC has taken conscious decisionto approve the resolution plan, then the adjudicating authority willhave to switch over to the hands off mode. It is not the case ofthe corporate debtor or its promoter/Director or anyone else thatsome of the factors which are crucial for taking decisionregarding the viability and feasibility, were not placed before CoCor the resolution professional….”

57. It could thus be seen, that the legislature has given paramountimportance to the commercial wisdom of CoC and the scope of judicialreview by Adjudicating Authority is limited to the extent provided underSection 31 of I&B Code and of the Appellate Authority is limited to theextent provided under sub-section (3) of Section 61 of the I&B Code, isno more res integra.

58. Bare reading of Section 31 of the I&B Code would also makeit abundantly clear, that once the resolution plan is approved by theAdjudicating Authority, after it is satisfied, that the resolution plan asapproved by CoC meets the requirements as referred to in sub-section(2) of Section 30, it shall be binding on the Corporate Debtor and itsemployees, members, creditors, guarantors and other stakeholders. Such

Aa provision is necessitated since one of the dominant purposes of theI&B Code is, revival of the Corporate Debtor and to make it runningconcern.

59. The resolution plan submitted by successful resolution applicantis required to contain various provisions, viz., provision for payment ofBinsolvency resolution process costs, provision for payment of debts ofoperational creditors, which shall not be less than the amount to be paidto such creditors in the event of liquidation of the Corporate Debtorunder section 53; or the amount that would have been paid to suchcreditors, if the amount to be distributed under the resolution plan hadbeen distributed in accordance with the order of priority in sub-sectionC(1) of section 53, whichever is higher. The resolution plan is also requiredto provide for the payment of debts of financial creditors, who do notvote in favour of the resolution plan, which also shall not be less than theamount to be paid to such creditors in accordance with sub-section (1)of section 53 in the event of liquidation of the Corporate Debtor.DExplanation 1 to clause (b) of sub-section (2) of Section 30 of the I&BCode clarifies for the removal of doubts, that distribution in accordancewith the provisions of the said clause shall be fair and equitable to suchcreditors. The resolution plan is also required to provide for themanagement of the affairs of the Corporate Debtor after approval ofthe resolution plan and also the implementation and supervision of theEresolution plan. Clause (e) of sub-section (2) of Section 30 of I&B Codealso casts duty on RP to examine, that the resolution plan does notcontravene any of the provisions of the law for the time being in force.60. Perusal of Section 29 of the I&B Code read with Regulation36 of the Regulations would reveal, that it requires RP to prepare anFinformation memorandum containing various details of the CorporateDebtor so that the resolution applicant submitting plan is aware of theassets and liabilities of the Corporate Debtor, including the details aboutthe creditors and the amounts claimed by them. It is also required tocontain the details of guarantees that have been given in relation to theGdebts of the corporate debtor by other persons. The details with regardto all material litigation and an ongoing investigation or proceeding initiatedby Government and statutory authorities are also required to be containedin the information memorandum. So also the details regarding the numberof workers and employees and liabilities of the Corporate Debtor towardsthem are required to be contained in the information memorandum.H

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

61. All these details are required to be contained in the informationmemorandum so that the resolution applicant is aware, as to what arethe liabilities, that he may have to face and provide for plan, whichapart from satisfying part of such liabilities would also ensure, that theCorporate Debtor is revived and made running establishment. Thelegislative intent of making the resolution plan binding on all the stake-holders after it gets the seal of approval from the Adjudicating Authorityupon its satisfaction, that the resolution plan approved by CoC meets therequirement as referred to in sub-section (2) of Section 30 is, that afterthe approval of the resolution plan, no surprise claims should be flung onthe successful resolution applicant. The dominant purpose is, that heshould start with fresh slate on the basis of the resolution plan approved.

62. This aspect has been aptly explained by this Court in the caseof Committee of Creditors of Essar Steel India Limited throughAuthorised Signatory (supra).

“107. For the same reason, the impugned Nclat judgment[Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCCOnLine NCLAT 388] in holding that claims that may exist apartfrom those decided on merits by the resolution professional andby the Adjudicating Authority/Appellate Tribunal can now bedecided by an appropriate forum in terms of Section 60(6) of theCode, 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 hasbeen accepted as this would amount to hydra head popping upwhich would throw into uncertainty amounts payable by aprospective resolution applicant who would successfully take overthe business of the corporate debtor. All claims must be submittedto and decided by the resolution professional so that prospectiveresolution applicant knows exactly what has to be paid in orderthat it may then take over and run the business of the corporatedebtor. This the successful resolution applicant does on freshslate, as has been pointed out by us hereinabove. For thesereasons, Nclat judgment must also be set aside on this count.”

63. In view of this legal position, we could have very well stoppedhere and held, that, the observation made by NCLAT in the appeal filedby EARC to the effect, that EARC was entitled to take recourse tosuch remedies as are available to it in law, is impermissible in law.

ABC

A64. As held by this Court in the case of Pr. Commissioner ofIncome Tax vs. Monnet Ispat and Energy Ltd.[10], in view of provisionsof Section 238 of I&B Code, the provisions thereof will have an overridingeffect, if there is any inconsistency with any of the provisions of the lawfor the time being in force or any instrument having effect by virtue ofany such law. As such, the observations made by NCLAT to the aforesaidBeffect, if permitted to remain, would frustrate the very purpose for whichthe I&B Code is enacted.

65. However, in Civil Appeal arising out of Special Leave Petition(Civil) No.11232 of 2020, Writ Petition (Civil) No.1177 of 2020 and CivilAppeals arising out of Special Leave Petition (Civil) Nos. 7147-7150 ofC2020,the issue with regard to the statutory claims of the State Governmentand the Central Government in respect of the period prior to the approvalof resolution plan by NCLT, will have to be considered.

66. Vide Section 7 of Act No.26 of 2019 (vide S.O. 2953(E),dated 16.8.2019 w.e.f. 16.8.2019), the following words have been insertedDin Section 31 of the I&B Code.

“including the Central Government, any State Government or anylocal authority to whom debt in respect of the payment of duesarising under any law for the time being in force, such as authoritiesto whom statutory dues are owed”E67. As such, with respect to the proceedings, which arise after16.8.2019, there will be no difficulty. After the amendment, any debt inrespect of the payment of dues arising under any law for the time beingin force including the ones owed to the Central Government, any StateGovernment or any local authority, which does not form part of theFapproved resolution plan, shall stand extinguished.

68. The only question, which remains is, what happens to suchdues if they pertain to period wherein Section 7 petitions have beenadmitted prior to 16.8.2019.

69. To answer the said question, we will have to consider, as toGwhether the said amendment is clarificatory/declaratory in nature or asubstantive one. If it is held, that it is declaratory or clarificatory in nature,it will have to be held, that such an amendment is retrospective in natureand exists on the statute book since inception. However, if the answer is

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

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 thestatute.

70. It will be relevant to refer to the “Statement of Objects andReasons” (hereafter referred to as “SOR”) of the Insolvency andBankruptcy Code (Amendment) Bill, 2019, which read thus:

“The Insolvency and Bankruptcy Code, 2016 (the Code) wasenacted with view to consolidate and amend the laws relating toreorganisation and insolvency resolution of corporate persons,partnership firms and individuals in time-bound manner formaximisation of value of assets of such persons, to promoteentrepreneurship, availability of credit and balance the interestsof all the stakeholders including alteration in the order or priorityof payment of Government dues and to establish an Insolvencyand Bankruptcy Board of India.2. The Preamble to the Code lays down the objects of theCode to include “the insolvency resolution” in time bound mannerfor maximisation of value of assets in order to balance the interestsof all the stakeholders. Concerns have been raised that in somecases extensive litigation is causing undue delays, which mayhamper the value maximisation. There is need to ensure that allcreditors are treated fairly, without unduly burdening theAdjudicating Authority whose role is to ensure that the resolutionplan complies with the provisions of the Code. Various stakeholdershave suggested that if the creditors were treated on an equalfooting, when they have different pre-insolvency entitlements, itwould adversely impact the cost and availability of credit. Further,views have also been obtained so as to bring clarity on the votingpattern of financial creditors represented by the authorisedrepresentative.

3. In view of the aforesaid difficulties and in order to fill thecritical gaps in the corporate insolvency framework, it has becomenecessary to amend certain provisions of the Insolvency andBankruptcy Code. The Insolvency and Bankruptcy Code(Amendment) Bill, 2019, inter alia, provides for the following,namely:–

(a) ……………………………………..;

(b) ……………………………………..;

(c) ……………………………………..;

(d) ……………………………………..;

(e) ……………………………………;

(f) to amend sub-section (1) of section 31 of the Code toBclarify that the resolution plan approved by the AdjudicatingAuthority shall also be binding on the Central Government,any State Government or any local authority to whom debtin respect of payment of dues arising under any law for thetime being in force, such as authorities to whom statutory duesare owed, including tax authorities;C

(g) ………………………………..”

[emphasis supplied]

71. Perusal of the SOR would reveal, that one of the prime objectsof I&B Code was to provide for implementation of insolvency resolutionDprocess in time bound manner for maximisation of value of assets inorder to balance the interests of all stakeholders. However, it was noticed,that in some cases there was extensive litigation causing undue delaysresultantly hampering the value maximisation. It was also found necessaryto ensure, that all creditors are treated fairly. It was therefore in view ofthe various difficulties faced and in order to fill the critical gaps in theEcorporate insolvency framework, it was necessary to amend certainprovisions of the I&B Code. Clause (f) of para 3 of the SOR of theInsolvency and Bankruptcy Code (Amendment) Bill, 2019 would amplymake it clear, that the legislative intent in amending sub-section (1) ofSection 31 of I&B Code was to clarify, that the resolution plan approvedFby the Adjudicating Authority shall also be binding on the CentralGovernment, any State Government or any local authority to whom adebt is owed in respect of payment of dues arising under any law for thetime being in force, such as authorities to whom statutory dues are owed,including tax authorities.

G72. In the Rajya Sabha debates, on 29.7.2019, when the Bill foramending I&B Code came up for discussion, there were certain issuesraised by certain Members. While replying to the issues raised by certainMembers, the Hon’ble Finance Minister stated thus:

“IBC has actually an overriding effect. For instance, you askedHwhether IBC will override SEBI. Section 238 provides that IBC

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

will prevail in case of inconsistency between two laws. Actually,Indian courts will have to decide, in specific cases, dependingupon the material before them, but largely, yes, it is IBC. […]

There is also this question about indemnity for successful resolutionapplicant. The amendment now is clearly making it binding on theGovernment. It is one of the ways in which we are providing that.The Government will not raise any further claim. The Governmentwill not make any further claim after resolution plan is approved.So, that is going to be major, major sense of assurance for thepeople who are using the resolution plan. Criminal matters alonewould be proceeded against individuals and not company. Therewill be no criminal proceedings against successful resolutionapplicant. There will be no criminal proceedings against successfulresolution applicant for fraud by previous promoters. So, I hopethat is absolutely clear. I would want all the hon. Members torecognize this message and communicate further that this Code,therefore, gives that comfort to all new bidders. So now, theyneed not be scared that the taxman will come after them for thefaults of the earlier promoters. No.Once the resolution plan isaccepted, the earlier promoters will be dealt with as individualsfor their criminality but not the new bidder who is trying to restorethe company. So, that is very clear ……………..

(emphasis supplied)”

73. It could thus be seen, that in the speech the Hon’ble FinanceMinister has categorically stated, that Section 238 provides that I&BCode will prevail in case of inconsistency between two laws. She alsostated, that there was question about indemnity for successful resolutionapplicant and that the amendment was clearly making it binding on theGovernment. She stated, that the Government will not make any furtherclaim after resolution plan is approved. So, that is going to be majorsense of assurance for the people who are using the resolution plan. Shehas categorically stated, that she would want all the Hon’ble Membersto recognize this message and communicate further that I&B Code givesthat comfort to all new bidders. They need not be scared that the taxmanwill come after them for the faults of the earlier promoters. She furtherstates, that once the resolution plan is accepted, the earlier promoterswill be dealt with as individuals for their criminality but not the newbidder who is trying to restore the company.

A74. This Court in the case of K.P. Varghese v. Income TaxOfficer, Ernakulam and Another[11]had an occasion to consider thequestion, as to whether the speech made by the Hon’ble Finance Minister,explaining the reason for the introduction of the Bill could be referredfor the purpose of ascertaining the mischief sought to be remedied bythe legislation. This Court observed thus:B

“Now it is true that the speeches made by the Members of theLegislature on the floor of the House when Bill for enacting astatutory provision is being debated are inadmissible for the purposeof interpreting the statutory provision but the speech made by theCMover of the Bill explaining the reason for the introduction of theBill can certainly be referred to for the purpose of ascertainingthe mischief sought to be remedied by the legislation and the objectand purpose for which the legislation is enacted. This is in accordwith the recent trend in juristic thought not only in western countriesbut also in India that interpretation of statute being an exerciseDin the ascertainment of meaning, everything which is logicallyrelevant should be admissible. In fact there are at least threedecisions of this Court, one in Loka ShikshanaTrust v. CIT [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 : 101 ITR234 : 1976 LR 1] , the other in Indian Chamber ofECommerce v. Commissioner of Income Tax [(1976) 1 SCC 324: 1976 SCC (Tax) 41 : 101 ITR 796 : 1976 Tax LR 210] and thethird in Additional Commissioner of Income Tax v. Surat ArtSilk Cloth Manufacturers’ Association [(1980) 2 SCC 31 : 1980SCC (Tax) 170 : 121 ITR 1] where the speech made by the FinanceMinister while introducing the exclusionary clause in Section 2,Fclause (15) of the Act was relied upon by the Court for the purposeof ascertaining what was the reason for introducing that clause.The speech made by the Finance Minister while moving theamendment introducing sub-section (2) clearly states what werethe circumstances in which sub-section (2) came to be passed,Gwhat was the mischief for which Section 52 as it then stood didnot provide and which was sought to be remedied by the enactmentof sub-section (2) and why the enactment of sub-section (2) wasfound necessary…..”

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

75. This Court in the case of Union of India and others vs.Martin Lottery Agencies Ltd.[12], in paragraph 38has relied on theaforesaid observations made in the judgment of K.P. Varghese (supra).

76. It could thus be seen, that the speech made by Hon’ble FinanceMinister while explaining the amendment could be referred to forascertaining what was the reason for moving the Bill. The speech canbe used for finding out:

(1)what were the circumstances in which the amendment wascarried out;

(2)what was the mischief for which the unamended sectiondid not provide; and

(3)what was sought to be remedied by amended enactment.

77. It is clear, that the mischief, which was noticed prior toamendment of Section 31 of I&B Code was, that though the legislativeintent was to extinguish all such debts owed to the Central Government,any State Government or any local authority, including the tax authoritiesonce an approval was granted to the resolution plan by NCLT; on accountof there being some ambiguity, the State/Central Government authoritiescontinued with the proceedings in respect of the debts owed to them. Inorder to remedy the said mischief, the legislature thought it appropriateto clarify the position, that once such resolution plan was approved bythe Adjudicating Authority, all such claims/dues owed to the State/CentralGovernment or any local authority including tax authorities, which werenot part of the resolution plan shall stand extinguished.

78. In Justice G.P. Singh treatise on “The principles of StatutoryInterpretation”, 14[th] Edition, Revised by Justice A.K. Patnaik, formerJudge of this Court, it is observed thus:

(i) Declaratory Statutes

The presumption against retrospective operation is not applicableto declaratory statutes. As stated in CRAIES and approved bythe Supreme Court: “For modern purposes declaratory Act maybe defined as an Act to remove doubts existing as to the common

Alaw, or the meaning or effect of any statute. Such Acts are usuallyheld to be retrospective. The usual reason for passing declaratoryAct is to set aside what Parliament deems to have been judicialerror, whether in the statement of the common law or in theinterpretation of statutes. Usually, if not invariably, such an Actcontains preamble, and also the word ‘declared’ as well as theBword ‘enacted’. ”[13] But the use of the words ‘it is declared’ is notconclusive that the Act is declaratory for these words may, attimes, be used to introduce new rules of law and the Act in thelatter case will only be amending the law and will not necessarilybe retrospective[14]. In determining, therefore, the nature of theCAct, regard must be had to the substance rather than to the form[15].If new Act is ‘to explain’ an earlier Act, it would be withoutobject unless construed retrospective[16]. An explanatory Act isgenerally passed to supply an obvious omission or to clear updoubts as to the meaning of the previous Act[17]. It is well settledthat if statute is curative or merely declaratory of the previousDlaw retrospective operation is generally intended[18]. The language‘shall be deemed always to have meant’[19] or ‘shall be deemed

13 CRAIES : Statute Law, 7th Edition, p. 58, approved in Central Bank of India v. TheirWorkmen, AIR 1960 SC 12, p. 27 : (1960) 1 SCR 200. See Jones v. Bennet, (1890) 63ELT 705, p. 708 (LORD COLERIDGE, C.J.); Madras Marine & Co. v. State of Madras,(1986) 3 SCC 552, p. 563 : AIR 1986 SC 1760; Satnam Overseas (Export) v. State ofHaryana, AIR 2003 SC 66, p. 84 : (2003) 1 SCC 561.14 Harding v. Queensland Stamp Commissioners, (1898) AC 769, pp. 775, 776 (PC)15 Ibid

16 R. V. Dursley (Inhabitants), (1832) 110 ER 168, p. 169

17 Keshavlal Jethalal Shah v. Mohanlal, AIR 1968 SC 1336, p. 1339 : (1968) 3 SCR 623.FThe question whether an ‘explanation’ added by an amending Act is really explanatoryor not would depend on its construction. In S. K. Govindan and Sons v. Commr. OfIncome-tax, Cochin, AIR 2001 SC 254 p. 260 : (2001) 1 SCC 460 : (2001) 247 ITR 192,Explanation 2 inserted in section 139(8) of the Income-tax Act, 1961 was held to beclarificatory. But in Birla Cement Works v. The Central Board of Direct Taxes, JT 2001(3) SC 256, p. 262 : (2001) 9 SCC 35 : AIR 2001 SC 1080, it was held that mere additionGof an ‘explanation’ by an amending Act in taxing Act cannot, without more, be held tobe clarificatory and retrospective. In Commissioner of Income-tax Bhopal v. ShellyProducts, (2003) 5 SCC 461, pp. 477, 478 : AIR 2003 SC 2532 provisos (a) and (b)added in section 240 of the Income-tax Act, 1961 by amending Act which came intoforce on 1-4-1989 were held to be clarificatory and retrospective.18 Channan Singh v. Jai Kuar (Smt.), AIR 1970 SC 349, p. 349, p. 351 : (1969) 2 SCC429H19 CIT v. Straw Products, AIR 1966 SC 1113 : 1966 (2) SCR 881

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never to have included’[20] is declaratory, and is in plain termsretrospective. In the absence of clear words indicating that theamending Act is declaratory, it would not be so construed whenthe pre-amended provision was clear and unambiguous[21]. Anamending Act may be purely clarificatory to clear meaning of aprovision of the principal Act which was already implicit. Aclarificatory amendment of this nature will have retrospective effectand, therefore, if the principal Act was existing law when theconstitution came into force, the amending Act also will be part ofthe existing law[22].

The above statement of the law relating to the nature and effectof declaratory statute has been quoted with approval by theSupreme Court from earlier editions of this book in number ofcases[23].

“In Mithilesh Kumari v. Prem Bihari Khare[24], section 4 of theBenami Transactions (Prohibition) Act, 1988 was, it is submitted,wrongly held to be an Act declaratory in nature for it was notpassed to clear any doubt existing as to the common law or themeaning or effect of any statute. The conclusion, however, thatsection 4 applied also to past benami transactions may besupportable on the language used in the section.” Theseobservations and criticism of Mithilesh Kumari’s case alsoreceived the approval in R. Rajgopal Reddy v. PadminiChandrasekharan[25], where the Supreme Court after quoting

20 Union of India v. S. Muthyam Reddy, JT 1999 (7) SC 596, p. 597 : 1999 (7) SCC 545

: AIR 1994 SC 3881

21 Sakuru v. Tanoji, (1985) 3 SCC 590, p. 594 : AIR 1985 SC 1279

22 Punjab Traders v. State of Punjab, AIR 1990 SC 2300, p. 2304 : 1991 (1) SCC 8623 R. Rajgopal Reddy v. Padmini Chandrasekharan, 1995 (1) Scale 692, p. 704 : AIR1996 SC 238, p. 246 : (1995) 2 SCC 630; Allied Motors (P. ) Ltd. v. CIT, AIR 1997 SC1361, pp. 1366, 1367 : 1997 (3) SCC 472; CIT v. Podar Cement Pvt. Ltd., AIR 1997 SC2523, pp. 2537, 2538 : 1997 (5) SCC 482; Shyam Sunder v. Ram Kumar, AIR 2001 SC2472, p. 2487 : (2001) 8 SCC 24; Zile Singh v. State of Haryana, (2004) 8 SCC 1, p. 9: AIR 2004 SC 5100, pp. 5103, 5104; Commissioner of Income Tax I, Ahmedabad v.Gold Coin Health Food Pvt. Ltd., (2008) 9 SCC 622 paras 19, 20 : (2009) 9 JT 312. Seefurther S. B. Bhattacharjee v. S. D. Majumdar, AIR 2007 SC 2102 (paras 26 to 29) :

(2007) 7 JT 381.

24 AIR 1989 SC 1247, p. 1255 : 1989 (2) SCC 9525 1995 (1) Scale 692 : 1995 AIR SCW 1422 : AIR 1996 SC 238

Athem (from 5[th] Edition pp. 315, 316) said : “No exception can betaken to the above observations”.[26]

proviso added from 1.4.1988 to section 43 inserted in theIncome Tax Act, 1961 from 1.4.1984 came up for considerationin AlliedMotors(P.) Ltd. v. Commissioner of Income-tax[27] andBit was given retrospective effect from the inception of the sectionon the reasoning that the proviso was added to remedy unintendedconsequences and supply an obvious omission so that the sectionmay be given reasonable interpretation and that in fact theamendment to insert the proviso would not serve its object unlessit is construed as retrospective. In Commissioner of Income-CTax, Bombay v. Podar Cement Pvt. Ltd.,[28]the Supreme Courtheld that amendments introduced by the Finance Act, 1987 in sofar they related to section 27(iii), (iiia) and (iiib) which redefinedthe expression ‘owner of house property’, in respect of whichthere was sharp divergence of opinion amongst the High Courts,Dwas clarificatory and declaratory in nature and consequentlyretrospective. Similarly, in Brij Mohan Das Laxman Das v.Commissioner of Income – tax[29]. Explanation 2 added to section40 of the Income-tax Act, 1961 from 1.4.1985 on question onwhich there was divergence of opinion was held to be declaratoryin nature and, therefore, retrospective. And in Zile Singh v. StateEof Haryana,[30]substitution of the word ‘upto’ for the word ‘after’in the proviso to section 13A (added in 1994) in Haryana MunicipalAct, 1973 by the Haryana Municipal (Second Amendment) Act,

1994 was held to be correction of an obvious drafting error to

F26 Ibid, p. 704 (Scale) : p. 246 (AIR)27 AIR 1997 Sc 1361, pp. 1366, 1367 : 1997 (3) SCC 472; Similarly in Commissioner ofIncome Tax v. Suresh N. Gupta, (2008) 4 SCC 362 paras 38 and 39 : AIR 2008 SC 572,proviso inserted in section 113 of the Income-tax Act with effect from 1-6-2002 washeld to be clarificatory and retrospective. Again in Commissioner of Income Tax v.Alom Extensions Ltd., (2010) 1 SCC 489 : (2009) 14 JT 441 deletion of secondproviso and consequent amendment in second proviso to section 43B of Income-taxGAct, 1961 by the Finance Act, 2003 was held to be curative and retrospective.28 AIR 1997 SC 2523, p. 2538 : (1997) 5 SCC 482.

29 AIR 1997 SC 1651, p. 1654 : 1997 (1) SCC 352; Affirmed in Suwalal Anandlal Jainv. Commr. Of Income-tax, AIR 1997 SC 1279 : (1997) 4 SCC 89 and Commissioner ofIncome-tax Bombay v. Kanji Shivji and co., AIR 2000 SC 774 : (2000) 2 SCC 253. Seefurther cases in note 42, supra.30 (2004) 8 SCC 1 : AIR 2004 SC 5100H

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bring about the text in conformity with the legislative intent and,therefore, retrospective. Even without the amendment of theproviso, the court in all probability would have read and interpretedthe section as corrected by the amendment[31].”

79. In the case of Zile Singh vs. State of Haryana and others[32],this Court had an occasion to consider the provisions ofSection13-A ofthe Haryana Municipal Act, 1973, which, prior to amendment, read thus:

“13-A. Disqualification for membership.—(1) person shallbe disqualified for being chosen as and for being member of amunicipality—

(c) if he has more than two living children:

Provided that person having more than two children on orafter the expiry of one year of the commencement of thisAct, shall not be deemed to be disqualified.

[emphasis supplied]

80. The faulty drafting in the provision was capable of beinginterpreted, that the legislative embargo imposed on person fromprocreating and giving birth to third child in the context of holding theoffice of member of municipality remained in operation for periodof one year only and thereafter it was lifted. It could be interpreted, thaton the date on which Section 13-A was brought on the statute book i.e.dated 5.4.1994, even if person became disqualified, the disqualificationceased to operate and he became qualified once again to contest theelection and hold the office of member of municipality on the expiry ofone year from 5-4-1994. After realizing the error, Section 13-A came tobe amended as under:

“2. In the proviso to clause (c) of sub-section (1) of Section 13-A of the Haryana Municipal Act, 1973 (hereinafter called theprincipal Act), for the word ‘after’, the word ‘upto’ shall besubstituted.”

[emphasis supplied]

31 Ibid, p. 23 (SCC).

32 (2004) 8 SCC 1

[2021] 13 S.C.R.

81. This Court while observing, that the amendment wasclarificatory in nature, held thus:

“14. The presumption against retrospective operation is notapplicable to declaratory statutes…. In determining, therefore,the nature of the Act, regard must be had to the substancerather than to the form. If new Act is “to explain” an earlierAct, it would be without object unless construed retrospectively.

An explanatory Act is generally passed to supply an obviousomission or to clear up doubts as to the meaning of the previousAct. It is well settled that if statute is curative or merelydeclaratory of the previous law retrospective operation isgenerally intended…. An amending Act may be purelydeclaratory to clear meaning of provision of the principalAct which was already implicit. clarificatory amendment ofthis nature will have retrospective effect (ibid., pp. 468-69).

15. Though retrospectivity is not to be presumed and rather thereDis presumption against retrospectivity, according to Craies (StatuteLaw, 7th Edn.), it is open for the legislature to enact laws havingretrospective operation. This can be achieved by express enactmentor by necessary implication from the language employed. If it is anecessary implication from the language employed that theElegislature intended particular section to have retrospectiveoperation, the courts will give it such an operation. In the absenceof retrospective operation having been expressly given, thecourts may be called upon to construe the provisions andanswer the question whether the legislature had sufficientlyexpressed that intention giving the statute retrospectivity. FourFfactors are suggested as relevant: (i) general scope andpurview of the statute; (ii) the remedy sought to be applied;(iii) the former state of the law; and (iv) what it was thelegislature contemplated. (p. 388) The rule against retrospectivitydoes not extend to protect from the effect of repeal, privilegeGwhich did not amount to accrued right. (p. 392)

16. Where statute is passed for the purpose of supplying anobvious omission in former statute or to “explain” formerstatute, the subsequent statute has relation back to the timewhen the prior Act was passed. The rule against retrospectivityis inapplicable to such legislations as are explanatory and

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

declaratory in nature. classic illustration is the case of AttorneyGeneral v. Pougett [(1816) 2 Price 381 : 146 ER 130] (Price atp. 392). By Customs Act of 1873 (53 Geo. 3, c. 33) duty wasimposed upon hides of 9s 4d, but the Act omitted to state that itwas to be 9s 4d per cwt., and to remedy this omission anotherCustoms Act (53 Geo. 3, c. 105) was passed later in the sameyear. Between the passing of these two Acts some hides wereexported, and it was contended that they were not liable to paythe duty of 9s 4d per cwt., but Thomson, C.B., in giving judgmentfor the Attorney General, said: (ER p. 134)

“The duty in this instance was, in fact, imposed by the firstAct; but the gross mistake of the omission of the weight, forwhich the sum expressed was to have been payable, occasionedthe amendment made by the subsequent Act: but that hadreference to the former statute as soon as it passed, and theymust be taken together as if they were one and the same Act;”(Price at p. 392)

17. Maxwell states in his work on Interpretation of Statutes (12thEdn.) that the rule against retrospective operation is presumptiononly, and as such it “may be overcome, not only by express wordsin the Act but also by circumstances sufficiently strong to displaceit” (p. 225). If the dominant intention of the legislature can beclearly and doubtlessly spelt out, the inhibition contained in therule against perpetuity becomes of doubtful applicability as the“inhibition of the rule” is matter of degree which would “varysecundum materiam” (p. 226). Sometimes, where the sense ofthe statute demands it or where there has been an obvious mistakein drafting, court will be prepared to substitute another word orphrase for that which actually appears in the text of the Act (p.231).

18. In recent decision of this Court in National AgriculturalCoop. Marketing Federation of India Ltd. v. Union ofIndia [(2003) 5 SCC 23] it has been held

that there is no fixed formula for the expression of legislativeintent to give retrospectivity to an enactment. Every legislationwhether prospective or retrospective has to be subjected tothe question of legislative competence. The retrospectivity isliable to be decided on few touchstones such as: (i) the words

used must expressly provide or clearly imply retrospectiveoperation; (ii) the retrospectivity must be reasonable and notexcessive or harsh, otherwise it runs the risk of being struckdown as unconstitutional; (iii) where the legislation is introducedto overcome judicial decision, the power cannot be used tosubvert the decision without removing the statutory basis ofthe decision. There is no fixed formula for the expression oflegislative intent to give retrospectivity to an enactment. Avalidating clause coupled with substantive statutory changeis only one of the methods to leave actions unsustainable underthe unamended statute, undisturbed. Consequently, the absenceof validating clause would not by itself affect the retrospectiveoperation of the statutory provision, if such retrospectivity isotherwise apparent.

19. The Constitution Bench in Shyam Sunder v. RamKumar [(2001) 8 SCC 24] has held: (SCC p. 49, para 39)

“Ordinarily when an enactment declares the previous law, itrequires to be given retroactive effect. The function of adeclaratory statute is to supply an omission or to explain aprevious statute and when such an Act is passed, it comes intoeffect when the previous enactment was passed. The legislativepower to enact law includes the power to declare what wasthe previous law and when such declaratory Act is passed,invariably it has been held to be retrospective. Mere absenceof use of the word ‘declaration’ in an Act explaining what wasthe law before may not appear to be declaratory Act but ifthe court finds an Act as declaratory or explanatory, it has tobe construed as retrospective.” (p. 2487).

20. In Bengal Immunity Co. Ltd. v. State of Bihar [(1955) 2 SCR603 : AIR 1955 SC 661] , Heydon case [(1584) 3 Co Rep 7a : 76ER 637] was cited with approval. Their Lordships have said: (SCRpp. 632-33)

“It is sound rule of construction of statute firmly establishedin England as far back as 1584 when Heydon case [(1584) 3Co Rep 7a : 76 ER 637] was decided that—

‘… for the sure and true interpretation of all statutes ingeneral (be they penal or beneficial, restrictive or enlarging

of the common law) four things are to be discerned andconsidered—

1st. What was the common law before the making of theAct.

2nd. What was the mischief and defect for which thecommon law did not provide.

3rd. What remedy Parliament hath resolved and appointedto cure the disease of the Commonwealth, and

4th. The true reason of the remedy; and then the office ofall the judges is always to make such construction as shallsuppress the mischief, and advance the remedy, and tosuppress subtle inventions and evasions for continuance ofthe mischief, and pro privato commodo, and to add forceand life to the cure and remedy, according to the true intentof the makers of the Act, pro bono publico.’ “

21. In Allied Motors (P) Ltd. v. CIT [(1997) 3 SCC 472] certainunintended consequences flowed from provision enacted byParliament. There was an obvious omission. In order to cure thedefect, proviso was sought to be introduced through anamendment. The Court held that literal construction was liable tobe avoided if it defeated the manifest object and purpose of theAct. The rule of reasonable interpretation should apply.

“A proviso which is inserted to remedy unintendedconsequences and to make the provision workable, provisowhich supplies an obvious omission in the section and is requiredto be read into the section to give the section reasonableinterpretation, requires to be treated as retrospective in operationso that reasonable interpretation can be given to the sectionas whole.” (SCC pp. 479-80, para 13)

22. The State Legislature of Haryana intended to impose adisqualification with effect from 5-4-1995 and that was done. Anyperson having more than two living children was disqualifiedon and from that day for being member of municipality.However, while enacting proviso by way of an exceptioncarving out fact situation from the operation of the newlyintroduced disqualification the draftsman’s folly caused thecreation of trouble. simplistic reading of the text of the proviso

Aspelled out consequence which the legislature had neverintended and could not have intended. It is true that the SecondAmendment does not expressly give the amendment aretrospective operation. The absence of provision expresslygiving retrospective operation to the legislation is notdeterminative of its prospectivity or retrospectivity. IntrinsicBevidence may be available to show that the amendment wasnecessarily intended to have retrospective effect and if theCourt can unhesitatingly conclude in favour of retrospectivity,the Court would not hesitate in giving the Act that operationunless prevented from doing so by any mandate contained inClaw or an established principle of interpretation of statutes.”

[emphasis supplied]

82. It could thus be seen, that what is material is, to ascertain thelegislative intent. If legislature by an amendment supplies an obviousomission in former statute or explains former statute, the subsequentDstatute has relation back to the time when the prior Act was passed.

83. The law laid down in Zile Singh (supra)has been subsequentlyfollowed in various judgments of this Court, including in the case ofCommissioner of Income Tax I, Ahmedabad vs. Gold Coin HealthFood Private Limited[33](three Judges’ Bench).

84. This Court recently in the case of State Bank of India vs. V.Ramakrishnan and another[34], had an occasion to consider the question,as to whether the amendment to sub-section (3) of Section 14 of I&BCode by Amendment Act 26 of 2018 was clarificatory in nature or not.By the said amendment, sub-section (3) of Section 14 of I&B Code wasFsubstituted to provide, that the provisions of sub-section (1) of Section14 shall not apply to surety in contract of guarantee for CorporateDebtor. Considering the said issue, this Court observed thus:

“30. We now come to the argument that the amendment of 2018,which makes it clear that Section 14(3), is now substituted to readGthat the provisions of sub-section (1) of Section 14 shall not applyto surety in contract of guarantee for corporate debtor. Theamended section reads as follows:

33 (2008) 9 SCC 622H34 (2018) 17 SCC 394

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“14. Moratorium.—(1)-(2) * * *

(3) The provisions of sub-section (1) shall not apply to—

(a) such transactions as may be notified by the CentralGovernment in consultation with any financial sector regulator;

(b) surety in contract of guarantee to corporate debtor.”

31. The Insolvency Law Committee, appointed by the Ministryof Corporate Affairs, by its Report dated 26-3-2018, made certainkey recommendations, one of which was:

“(iv) to clear the confusion regarding treatment of assets ofguarantors of the corporate debtor vis-à-vis the moratoriumon the assets of the corporate debtor, it has beenrecommended to clarify by way of an explanation that allassets of such guarantors to the corporate debtor shall beoutside scope of moratorium imposed under the Code;”

(emphasis supplied)

32. The Committee insofar as the moratorium under Section 14

is concerned, went on to find:

“5.5. Section 14 provides for moratorium or stay oninstitution or continuation of proceeding, suits, etc. against thecorporate debtor and its assets. There have been contradictingviews on the scope of moratorium regarding its application tothird parties affected by the debt of the corporate debtor, likeguarantors or sureties. While some courts have taken the viewthat Section 14 may be interpreted literally to mean that it onlyrestricts actions against the assets of the corporate debtor, afew others have taken an interpretation that the stay applieson enforcement of guarantee as well, if CIRP is going onagainst the corporate debtor.”

“5.7. The Allahabad High Court subsequently took differingview in Sanjeev Shriya v. SBI [Sanjeev Shriya v. SBI, 2017SCC OnLine All 2717 : (2018) 2 All LJ 769 : (2017) 9 ADJ723] , by applying moratorium to enforcement of guaranteeagainst personal guarantor to the debt. The rationale being thatif CIRP is going on against the corporate debtor, then the

debt owed by the corporate debtor is not final till the resolutionplan is approved, and thus the liability of the surety would alsobe unclear. The Court took the view that until debt of thecorporate debtor is crystallised, the guarantor’s liability maynot be triggered. The Committee deliberated and noted thatthis would mean that surety’s liabilities are put on hold if aCIRP is going on against the corporate debtor, and such aninterpretation may lead to the contracts of guarantee beinginfructuous, and not serving the purpose for which they havebeen entered into.

5.8. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan,2018 SCC OnLine Nclat 384] , Nclat took broad interpretationof Section 14 and held that it would bar proceedings or actionsagainst sureties. While doing so, it did not refer to any of theabove judgments but instead held that proceedings againstguarantors would affect the CIRP and may thus be barred bymoratorium. The Committee felt that such broad interpretationof the moratorium may curtail significant rights of the creditorwhich are intrinsic to contract of guarantee.

5.9. contract of guarantee is between the creditor, the principaldebtor and the surety, whereunder the creditor has remedyin relation to his debt against both the principal debtor and thesurety (National Project Construction Corpn. Ltd. v. Sadhuand Co. [National Project Construction Corpn.Ltd. v. Sadhu and Co., 1989 SCC OnLine P&H 1069 : AIR1990 P&H 300] ). The surety here may be corporate or anatural person and the liability of such person goes as far theliability of the principal debtor. As per Section 128 of theContract Act, 1872, the liability of the surety is co-extensivewith that of the principal debtor and the creditor may go againsteither the principal debtor, or the surety, or both, in no particularsequence (Chokalinga Chettiar v. DandayuthapaniChettiar [Chokalinga Chettiar v. Dandayuthapani Chettiar,1928 SCC OnLine Mad 236 : AIR 1928 Mad 1262] ). Thoughthis may be limited by the terms of the contract of guarantee,the general principle of such contracts is that the liability of theprincipal debtor and the surety is co-extensive and is joint andseveral (Bank of Bihar Ltd. v. Damodar Prasad [Bank of

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297] ). TheCommittee noted that this characteristic of such contracts i.e.of having remedy against both the surety and the corporatedebtor, without the obligation to exhaust the remedy againstone of the parties before proceeding against the other, is ofutmost importance for the creditor and is the hallmark of aguarantee contract, and the availability of such remedy is inmost cases the basis on which the loan may have beenextended.

5.10. The Committee further noted that literal interpretationof Section 14 is prudent, and broader interpretation may notbe necessary in the above context. The assets of the suretyare separate from those of the corporate debtor, andproceedings against the corporate debtor may not be seriouslyimpacted by the actions against assets of third parties likesureties. Additionally, enforcement of guarantee may not havea significant impact on the debt of the corporate debtor as theright of the creditor against the principal debtor is merely shiftedto the surety, to the extent of payment by the surety. Thus,contractual principles of guarantee require being respected evenduring moratorium and an alternate interpretation may nothave been the intention of the Code, as is clear from plainreading of Section 14.

5.11. Further, since many guarantees for loans of corporatesare given by its promoters in the form of personal guarantees,if there is stay on actions against their assets during CIRP,such promoters (who are also corporate applicants) may filefrivolous applications to merely take advantage of the stay andguard their assets. In the judgments analysed in this relation,many have been filed by the corporate applicant under Section10 of the Code and this may corroborate the above apprehensionof abuse of the moratorium provision. The Committeeconcluded that Section 14 does not intend to bar actions againstassets of guarantors to the debts of the corporate debtor andrecommended that an explanation to clarify this may be insertedin Section 14 of the Code. The scope of the moratorium maybe restricted to the assets of the corporate debtor only.”

A33. The Report of the said Committee makes it clear that theobject of the amendment was to clarify and set at rest what theCommittee thought was an overbroad interpretation of Section14. That such clarificatory amendment is retrospective in nature,would be clear from the following judgments”

B85. In the case of B.K. Educational Services Private Limitedvs. Parag Gupta and Associates (supra), this Court considered thequestion, as to whether the 2018 amendment which inserted Section238A to the I&B Code was clarificatory in nature or not. After consideringvarious earlier judgments of this Court, this Court observed thus:

C“26. In the present case also, it is clear that the amendment ofSection 238-A would not serve its object unless it is construed asbeing retrospective, as otherwise, applications seeking to resurrecttime-barred claims would have to be allowed, not being governedby the law of limitation.

D27. We may also refer to recent decision of this Court in SBI v. V.Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394] ,where this Court, after referring to the selfsame Insolvency LawCommittee Report, held that the amendment made to Section 14of the Code, in which the moratorium prescribed by Section 14was held not to apply to guarantors, was held to be clarificatory,Eand therefore, retrospective in nature, the object being that anoverbroad interpretation of Section 14 ought to be set at rest byclarifying that this was never the intention of Section 14 from thevery inception.86. As discussed hereinabove, one of the principal objects of I&BFCode is, providing for revival of the Corporate Debtor and to make it agoing concern. I&B Code is complete Code in itself. Upon admissionof petition under Section 7, there are various important duties and functionsentrusted to RP and CoC. RP is required to issue publication invitingclaims from all the stakeholders. He is required to collate the saidGinformation and submit necessary details in the information memorandum.The resolution applicants submit their plans on the basis of the detailsprovided in the information memorandum. The resolution plans undergodeep scrutiny by RP as well as CoC. In the negotiations that may beheld between CoC and the resolution applicant, various modificationsmay be made so as to ensure, that while paying part of the dues ofHfinancial creditors as well as operational creditors and other stakeholders,

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

the Corporate Debtor is revived and is made an on-going concern. AfterCoC approves the plan, the Adjudicating Authority is required to arriveat subjective satisfaction, that the plan conforms to the requirementsas are provided in sub-section (2) of Section 30 of the I&B Code. Onlythereafter, the Adjudicating Authority can grant its approval to the plan.It is at this stage, that the plan becomes binding on Corporate Debtor, itsemployees, members, creditors, guarantors and other stakeholdersinvolved in the resolution Plan. The legislative intent behind this is, tofreeze all the claims so that the resolution applicant starts on cleanslate and is not flung with any surprise claims. If that is permitted, thevery calculations on the basis of which the resolution applicant submitsits plans, would go haywire and the plan would be unworkable.

87. We have no hesitation to say, that the word “other stakeholders”would squarely cover the Central Government, any State Governmentor any local authorities. The legislature, noticing that on account ofobvious omission, certain tax authorities were not abiding by the mandateof I&B Code and continuing with the proceedings, has brought out the2019 amendment so as to cure the said mischief. We therefore hold, thatthe 2019 amendment is declaratory and clarificatory in nature andtherefore retrospective in operation.

88. There is another reason, which persuades us to take the saidview. Sub-section (10) of Section 3 of the I&B Code defines “creditor”thus:

“(10) “creditor” means any person to whom debt is owed andincludes financial creditor, an operational creditor, securedcreditor, an unsecured creditor and decree-holder;”

89. Sub-sections (20) and (21) of Section 5 of the I&B Codedefine “operational creditor” and “operational debt” respectively as such:

(20) “operational creditor” means person to whom an operationaldebt is owed and includes any person to whom such debt hasbeen legally assigned or transferred;

(21) “operational debt” means claim in respect of the provisionof goods or services including employment or debt in respect ofthe payment of dues arising under any law for the time being inforce and payable to the Central Government, any StateGovernment or any local authority;

90. “Creditor” therefore has been defined to mean ‘any personto whom debt is owed and includes financial creditor, an operationalcreditor, secured creditor, an unsecured creditor and decree-holder’.

“Operational creditor” has been defined to mean person to whoman operational debt is owed and includes any person to whom such debtBhas been legally assigned or transferred.

“Operational debt” has been defined to mean claim in respectof the provision of goods or services including employment or debt inrespect of the payment of dues arising under any law for the time beingin force and payable to the Central Government, any State GovernmentCor any local authority.

91. It is cardinal principle of law, that statute has to be read asa whole. Harmonious construction of sub-section (10) of Section 3 ofthe I&B Code read with sub-sections (20) and (21) of Section 5 thereofwould reveal, that even claim in respect of dues arising under any lawDfor the time being in force and payable to the Central Government, anyState Government or any local authority would come within the ambit of‘operational debt’. The Central Government, any State Government orany local authority to whom an operational debt is owed would comewithin the ambit of ‘operational creditor’ as defined under sub-section(20) of Section 5 of the I&B Code. Consequently, person to whom aEdebt is owed would be covered by the definition of ‘creditor’ as definedunder sub-section (10) of Section 3 of the I&B Code. As such, evenwithout the 2019 amendment, the Central Government, any StateGovernment or any local authority to whom debt is owed, including thestatutory dues, would be covered by the term ‘creditor’ and in any case,Fby the term ‘other stakeholders’ as provided in sub-section (1) of Section31 of the I&B Code.

92. The Division Bench of the Rajasthan High Court in D.B. CivilWrit Petition No.9480 of 2019 in the case of Ultra Tech NathdwaraCement Ltd. vs. Union of India & Ors., by judgment and order datedG7.4.2020 has taken view, that the demand notices, issued by the CentralGoods and Service Tax Department, for period prior to the date onwhich NCLT has granted its approval to the resolution plan, are notpermissible in law. While doing so, the Rajasthan High Court has reliedon the judgment of this Court in the case of Committee of Creditors ofEssar Steel India Limited through Authorised Signatory (supra).H

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

93. The Calcutta High Court in the case of Akshay Jhunjhunwala& Anr. vs. Union of India through the Ministry of Corporate Affairs& Ors.[35]has also taken view, that the claim of operational creditor willalso include claim of statutory authority on account of moneyreceivable pursuant to an imposition by statute. We are in agreementwith the views taken by these Courts.

94. Therefore, in our considered view, the aforesaid provisionsleave no manner of doubt to hold, that the 2019 amendment is declaratoryand clarificatory in nature. We also hold, that even if 2019 amendmentwas not effected, still in light of the view taken by us, the CentralGovernment, any State Government or any local authority would be boundby the resolution plan, once it is approved by the Adjudicating Authority(i.e. NCLT).

CONCLUSION

95. In the result, we answer the questions framed by us as under:

(i)That once resolution plan is duly approved by theDAdjudicating Authority under sub-section (1) of Section 31,the claims as provided in the resolution plan shall stand frozenand will be binding on the Corporate Debtor and itsemployees, members, creditors, including the CentralGovernment, any State Government or any local authority,Eguarantors and other stakeholders. On the date of approvalof resolution plan by the Adjudicating Authority, all suchclaims, which are not part of resolution plan, shall standextinguished and no person will be entitled to initiate orcontinue any proceedings in respect to claim, which is notpart of the resolution plan;F(ii)2019 amendment to Section 31 of the I&B Code isclarificatory and declaratory in nature and therefore will beeffective from the date on which I&B Code has come intoeffect;

(iii)Consequently all the dues including the statutory dues owedto the Central Government, any State Government or anylocal authority, if not part of the resolution plan, shall standextinguished and no proceedings in respect of such dues

for the period prior to the date on which the AdjudicatingAuthority grants its approval under Section 31 could becontinued.

96. In the light of what has been held by us hereinabove, we nowproceed to decide individual matters.

CIVIL APPEAL NO.8129 OF 2019

97. In the said appeal, admittedly, the Company Petition filed bythe SBI under Section 7 of I&B Code in respect of OMML/CorporateDebtor came to be admitted on 3.8.2017. Correspondingly, order ofmoratorium and appointment of IRP also came to be passed on the saidCdate. By public notice, RP invited claims from the creditors. The lastdate for submission of such claims was 18.8.2017. RP also invited EOIas well as resolution plans. In response to the said invitation, both GMSPLand EARC had submitted their resolution plans. In the 8[th] meeting ofCoC held on 14.3.2018, the resolution plan submitted by EARC wasDfound to be most competitive and as such, it was declared as H1 bidder.However, during negotiation, the resolution plan of EARC was not foundto be satisfactory by CoC and as such, in the 9[th] meeting of CoC held on31.3.2018, resolution plan of EARC came to be rejected.

98. Thereafter, since GMSPL was H2 bidder, negotiations wereEheld with it. However, the resolution plan submitted by GMSPL wasalso not found to be satisfactory and therefore in the 10[th] meeting ofCoC held on 3.4.2018, it was decided to annul the existing proceedingsand initiate fresh process for invitation for submission of resolutionplan. This was restricted only to such entities, which had submitted theirEOI for submission of resolution plan. In response to the fresh invitationFfor submission of resolution plan, three bidders, namely, GMSPL, EARCand SIFL submitted their resolution plans. In the 11[th] meeting of CoCheld on 13.4.2018, the resolution plan submitted by GMSPL was foundto be most competitive and as such, CoC declared it as H1 bidder. Afterholding several rounds of negotiations, in the 12[th] meeting of CoC heldGon 21.4.2018, CoC unanimously decided to convene meeting of theCoC on 25.4.2018 for voting on the resolution plan proposed by GMSPL.In the meeting of the CoC held on 25.4.2018, CoC being satisfied thatthe resolution plan submitted by GMSPL meets all the requirements undersub-section (2) of Section 30 of I&B Code, placed the same for voting.The said resolution plan of GMSPL was approved by more than 89.23%Hof voting share of financial creditors of the Corporate Debtor. Accordingly,

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

an application being CA (IB) No.402/KB/2018came to be filed by RPfor grant of approval to the resolution plan submitted by GMSPL beforethe NCLT. EARC filed application being CA (IB) No.398/KB/2018,challenging the approval granted by CoC to the resolution plan submittedby GMSPL. It also filed CA (IB) No. 470/KB/2018, challenging thedecision of RP in not admitting its claim. One Application being CA(IB)No.509/KB/2018 came to be filed by the District Mining Officer,Department of Mining and Geology, Jharkhand challenging the non-admission of its claim to the tune of Rs.93,51,91,724/- and Rs.760.51crores.99. By common order dated 22.6.2018, application being CA(IB)No.402/KB/2018 filed by RP, came to be allowed thereby, grantingapproval under the provisions of Section 31(1) of the I&B Code anddeclaring that the same will be binding on the Corporate Debtor, itsemployees, members, creditors, guarantors and other stakeholdersinvolved in the resolution Plan. Application being CA (IB) No.398/KB/2018 filed by EARC challenging the approval granted by CoC to theresolution plan submitted by GMSPL was dismissed. Vide same orderdated 22.6.2018, application being CA (IB) No.470/KB/2018 filed byEARC challenging the decision of the RP in not admitting its claim andapplication being CA(IB) No.509/KB/2018 filed by the District MiningOfficer, Department of Mining and Geology, Jharkhand challenging thenon-admission of its claim were also dismissed with cost of Rs.1,00,000/- each.

100. While allowing the application filed by RP, granting approvalto the resolution plan of GMSPL (i.e. CA No.402/KB/2018) and rejectingthe application of EARC challenging the grant of approval to the resolutionplan of GMSPL by CoC (i.e. CA No.398/KB/2018), NCLT found, thatRP had followed the entire procedure as required under the I&B Codeand the Regulations. It also found, that CoC after applying its mind found,that the resolution plan submitted by GMSPL was in conformity with therequirements under Section 30(2) of the I&B Code.

101. Insofar as the application filed by EARC with regard to non-admission of its claim submitted to RP is concerned, NCLT found, thatthe Corporate Debtor had executed guarantee securing loan receivedby APNRL, which had been given by India Infrastructure FinanceCompany Limited (“IIFCL” for short). The corporate guarantee executedby the Corporate Debtor was in favour of IIFCL. The Corporate Debtor

Aalso owned share in APNRL, which was pledged with IIFCL to securethe loan given by IIFCL to APNRL. IIFCL assigned its rights to EARC.EARC being the assignee of the aforesaid submitted its claims to theRP.

102. NCLT found, that by email dated 6.1.2018,EARC hadBsubmitted its claim in Form ‘C’ for an amount of Rs.648,89,62,395/-. Inresponse to the said email, RP sought clarification, as to whether thecorporate guarantee had been invoked by the applicant. RP had notreceived any response till 21.2.2018 from EARC. Despite repeatedrequests made by RP, EARC did not respond to the query made by RP.From the record placed before NCLT, it was clear, that EARC had notCinvoked the corporate guarantee. NCLT therefore posed question toitself, as to whether an uninvoked corporate guarantee could be consideredas matured claim of the applicant. NCLT found, that once the moratoriumwas applied under Section 14 of I&B Code, EARC was prevented frominvoking the corporate guarantee. NCLT further found, that the OMML’sDguarantee had not been invoked by EARC till the date of completion ofCIRP process and once the moratorium was imposed, it could not invokethe corporate guarantee. NCLT therefore found, that there is no illegalityor irregularity in not admitting the claim of EARC.

103. NCLT found, that the entire information was uploaded in theEvirtual data room to which EARC had access since it was also one ofthe resolution applicants. NCLT found, that the information with regardto claim of all financial creditors inclusive of EARC’s claim was availablein the virtual data room. The record also revealed, that the claim ofEARC was not admitted for the reason that the corporate guarantee inquestion was uninvoked as on date.F

104. Insofar as the second objection of EARC with regard to theshares owned by the Corporate Debtor in APNRL, which were pledgedwith IIFCL to secure the loan given by IIFCL to APNRL and whichwere assigned to EARC being invoked on 30.4.2018 is concerned, NCLTfound the same claim also to be without merit. NCLT found, that onG30.4.2018, the moratorium was in force and therefore invocation of pledgeby EARC on 30.4.2018 was not permissible in law. It was further found,that RP had rightly not admitted the said claim.105. It was sought to be argued on behalf of EARC, that CIRPprocess was complete on 29.4.2018 and therefore, invocation of pledgeHby EARC on 30.4.2018 was legal and valid. However, NCLT found,

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

that unless the application filed by RP under Section 31(1) for approvalof the plan was decided and an order either approving or rejecting theresolution plan was passed, the moratorium declared under Section 14would continue to have force. As such, invocation of pledge on 30.4.2018was held to be not permissible in law. It would be relevant to refer to theobservations made by NCLT with regard to conduct of EARC.

“It appears to us that it is deliberate attempt to stagemange an objection against the approval of resolution plan otherthan the plan submitted by the resolution applicant. We also foundthat CA 398 of 2018 filed for rejection of the resolution plan isliable to be dismissed since the very same applicant not at allsucceeds in proving its contention and that the applicant approachesthe Bench without any clean hand. Instances of challengingresolution plan by unsuccessful resolution applicant is at theincrease. Filing like petition is also one among the reason for thedelay in approving the resolution plan passed by the CoC incompliance of the provisions of the Code. This is unique case inwhich the applicant herein filed the application without any validgrounds. Dismissing like petition without cost may encourage theapplicant like the applicant to file like petition. It would also amountto allowing the applicant to abuse the process of the Tribunal aswell as deliberately delaying the completion of CIRP process.Accordingly, we hold that this application is liable to be dismissedwith costs of Rs.1,00,000/-. Awarding cost of Rs.1,00,000/- in thepeculiar nature and circumstances of the case in hand is foundreasonable.”

106. Insofar as application being CA No.509/KB/2018 filed bythe District Mining Officer is concerned, NCLT found, that RP had soughtclarification from the said applicant with regard to its claim made inForm ‘B’ since the information supplied therein was found to beinadequate. It was found, that in spite of the said request, the DistrictMining Officer had failed to place on record any supportive documentor affidavit as required under the Regulations. NCLT found no merit inthe contentions raised on behalf of the District Mining Officer with regardto the claim on the basis of Section 25 of the Mines and Mineral(Development and Regulation) Amendment Act, 1972.It was found, thatin view of the provisions of Section 238 of I&B Code, the provisions ofI&B Code have an overriding effect over any other law.

A107. It was therefore found, that no error was committed by RPin not admitting the claim of the District Mining Officer since it was notsupported by any document or affidavit. NCLT therefore rejected thesaid application with cost of Rs.1,00,000/-.

108. The order dated 22.6.2018 passed by NCLT was challengedBby way of four appeals before NCLAT; two appeals being CompanyAppeal (AT) (Insolvency) Nos.437 and 444 of 2018 filed by EARC; oneappeal being Company Appeal (AT) (Insolvency) No. 438 of 2018 filedby one Deepak Singh and one appeal being Company Appeal (AT)(Insolvency) No. 500 of 2018 filed by Sundargarh Mines & TransportWorkers Union.C109. Vide the impugned judgment and order dated 23.4.2019,NCLAT found, that as no ground was made out in terms of Section61(3) of I&B Code, no relief could be granted in the appeals. However,while doing so, NCLAT observed thus:“28. However, we make it clear that the rejection of the claim forDthe purpose of collating the claim and making it part of the‘Resolution Plan’ will not affect the right of the Appellant-‘Edelweiss Asset Reconstruction Limited’ to invoke the BankGuarantee against the ‘Corporate Debtor’ in case the ‘PrincipalBorrower’ failed to pay the debt amount, the ‘Moratorium’ periodEhaving come to an end.

42. From the aforesaid provisions, it is clear that after period ofMoratorium it is open to the person to move before Civil Courtor to move an application before the Court of CompetentJurisdiction against the ‘Corporate Debtor’.

F43. In the present case, since it is not possible either for theAdjudicating Authority or for this Appellate Tribunal to give anyspecific finding, we are of the view that the Appellant may movebefore the Civil Court or Court of Competent Jurisdiction andmay file an application before the Labour Court for appropriaterelief in favour of the concerned workmen or against theG‘Corporate Debtor’ if they have actually worked and have notbeen taken care in the ‘Resolution Plan’ due to lack of knowledgeand non-filing of the claim within time.

51. In the present case, as no ground has been made out in termsof sub-section (3) of Section 61 of the ‘I&B Code’ and the decisionHof the ‘Resolution Professional’ was not challenged by the

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

Appellant, no relief can be granted. However, this order will notcome in the way of the Appellant to move before appropriateforum for appropriate relief if the claim is not barred by limitation.

52. In so far dues of State of Jharkhand is concerned, we holdthat the statutory dues shall be payable to the State of Jharkhandin terms of existing law which comes within the meaning of‘operational debt’ as defined in Section 5(20) read with Section5(21) and held in “Pr. Director Company Appeal (AT) (Insolvency)Nos. 437, 438, 444 & 500 of 2018 General of Income Tax (Admn.& TPS) Vs. M/s. Spartek Ceramics India Ltd. & Anr.- CompanyAppeal (AT) (Insolvency) No. 160 of 2017”.

Except the aforesaid observations, in absence of any appealfiled by the State of Jharkhand, no order is passed.”

110. We find, that the aforesaid observations are beyond the scopeof the powers available with NCLAT under sub-section (3) of Section61 of I&B Code. We also find, that the said observations run totallycontrary to the consistent view taken by this Court in the line of judgmentsstarting from K. Sashidhar (supra) to Kalpraj Dharamshi (supra).

111. NCLAT has categorically found, that no ground as is availableunder sub-section (3) of Section 61 of I&B Code has been made outand has also categorically found, that the resolution plan submitted byGMSPL was better offer than the other two resolution applicants,including EARC and that the Adjudicating Authority has rightly approvedthe resolution plan of GMSPL. After coming to such finding, the onlyoption available with NCLAT was to dismiss the appeals. In our view,the observations made in the aforesaid paragraphs, if permitted to remain,would totally frustrate the object of I&B Code of revival of CorporateDebtor and to resurrect it as going concern. As held by this Court, thesuccessful resolution applicant cannot be flung with surprise claims whichare not part of the resolution plan.

112. It will also be relevant to refer to the conduct of EARC.Clause 2.1.3 of the resolution plan submitted by EARC reads as under:

“2.1.3 Financial Creditors other than Identified Financial Creditors

(i) Liabilities

We have been informed by the RP that other than theIdentified Financial Creditors, there are no other FinancialCreditors of the Company, whether secured or unsecured.

Other than the Assigned Debt, any and all dues to, liabilitiesor obligations payable to, claims, counter claims, demands,actions or penalties made or imposed by (including but notlimited to all interests, damages, losses, expenses and thirdparty claims), and any right, title, interest enjoyed by, anyactual or potential Financial Creditor or in connection withany Financial Debt, whether, or not claimed, whether ornot filed, whether or not crystallised, whether or not accrued,whether or not admitted, whether or not notional, whetheror not known, whether due or contingent, whether or notdisputed, present or future, whether or not being adjudicatedin any proceeding, whether or not decreed, whether or notreflected in the financial statements of the Company, orwhether or not reflected in any record, document, statement,statutory or otherwise, arising prior to or after the EffectiveDate, but pertaining to period prior to the Effective Date,or arising in connection with the Assignment or acquisitionof shares of the Company by the Investors or conversionof the Conversion Debt into equity or restructuring of theAssigned Debt or in any other manner as result of or inconnection with this Plan, shall be deemed to have beenirrevocably waived and permanently extinguished andwritten off in full with effect from the Effective Date. Togive effect to such waiver and extinguishment, any contract,agreement, deed or document; whether oral or written,express or implied, statutory or otherwise, pursuant to whichany such dues, liabilities, obligations, claims, counter claims,demands, actions, penalties, right, title or interest is claimed(other than as specifically mentioned herein) shall standmodified with effect from the Effective Date without anyfurther act or deed, and approval of this Plan by NCLTshall be deemed to be sufficient notice which may berequired to be given to any Person for such matter and nofurther notice shall be required to be given. “

113. It will also be relevant to refer to similar provisions made inthe resolution plan submitted by GMSPL, which read as under:

“7. Withdrawal of litigations initiated by the Financial Creditorsagainst OMML, issue no-dues certificate(s) in favour of OMML

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

and release their respective charges on the securities in full andcomplete satisfaction of all debts owed to the Financial Creditorsby OMML / the respective SPVs as the case may be, includingall guarantees which may have been provided to the FinancialCreditors, for credit facilities availed by OMML.

8. Extinguishment and waiver of all dues to the IncumbentPromoter Group by OMML.

9. Directions to ensure that the Proposed Merger application shallstand withdrawn. Relinquishment of corporate guarantee issuedby OMML in favour of or on behalf of any of its subsidiaries,associates, group companies or any third party. Directions to theeffect that the guarantees provided by any and all members ofIncumbent Promoter Group or their respective promoters or anyperson associated with the Incumbent Promoter Group, maycontinue with the Financial Creditors. However, the same shallnot result in any liability towards OMML or the ResolutionApplicants.”114. It is thus clear, that according to the resolution plan submittedby EARC itself, had it been successful applicant, then in that event,the claims made by it would have been irrevocably waived andpermanently extinguished and written off in full with effect from theEffective Date. Had the resolution plan of EARC been approved, thenall such debts would have stood extinguished without any further act ordeed and approval of the said plan by NCLT would have been sufficientnotice required to be given to any person for such matter. Undisputedly,the resolution plan submitted by EARC was on the basis of the informationmemorandum submitted by RP wherein, it was specifically clarified, thatthe claims of EARC were not admitted by RP. It is thus clear, thatEARC 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 successful resolution applicant andapproval of other applicant as successful resolution applicant, its claimwould survive. party cannot be permitted to apply two differentyardsticks.

115. Shri Bhushan, learned counsel appearing on behalf of EARC,strongly relying on the judgment of NCLAT dated 14.8.2018 passed in

AExport Import Bank of India vs. Resolution Professional JEKPLPrivate Limited[36], submits, that NCLAT itself in the said case had held,that invocation of corporate guarantee has no nexus with filing of theclaim pursuant to public announcement made under Section 13(1)(b)read with Section 15(1)(c) of the I&B Code and also for collating theclaim under Section 18(1)(b) or for updating claim under Section 25(2)(e).BHe submits, that Civil Appeal challenging the said judgment and orderhas been dismissed by this Court vide order dated 23.1.2019.

116. He submits, that NCLAT itself in the said case had directedEXIM Bank and Axis Bank to be treated as ‘financial creditors’ and hadfurther directed them to be given representation on CoC. He submits,Cthat, however, in the present case, NCLAT has taken contrary view.He therefore submits, that in the alternative this Court should direct RP/CoC to treat EARC as ‘financial creditor’ and give it representationon CoC and take decision in accordance with law.

117. We find, that the said case, on facts, would not be applicableDto the case at hand. No doubt, that the appeal filed against the judgmentand order of NCLAT dated 14.8.2018 has been dismissed by this Courton 23.1.2019. However, it is settled law, that dismissal of SpecialLeave Petition/Appeal does not amount to affirmation of the view takenin the judgment impugned in the Special Leave Petition/Appeal. It willEalso be relevant to refer to the order passed by this Court dated 23.1.2019while dismissing the appeal, which reads thus:

“Civil Appeal No.10134/2018

We have heard learned counsel for the parties and perusedthe relevant material on record.FThe Civil Appeal is dismissed.

It will be open for the appellant to urge all points as may beavailable to it in law before the appropriate forum, if so advised.”

118. It will thus be clearly seen, that this Court while dismissingGthe appeal has reserved the liberty to the appellant to urge all points asmay be available to it in law before the appropriate forum.

119. It is to be noted, that in the appeal before NCLAT, the EXIMBank as well as Axis Bank had taken steps immediately after the claim

H36 Company Appeal (AT) (Insolvency) No.304 of 2017 and connected matters.

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

of said Banks on the basis of corporate guarantee came to be rejectedby RP/CoC. After rejection of the claim, said Banks had filed anapplication under Section 60(5) before NCLT. On NCLT rejecting thesaid claim, those Banks had approached NCLAT in appeals, which wereallowed and the order, as stated hereinabove, was passed.

120. In the present case, the claim of EARC was rejected on22.1.2018. Instead of challenging the said rejection, EARC participatedin the proceedings and was one of the resolution applicants. Not onlythat, in the first round, it was successful bidder being ranked H1 bidder.However, since in the negotiations it failed to satisfy CoC, fresh bidswere invited from the resolution applicants, which had submitted theirEOI. In the 12[th] meeting of CoC held on 25.4.2018, the resolution planof GMSPL was approved by 89.23% of the voting shares. Only thereafter,EARC filed two applications; one challenging the approval of resolutionplan of GMSPL by CoC and another challenging rejection of its claimsby RP/CoC.

121. 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 anapplication under Section 60(5)but waited till the decision of CoC. Duringthis period, it was actually pursuing its resolution plan. Only after itsresolution plan was not approved and the resolution plan of GMSPL wasapproved, it filed the aforesaid two applications. Apart from that, asalready observed hereinabove, in the resolution plan of EARC itself, ithas provided for extinguishment of all claims not forming part of resolutionplan.

122. Even otherwise, if for the sake of argument, it is held, thatEARC was entitled to be treated as ‘financial creditor’ and entitled fora participation in CoC, still its share was about 9% and as such, theresolution plan of GMSPL would have been passed by majority of80%, which is much above the statutory requirement.

123. We are therefore of the considered view, that the observationmade by NCLAT giving liberty to EARC to take recourse to suchproceedings as available in law for raising its claims is totallyunsustainable.

124. Insofar as, the observation made with regard to claim of theJharkhand Government is concerned, it is to be noted, that the State ofJharkhand has not even appealed against the order passed by NCLT.

AInsofar as, the claims of Labour and Workmen are concerned, RP hasspecifically stated before NCLAT, that whatever claims were receivedfrom the workmen were duly considered in the resolution plan. Despitethat, observing that liberty is available to the workmen to raise theirclaims before Civil Court or Labour Court, in our view, is totally inconflict with the provisions of I&B Code. The same would equally applyBto the observation made in the appeal of Mr. Deepak Singh, claiming tobe ‘operational creditor’.

125. We are therefore of the considered view, that the appealdeserves to be allowed by expunging the paragraphs nos. 28, 42, 43, 51and 52 from the judgment of NCLAT dated 23.4.2019. It is orderedCaccordingly. The judgment and order passed by NCLT dated 22.6.2018is upheld. No costs.

CIVIL APPEAL ARISING OUT OF SPECIAL LEAVEPETITION (CIVIL) NO.11232 OF 2020

D126. The present appeal arises out of the judgment and orderpassed by the Division Bench of the Allahabad High Court dated 6.7.2020thereby, dismissing the petition filed by the appellant on the ground ofavailability of alternate remedy. The petition being Civil Misc. Writ Petition(Tax) No.354 of 2020 came to be filed seeking following reliefs:

“i. Issue writ, order or direction in the nature of certiorariquashing the order dated 30.01.2020 passed by the AdditionalCommissioner Grade – 2 (Appeal) rejecting the appeal preferredby the petitioner in respect of Assessment Year 2015-16 (U.P. VA T) and affirming demand of Rs. 232.60 Lacs raised on thepetitioner;F

ii. Issue writ, order or direction in the nature of certiorari quashingthe Communications/orders of the Joint Commissioner (Corporate),Ghaziabad holding that the proceedings in the State of U.P. wouldremain unaffected irrespective of the Resolution Plan of thepetitioner being approved by the NCLT under the Insolvency andGBankruptcy Code as the NCLT order does not specifically prohibitthese proceedings;

iii. Issue writ, order or direction in the nature of mandamusdirecting refund of the amount which the petitioner is entitled toas result of orders passed by the respondents;

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

iv. Issue declaration that all proceedings pending before differentauthorities (assessing authority, first appellate authority orCommercial Tax Tribunal, Ghaziabad Bench) in respect oftransactions entered into by the petitioner prior to the TransferDate involving consolidated amount of Rs. 769.73 Lacs standabated in terms of the Resolution Plan approved by the NCLTunder the Insolvency and Bankruptcy Code, 2016;

v. Issue writ, order or direction in the nature of mandamusdirecting the Respondents to refund Rs. 248.92 Lacs/- depositedby the petitioner under protest in these proceedings and also toreturn the bank guarantee submitted for Rs. 16.31 Lacs/-.

vi. Issue writ, order or direction in the nature of mandamusrestraining the Respondents from passing any orders includingpenalty orders, raising any further demands, imposing any liabilityor taking any coercive steps including continuing with pendingassessments / proceedings / litigation / appeals / revisions in respectof period prior to Transfer Date.”

127. The High Court found, that the appellant has an alternativeefficacious remedy of filing the Second Appeal and as such, deemed itfit to not to entertain the said petition. The basic grievance of the appellantin the writ petition was, that after the resolution application was approvedby the Adjudicating Authority and the management of the CorporateDebtor was transferred to the resolution applicant, all the claims stoodextinguished and the proceedings in respect thereof could not continue.

128. The main ground raised on behalf of the respondent is, withregard to availability of alternate remedy. The second ground raised is,since the transfer date is prior to 2019 amendment to Section 31 of I&BCode, the said amendment would not be applicable to the debts owed tothe State Government or Central Government.

129. As held by this Court in catena of cases including in thecases of Babu Ram Prakash Chandra Maheshwari vs. Antarim ZillaParishad Muzaffar Nagar[37], Whirlpool Corporation vs. Registrarof Trade Marks, Mumbai & Ors.[38], Nivedita Sharma vs. CellularOperators Association of India & Ors.[39], Embassy Property

37 (1969) 1 SCR 51838 (1998) 8 SCC 1

39 (2011) 14 SCC 337

ADevelopments Pvt. Ltd. vs. State of Karnataka and Others[40]andrecently in the case of Kalpraj Dharamshi (supra), that non-exerciseof jurisdiction under Article 226 is rule of self-restraint. It has beenconsistently held, that the alternate remedy would not operate as bar inat least three contingencies, namely, (1) where the writ petition has beenfiled for the enforcement of any of the Fundamental Rights; (2) whereBthere has been violation of the principle of natural justice; and (3)where the order or proceedings are wholly without jurisdiction or thevires of an Act is challenged.130. In the foregoing paragraphs, we have held, that 2019amendment to Section 31 of I&B Code is clarificatory and declaratoryCin nature and therefore will have retrospective operation. As such,when the resolution plan is approved by NCLT, the claims, which arenot part of the resolution plan, shall stand extinguished and the proceedingsrelated thereto shall stand terminated. Since the subject matter of thepetition are the proceedings, which relate to the claims of the respondentsDprior to the approval of the plan, in the light of the view taken by us, thesame cannot be continued. Equally the claims, which are not part of theresolution plan, shall stand extinguished.

131. In this view of the matter, we find, that relegating the appellantto the alternative remedy would serve no purpose. party cannot beEmade to run from one forum to another forum in respect of theproceedings and the claims, which are not permissible in law.

132. The appeal therefore is allowed. The impugned judgmentand order dated 6.7.2020 passed by the Allahabad High Court is quashedand set aside. We hold and declare, that the respondents are not entitledFto recover any claims or claim any debts owed to them from the CorporateDebtor accruing prior to the transfer date. Needless to state, that theconsequences thereof shall follow.

WRIT PETITION (CIVIL) NO.1177 OF 2020

133. For the reasons stated, I.A. for change of name of theGpetitioner No.1. is allowed. Cause title be amended accordingly.

134. The present writ petition has been filed by the petitionersunder Article 32 of the Constitution. In this case also, the resolution planin respect of the Corporate Debtor (petitioner – Company) has been

H40 (2020) 13 SCC 308

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

approved by the Adjudicating Authority on 24.7.2018. Pursuant thereto,the management of the Corporate Debtor (petitioner – Company) wastransferred to the successful resolution applicant i.e. Aion-JSW.

135. After the completion of CIRP on 5.1.2019, the respondentNo.2 issued reminder to the petitioner to pay an amount ofRs.4,49,34,917.00 towards the service tax deposited by it towards royalty,DMF and NMET for the period between 1.4.2016 and 30.6.2017. Thepetitioner replied to the said notice pointing out to the authorities theprovisions of I&B Code and stating therein, that the demand made bythe respondent were not permissible in view of I&B Code. The petitionershad also requested for refund of an amount of Rs.5,25,15,880/- depositedas advance against supply of iron ore.

136. In this background, the petitioners have approached this Courtchallenging the demand notice dated 20.7.2018 and 28.4.2020.

137. The present case would also be covered by the view takenby us hereinabove.

138. It is further to be noted, that the Income Tax Authorities hadapproached this Court with respect to income tax dues concerning thepresent petitioner by way of Special Leave Petition (Civil) No.6483 of2018. This Court passed the following order in the said Special LeavePetition on 10.8.2018:

“Heard.

Delay, if any, is condoned.

Given Section 238 of the Insolvency and Bankruptcy Code, 2016,it is obvious that the Code will override anything inconsistentcontained in any other enactment, including the Income-Tax Act.

We may also refer in this Connection to Dena Bank vs. BhikhabhaiPrabhudas Parekh and Co. & Ors.(2000) 5 SCC 694 and itsprogeny, making it clear that income-tax dues, being in the natureof Crown debts, do not take precedence even over securedcreditors, who are private persons.

We are of the view that the High Court of Delhi, is, therefore,correct in law.

Accordingly, the Special Leave Petitions are dismissed.

Pending applications, if any, stand disposed of.”

A139. In ordinary course, we would not have entertained such apetition directly under Article 32 of the Constitution. However, questionof law, which arises for consideration in the present petition has beenconsidered by us in this batch of matters. In that view of the matter, wefind, that it would not be in the interest of justice to non-suit the presentpetitioner, when we have specifically decided question of law, whichBwould govern the present case also. As such, the present petition isallowed.

140. We hold and declare, that the respondents are not entitled torecover any claims or claim any debts owed to them from the CorporateDebtor accruing prior to the transfer date. Needless to state, that theCconsequences thereof shall follow.CIVIL APPEALS ARISING OUT OF SPECIAL LEAVEPETITION (CIVIL) NOS.7147-7150 OF 2020

141. For the reasons stated, I.A. for intervention on behalf of theDapplicant – TATA Steel BSL Limited is allowed.

142. In the present case, the appellant challenges the judgmentand order passed by the Division Bench of the Jharkhand High Courtdated 1.5.2020 vide which the petitions filed by the appellant, challengingthe action of the respondent – authorities thereby, seeking to recover theEJharkhand Value Added Tax (JVAT) for the period between 2011-2012and 2012-2013, have been rejected. Both the learned Judges have writtenseparate judgments.

143. In the judgment authored by H.C. Mishra, J, the petitionsfiled by the appellant were rejected on two grounds, viz., one, that sinceFthe management of the appellant was taken over by M/s Vedanta Limitedon 4.6.2018, it was only M/s Vedanta Limited, which had locus to filewrit petitions. Secondly, it was debatable whether the amount of JVATshall be covered by the expressions “debt in respect of the payment ofdues arising under any law for the time being in force and payable to theGCentral Government, any State Government” so as to bring it within thedefinition of “operational debt”.

144. Insofar as, the judgment authored by Deepak Roshan, J. isconcerned, the learned Judge has observed, that since the resolutionplan was approved by NCLT on 17.4.2018, 2019 amendment to Section31(1) of I&B Code would not apply to the said plan. We find, that theH

GHANASHYAM MISHRA AND SONS (P) LTD. THROUGH THE AUTH.SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.THROUGH THE DIRECTOR [B. R. GAVAI, J.]

finding of the High Court, that the dues owed to the State Governmentand Central Government would not come within the definition of‘operational debt’, is incorrect in law in the light of the view that is takenby us. So also the finding, that since the order of NCLT is prior to thedate on which Section 31(1) of I&B Code was amended, the provisionsof Section 31 would not be applicable, also cannot stand in view of theforegoing observations made by us hereinabove.

145. We also find, that the High Court has erred in holding, thatthe Appellant – Company does not have locus to file the writ petitionsinasmuch as, the management has been taken over by M/s VedantaLimited. The resolution plan is in respect of the Corporate Debtor andthe successful resolution applicant only takes over the management ofthe Corporate Debtor in accordance with the resolution plan. Theresolution applicant steps into the shoes of the Corporate Debtor. Assuch, the finding in this respect would also not be sustainable in law.146. Shri Gurukrishna Kumar, learned Senior Counsel, strenuouslyargued, that RP/CoC had acted in fraudulent manner. It is submitted,that though notice inviting claim was required to be published in localnewspapers where the registered office of the Corporate Debtor wassituated, the notice was published in the newspaper of Kolkata edition.As per Regulation 6(2)(b) of the 2016 Regulations, the said notice isrequired to be published in one English and one regional languagenewspaper with wide circulation at the location of the registered officeand corporate office of the Corporate Debtor. Perusal of the recordwould reveal, that the notice was published in Business Standard andAnanda Bazar Patrika newspapers of the Kolkata edition, which havewide circulation in Ranchi. The corporate office of the Corporate Debtoris at Kolkata whereas its registered office is at Ranchi. In any case, it isto be noticed, that the Forest Department of the State Government hadfiled intervention application before NCLT as well as NCLAT. Whenone of the wings of the State Government has approached NCLT andNCLAT, it is difficult to believe, that other organ of the State was notaware about the said proceedings.

147. The contention of Shri Gurukrishna Kumar, learned SeniorCounsel, that finding with regard to non-compliance of Section 13 is notchallenged by the Electrosteel Steels Limited, is also incorrect, inasmuchas, Electrosteel Steels Limited has raised the specific ground in Grounds‘U’ to ‘ AA’ to that effect in the appeal memo.

A148. In the result, the appeals deserve to be allowed. It is orderedaccordingly. The impugned judgment and order of the Jharkhand HighCourt dated 1.5.2020 is quashed and set aside.

149. We hold and declare, that the respondents are not entitled torecover any claims or claim any debts owed to them from the CorporateBDebtor accruing prior to the transfer date. Needless to state, that theconsequences thereof shall follow.

Nidhi Jain

Appeals and Writ Petition allowed.