The approved resolution plan is binding on all stakeholders, and any unaddressed claims are extinguished under the provisions of the Insolvency and Bankruptcy Code, 2016.
The National Company Law Tribunal (NCLT), New Delhi Bench comprising Mr. Ashok Kumar Bhardwaj (Judicial Member) and Mr. Subrata Kumar Dash (Technical Member) while approving a Resolution Plan of an SRA, observed that the Resolution Plan, once approved by the Committee of Creditors (CoC), becomes binding on all stakeholders and extinguishes any claims not addressed in the plan, with the Resolution Applicant entitled only to statutory reliefs under Sections 31(1) and 32A of the IBC, 2016, while any further reliefs must be pursued through the relevant authorities.
In Interlocutory Application No. 21 of 2024, Mr. Anil Kumar Singhal, the Resolution Professional (RP) of Frugal Developers Private Limited, sought the Tribunal's approval for the Resolution Plan submitted by Appu Financial Services Limited. This plan had already been approved by the Committee of Creditors (CoC) in its 11th meeting, with a unanimous 100% voting share. Frugal Developers Private Limited had been admitted into the Corporate Insolvency Resolution Process (CIRP) following a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, filed by Covet Financial Services Private Limited. The RP followed the prescribed regulations by issuing public notices and inviting claims from creditors. Throughout the process, the CoC, comprising two Unsecured Financial Creditors, held 11 meetings before unanimously approving the plan on 10.04.2024.
The RP certified that the Resolution Applicant complied with Section 29A of the IBC, confirming it was not disqualified. The approved Resolution Plan proposed a lump sum payment of Rs. 10,00,000 to cover CIRP costs, with no payment allocated for operational creditors as no claims had been admitted. Additionally, no claims were received from employees, workmen, or government/statutory authorities, as the Corporate Debtor had been non-operational for five years. The Transaction Audit Report revealed no Preferential, Undervalued, Fraudulent, or Extortionate (PUFE) transactions. The liability for prior offences was extinguished due to the management change. The plan further proposed the transfer of the Corporate Debtor's share capital to the Resolution Applicant or its nominee, with payments to creditors scheduled within 90 days post-approval.
The Tribunal noted that the Successful Resolution Applicant (SRA) had sought various reliefs and concessions in the plan but provided an undertaking that the plan would remain in effect regardless of whether these were granted by the Adjudicating Authority. It was clarified that the SRA’s payments to creditors and stakeholders, and the continuation of the Corporate Debtor, were not conditional upon the approval of these reliefs. The Tribunal also emphasized that under Section 31(4) of the IBC, the SRA was required to secure necessary approvals from relevant authorities within one year of the plan’s approval. Further, under Section 14 of the IBC, licenses and permits could not be suspended during the insolvency process, provided there were no defaults in current payments.
Ultimately, the Tribunal ruled that any claims not addressed in the Resolution Plan would not survive post-approval. The SRA was entitled only to reliefs under Sections 31(1) and 32A of the IBC and could approach relevant authorities for other claims. The Tribunal approved the Resolution Plan, with immediate implementation instructions, the formation of a Monitoring Committee, and the cessation of the moratorium. Records of the CIRP were to be forwarded to the Insolvency and Bankruptcy Board of India (IBBI) for their records.
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