The maxim "Vigilantibus non dormientibus iura subveniunt", means law aids the vigilant and not the indolent. In other words, the law comes to the assistance of those who are vigilant with their rights, and not those who sleep on their rights.
The Hon'ble National Company Law Appellate Tribunal ("NCLAT") recently passed two judgments demonstrating the true essence of the aforesaid legal maxim. In State Tax Officer vs. Ricoh India Ltd. & Ors.,1 NCLAT dealt with a legal proposition concerning whether a creditor having failed to take any steps for agitating its claim at the relevant time, could later raise any grievance for non-allocation of any amount in the approved resolution plan. In another judgment Calyx Chemicals and Pharmaceuticals Private Limited vs. Ravindra N. Athavale & Ors.,2 with Calyx Chemicals and Pharmaceuticals Private Limited vs. Dnyanaba Namdeo Karande & Ors.,3 NCLAT examined whether the claims of the respondent stood extinguished and if so, whether the Adjudicating Authority, on the grounds of non-implementation of the plan, could have revived the gratuity dues claimed by the respondent and given directions to pay gratuity dues to the respondent without consideration by the Committee of Creditors ("CoC").?
The common legal proposition emerged from both rulings is that once the resolution plan is approved by the National Company Law Tribunal ("Adjudicating Authority"/ "NCLT") and remains unchallenged within the prescribed timeframe under the provisions of Insolvency and Bankruptcy Code, 2016 ("Code"), it attains finality. Therefore, no claims whether statutory or otherwise shall be entertained by the Adjudicating Authority thereafter.
In State Tax Officer vs. Ricoh India Ltd. & Ors. (Supra), it was observed that an appeal has been filed by the State Tax Officer ("Appellant") challenging the Order dated November 28, 2019 passed by the Adjudicating Authority by which the resolution plan submitted by the respondent nos. 2 and 3 has been approved by the Adjudicating Authority ("Plan Approval Order"). It is Appellant's case that they have filed their claims towards statutory liabilities such as CST, VAT, and Sales Tax with the Resolution Professional ("RP"). Despite the claim being filed, the RP did not admit it due to ongoing disputes and appeals. The approved resolution plan subsequently proposed nil payment to statutory authorities, including the State Tax Officer. The Plan Approval Order has been challenged before NCLAT by way of aforesaid appeal.
The NCLAT while dismissing the aforesaid appeal observed that the Appellant's claim was included in the creditor list but marked as "not admitted" due to pending disputes before various forums. The status of the claim was publicly available, and the Appellant failed to challenge it during the CIRP before the Adjudicating Authority at any time before approval of the resolution plan. The NCLAT emphasized that since the Appellant did not take timely steps for agitating its claim before the Adjudicating Authority at relevant time, it could not later raise any grievance for non-allocation of any amount in the resolution plan.
In another judgment Calyx Chemicals and Pharmaceuticals Private Limited ("CCPPL") vs. Ravindra N. Athavale & Ors. with Calyx Chemicals and Pharmaceuticals Private Limited ("CCPPL") vs. Dnyanaba Namdeo Karande & Ors., (Supra), post approval of the resolution plan by the Adjudicating Authority, the ex-employees of the CD inquired about their claims from the Successful Resolution Applicant ("SRA"), which were filed by them before the RP during CIRP of the Corporate Debtor. The SRA replied that as per the approved resolution plan, there was no provision for payments to employees who were not on the CD's payroll as of February 06, 2018. Aggrieved by this, ex-employees filed Interim application seeking payment of gratuity before the Adjudicating Authority. The Adjudicating Authority admitted both applications vide two orders both dated January 19, 2024 ("Impugned Orders"), holding that gratuity dues to the extent of admitted claims, deserved to be paid. Being aggrieved by the aforesaid Impugned Orders, CCPPL challenged it before NCLAT under Section 61 of the Code.
The NCLAT while allowing both appeals against the aforesaid Impugned Orders observed that once the Adjudicating Authority approves a resolution plan, it constitutes a statutory closure to all claims that creditors or other entities may have against the CD unless it is challenged within the statutorily prescribed timeframe.
The NCLAT ruled that the Adjudicating Authority overstepped its jurisdiction by modifying the resolution plan, which is impermissible without the CoC's approval. It was observed that allowing such claims five years after plan implementation would disrupt the insolvency process and contravene the Code's framework. The NCLAT concluded that the resolution plan had been fully implemented and that no valid grounds existed to revive claims and thus, set aside the Impugned Orders, reaffirming the finality of the approved resolution plan.
In our view, both the judgments act as a reminder to bonafide claimants to be vigilant and act swiftly to ensure that their claims attain finality at the time of approval of resolution plan alongwith the fact that SRA cannot be left open to entertain claims which have not been factored in the resolution plan. It is now a settled position of law that after the approval of a resolution plan no claim/ proceedings can be initiated or continued in respect of a claim which is not part of the resolution plan.
Footnotes
1 Company Appeal (AT) (Insolvency) No. 248 of 2020>
2 Company Appeal (AT) (Insolvency) No. 522 of 2024
3 Company Appeal (AT) (Insolvency) No. 523 of 2024
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