Recently the Supreme Court dismissed the Noida Special Economic Zone's (NSEZ) plea challenging the NCLAT's decision to approve a resolution plan. The resolution plan granted Rs. 50 Lacs against NSEZ's admitted claim of Rs. 6 Crore. While adjudicating the matter, the court came up with various propositions settling contentious views around the Insolvency and Bankruptcy Code (IBC), 2016.
The facts and circumstances that led to the instant issue arose when Respondent No.02, i.e., Shree Bhoomika International Limited (hereinafter referred to as “Corporate Debtor”) was sub-leased the contentious Plot at NOIDA Special Economic Zone by the Appellant, in the capacity of lessee of the said land from the NOIDA Authority. The appellant’s contention is that the Corporate Debtor began defaulting on lease payments. The corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) was initiated by the Appellant before the NCLT. The Committee of Creditors, which comprised the Sole Financial Creditor, the Stressed Assets Stabilization Fund – IDBI Bank Limited was constituted by the Interim Resolution Professional. Afterward, the Appellant filed a claim of INR 6,29,18,121/- which was admitted by the Respondent No.01 – Resolution Professional (hereinafter referred to as “RP”) in entirety. Valuation of the Corporate Debtor was thereby conducted and the liquidation value was fixed at INR 04.25 Crores and not 6 Crores as claimed by the Appellant. The Resolution Plan which was prepared by Respondent No. 03 – M/s Commodities Trading, being the Resolution Applicant (hereinafter referred to as “Resolution Applicant”) was put before the Committee of Creditors, which approved. An application was then filed under Sections 31(1) and 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC 2016”) before the NCLT by the RP, seeking approval of the Resolution Plan on behalf of the Committee of Creditors. The same was allowed by NCLT granting only INR 50 Lakhs to the Appellant against its admitted claim of INR 06.29 Crores. Aggrieved, the Appellant put forth its objections before the RP to the Resolution Plan and claimed payment of the entire amount of INR 06.29 Crores from the Corporate Debtor, leaving open the legal remedy to recover the full dues, in case the same was not accepted. Being aggrieved with the RP, the Appellant moved an application before the NCLT challenging the approval of the Resolution Plan. This was dismissed on the ground that NCLT lacks jurisdiction to accept the prayer made in the application, which would amount to setting aside the Resolution Plan, hence the Appellant then filed an appeal before the NCLAT.
After considering the facts, circumstances, and rival submissions of the parties, the Supreme Court decided in favor of the resolution plan. The Court reiterated its well-settled position in Duncans Industries Ltd. v. State of U.P. and Others (2000) 1 SCC 633 that the question of valuation is basically a question of facts, which does not call for any interference if it is based on relevant material on record. Following precedents such as Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss ARC (2021) 9 SCC 657 and Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh (2020) 11 SCC 467, the Court emphasized that all claims, including statutory dues not included in an approved resolution plan, are extinguished. This includes claims by the Central Government, State Governments, and local authorities. As regards the other claims pertaining to the transfer fees, etc., the court held that they were not to be interfered with by courts or tribunals as they are related to the commercial wisdom of the Committee of Creditors who are the best persons to determine their interests, therefore any interference here is non-justiciable except as provided by Section 30(2) of IBC 2016. Section 30(2) of IBC outlines the requirements that a Resolution Plan must meet before it is approved by the Committee of Creditors (CoC) and subsequently by the Adjudicating Authority (NCLT). The provision ensures that the Resolution Plan Complies with the provisions of the law. It also provides for the payment of debts to operational creditors and financial creditors, ensuring that the interests of various stakeholders, particularly operational creditors, are not ignored. It further ensures that the Resolution Plan does not contravene any other laws of the land unless overridden by Section 238 of IBC, which gives IBC precedence over conflicting provisions of other laws. Consequently, in the instant case, the Court reaffirmed that under Section 238 of the IBC which provides for the provisions of IBC 2016 to have an overriding effect over the other laws, IBC’s provisions have an overriding effect over conflicting laws, including the Special Economic Zone (SEZ) Act. After placing reliance on the judgment of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531, the Court stated that once a resolution plan has been approved and implemented, courts cannot interfere or grant relief to dissatisfied creditors. Hence, the Court dismissed the appellant's claim.