Case Note & Summary
The Supreme Court addressed critical questions regarding the binding nature of approved Resolution Plans under the Insolvency and Bankruptcy Code, 2016 (I&B Code). The case involved Ghanashyam Mishra and Sons Private Limited (GMSPL) and Edelweiss Asset Reconstruction Company Limited (EARC), among others, concerning the approval of a Resolution Plan for the Corporate Debtor, Orissa Manganese & Minerals Limited (OMML). The Corporate Insolvency Resolution Process (CIRP) was initiated by the State Bank of India (SBI) under Section 7 of the I&B Code, leading to the appointment of an Interim Resolution Professional (IRP) and subsequent meetings of the Committee of Creditors (CoC). GMSPL's Resolution Plan was ultimately approved by over 89% of the CoC, while EARC's claims were rejected. EARC challenged this approval, asserting its rights as a financial creditor. The National Company Law Appellate Tribunal (NCLAT) upheld the NCLT's decision but noted that EARC could invoke its bank guarantee post-moratorium. The Supreme Court, upon review, clarified that once a Resolution Plan is approved, it is binding on all creditors, including governmental authorities, thus extinguishing any claims not included in the plan. The court also ruled that the 2019 amendment to Section 31 of the I&B Code was clarificatory, reinforcing the principle that statutory dues not part of the approved plan are extinguished. The court emphasized the importance of maintaining the integrity of the resolution process to facilitate the revival of corporate debtors.
Headnote
A) Insolvency Law - Binding Nature of Resolution Plans - Creditors Bound by Approved Plans - Insolvency and Bankruptcy Code, 2016, Section 31 - The court held that once a Resolution Plan is approved by the adjudicating authority, it is binding on all creditors, including the Central and State Governments, thereby extinguishing any claims not included in the plan. This ensures the efficacy of the resolution process and the revival of the corporate debtor (Paras 2-3). B) Legislative Interpretation - Nature of Amendments - Clarificatory vs. Substantive - Insolvency and Bankruptcy Code, 2016, Section 31 - The court determined that the amendment to Section 31 by Act 26 of 2019 is clarificatory in nature, affirming that statutory dues not included in the Resolution Plan are extinguished, thus reinforcing the binding nature of approved plans (Paras 2-3).
Issue of Consideration
Whether creditors are bound by an approved Resolution Plan under the Insolvency and Bankruptcy Code, and the nature of amendments to Section 31.
Final Decision
The Supreme Court upheld the approval of GMSPL's Resolution Plan, ruling that it is binding on all creditors, including the Central and State Governments, and that claims not included in the plan are extinguished. The court also clarified that the 2019 amendment to Section 31 of the I&B Code is clarificatory in nature.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Resolution Plan Approval
- Creditor Rights
- Clarificatory Amendments
