Status as on- 09/02/2020
The Hon’ble NCLAT has held that a Creditor cannot be permitted to take alternate recourse under section 60(6) of the IBC that excludes moratorium period while calculating limitation on instituting litigation/arbitration once its claim had been duly acknowledged and “given same treatment as has been given to the other similarly situated ‘Financial Creditors’/ ‘Operational Creditors’, the ‘Financial Creditors’/ ‘Operational Creditors.’
In 2010 the Appellants/Creditors had sent a statutory notice to the Corporate Debtor, for the breach of their Term Loan Agreement for a sum of Rs. 6.03 Crore.
The Corporate Debtor, in turn, approached the Hon’ble High Court of Calcutta to direct the converting of the entire outstanding amount outstanding into equity shares on the basis of an Oral Agreement between the parties. In June 2016 the parties were directed to enter into arbitration proceeding by the Hon’ble High Court.
In May 2018 insolvency proceedings were admitted against the Corporate Debtor and the Arbitrator thus adjourned arbitration proceedings sine dine on 11 August 2018.
A brief summary of the insolvency proceedings is as follows;
- The Appellants/ Creditors claim under From C were rejected by the Resolution Professional on 1 September 2018 as the claim was not filed within the stipulated time provided under Regulation 12(c) of the CIRP Regulations;
- The Appellants subsequently filed an interlocutory application under section 60(5) of the IBC for directing the Resolution Professional to take into consideration their claim;
- On 7 December 2018 NCLT approved the Resolution Plan put forth by Successful Resolution Applicant;
- On 21 December 2019 the Appellants/ Creditors interlocutory application was rejected.
LEGAL GROUNDS FOR APPEAL
The Appellants /Creditors appealed the order of 7 December 2018 of approving the Resolution Plan on the grounds that;
- The Appellants /Creditors contended that the ‘Resolution Plan’ is against the provisions of Section 30(2) of the IBC, as it failed to consider the claims of the Appellants as ‘Financial Creditor(s)’;
- The Appellant also prayed to be permitted to invoke section 60(6) of the IBC to pursue pending arbitration proceeding in the alternate; provisions of section 60(6) of the IBC states the following;
“(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.”
The Successful Resolution Applicant on 19 September 2019 revised the Resolution Plan and agreed to provide more than Rs.31,87,829 on the basis of the claim made by the Appellants, as opposed to the earlier offer of Rs 3,02,000. The Appellants /Creditors refused the revised offer.
The Hon’ble NCLAT on deciding the appeal on merit observed that the Appellants should have accepted the revised offer made by the Successful Resolution Applicant as the same treatment had been given to similarly situated ‘Financial Creditors’.
The Hon’ble NCLAT made the following observations with respect to section 60(6) of the IBC with respect to Creditors;
“…it is always open to a Creditor to proceed with the suit or arbitration proceeding, if pending, on completion of the Moratorium. However, once a Creditor/’Financial Creditor’ or ‘Operational Creditor’ files its claim before the ‘Resolution Professional’ and the same is taken into consideration by the ‘Successful Resolution Applicant’ and while submitting the plan or the revised plan providing them same treatment as has been given to the other similarly situated ‘Financial Creditors’/ ‘Operational Creditors’, the ‘Financial Creditors’/ ‘Operational Creditors’, thereafter cannot take the benefit of sub-section (6) of Section 60 of the ‘I&B Code’ nor they can pray to pursue the suit or arbitration proceeding or to file a fresh suit or arbitration proceeding for the same claim.”
The Hon’ble NCLAT thus held that the Appellants cannot be permitted to pursue alternative remedy of suit/arbitration proceeding even if pending as Resolution Plan is binding on all the stakeholders including the ‘Financial Creditor’/ ‘Operational Creditor’ and the ‘Corporate Debtor’ etc. once it is approved by an Adjudicating Authority as per section 31 of the IBC.
Disclaimer– The above article is based on the personal interpretation of related laws, which may differ from person to person. The readers are expected to take expert opinion before relying on this article. For more clarification, the readers can be expected at firstname.lastname@example.org