NCLAT Answers Whether an ‘Operational Creditor’ Can Be Allowed To Pursue Prior Arbitration Proceedings Post Approval of Resolution Plan.

• An Appeal was filed before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”), in the matter of Shapoorji Pallonji & Co. Pvt. Ltd. vs Korba West Power Company Ltd. & Ors., challenging the Impugned Order passed by the Learned Adjudicating Authority (NCLT, Ahmedabad Bench) allowing the Interlocutory Application filed by the Resolution Professional (“RP”) of the Corporate Debtor/M/s. Korba West Power Company Limited, seeking approval of the ‘Resolution Plan’.

• The fact of the matter was that the corporate insolvency resolution process (“CIRP”) was initiated by the Corporate Debtor itself by invoking Section 10 of the Insolvency and Bankruptcy Code (“IBC”) and that there were three Arbitration Proceedings pending between the Appellant and the Corporate Debtor prior to the initiation of the CIRP. The RP did not communicate the rejection of claim of the Appellant in writing but instead, as per Regulation 13(2)(c) of the CIRP Regulations, 2016, which did not provide for any ‘Individual Notice’ to be served on the ‘Creditors’ regarding admission or non-admission all their claims, uploaded the status of the claims on the website of the Corporate Debtor twice. The RP rejected the claim of the Appellant deeming it ‘not verifiable’ in the light of the pending Arbitration Proceedings.
• It was the case of the RP that there is no provision in IBC to give any communication in writing regarding the rejection of claims to the creditors and that the Appellant never challenged the rejection of its claim and filed this Appeal belatedly after a lapse of a period of 152 days and that too against the Order approving the Resolution Plan.

• To adjudicate the issue at hand, the Hon’ble NCLAT discussed and relied upon the ratio in the case of Fourth Dimension Solutions Vs. Ricoh India Limited & Ors. wherein the Hon’ble Apex Court held that ‘Operational Creditor will have the liberty to pursue Arbitration Proceedings which are pending at the time of CIRP, even after the Resolution Plan is approved and all contentions would be decided on its own merits’.

• Thus, in the similar facts and circumstances, the NCLAT vide its order dated February 23, 2023, observed that there was no illegality in the Order of ‘Approval of the Resolution Plan’ by the Adjudicating Authority and therefore, no reason to set aside the Resolution Plan per se except for observing that the RP ought to have made a ‘Contingent Provision’ with respect to the Appellant having regard to the specific facts of this case, which would be subject to the result of the Arbitration Proceedings. Thus, liberty was granted to the Appellant to pursue all contentions available to them in the pending Arbitration Proceedings and the same be decided in the said proceedings on its own merits in accordance with law.