Read why Supreme Court dismissed NOIDA Special Economic Zone Authority’s appeal for claim of Rs. 6 Crore against corporate debtor

Supreme Court: In a set of two civil appeals challenging the decision of the National Company Law Appellate Tribunal, Principal Bench, New Delhi (‘NCLAT’), wherein the challenge to the order of the National Company Law Tribunal, New Delhi (‘NCLT’) approving the Resolution Plan as presented on the approval by the Committee of Creditors and challenge to the approval of the Resolution Plan were rejected, the Division Bench of Abhay S. Oka and Augustine George Masih, JJ., dismissed the appeals, upholding that Resolution Plan approved By Committee Of Creditors and that the IBC prevails over Special Economic Zone Act, 2005.

Background

Shree Bhoomika International Limited, being the Corporate Debtor was sub-leased the Plot at NOIDA Special Economic Zone (‘NSEZ’) by Noida Special Economic Zone Authority (‘appellant’) in capacity of lessee of the said land. The lease was valid for a period of 15 years. The appellant’s case was that the Corporate Debtor had begun defaulting on lease payments in 1999, and moreover, there was no performance or activity on the said land since the year 2003-2004 leading to financial losses to the Government Exchequer, and same also being violative of the Special Economic Zone Rules and guidelines framed therein. In the light of the defaults committed by the Corporate Debtor, Corporate Insolvency Resolution Process (‘CIRP’) was initiated by the appellant before the NCLT. An Interim Resolution Professional (‘IRP’) was appointed. The appellant filed a claim of Rs. 6,29,18,121/- which was admitted by the Resolution Professional (‘RP’) in entirety. The liquidation value of the Corporate Debtor was fixed at Rs. 04.25 Crores. Subsequently, an application under Sections 31(1) and 60(5) of the Insolvency and Bankruptcy Code, 2016 (‘IBC 2016’) before the NCLT was moved by the RP, seeking an approval of the Resolution Plan on behalf of the Committee of Creditors. The same was allowed by NCLT vide Order dated 05-10-2020, granting only Rs. 50 Lakhs to the appellant against its admitted claim of Rs 06.29 Crores. Being at loggerheads with the RP with respect to the payment of admitted claim, the appellant moved an application before the NCLT challenging the Order dated 05-10-2020, approving the Resolution Plan. However, the same came to be rejected on grounds of lack of jurisdiction, hence, the appellant moved appeals under Section 61 of IBC 2016 before the NCLAT, challenging both the orders. These appeals also came to be dismissed vide the impugned Judgment dated 14-02-2022.

Analysis and Decision

Regarding the appellant’s assertions as to the statutory dues, the Court said that the same were rightly analysed by the NCLAT as per the ratio laid down in Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467; Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657; K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 elucidating that all the dues, including statutory dues owned by the Central Government, State Government and local authority, which is not the part of the Resolution Plan shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority had approved the Resolution Plan could be pressed into service or continues.

The Court said that no violation of the statute or the procedure was found and the Resolution Plan as approved by the Committee of Creditors being accepted was rightly left untouched. Regarding the claims pertaining to the transfer fees, etc., the Court refused to interfere with the same, stating that the claims were not be interfered with by courts or tribunals as the same stood related to the commercial wisdom of the Committee of Creditors for they being the best persons to determine their interests, and any such interference is non-justiciable except as provided by Section 30(2) of IBC 2016.

The Court stated that fundamentally, the financial decisions taken by Committee of Creditors, especially with regard to viability or otherwise, while evaluating the plan would thus prevail. The Court added that the submission that exemptions from NSEZ payments, including any type of fees or penalty for renewal of sub-lease and/or for transfer charges due with regard to the change of directorship or shareholding in favour of the Resolution Applicant should be dealt with as per Clause 10.9 of the Resolution Plan could not be accepted in the light of Section 238 of IBC 2016, which provides for the provisions of IBC 2016 to have an overriding effect over the other laws. The Court noted that the amount was disbursed vide Demand Draft and the same was received and accepted by the appellant.

Placing reliance upon Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 and its reiteration by numerous subsequent decisions of this Court, the Court refused to accept the claim of the appellant. Hence, the impugned orders dated 05-10-2020 and 27-11-2020, as have been passed by the NCLT and approved by the NCLAT did not call for any interference.