The NCLT Bengaluru Bench, has held that all claims, including those which are subject to ongoing arbitration proceedings, will stand extinguished following the approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code (IBC).
In February 2019, Vikas Telecom Private Limited (VTPL) engaged Synergy Property Development Services Pvt. Ltd. (later Colliers International India Property Services Limited) as the Project Management Consultant for Parcel 3A and MLCP at Embassy Tech Village, Bangalore. Katerra India Pvt. Ltd. was contracted for the design and build package but failed to complete the project on time despite an extended deadline, leading to its admission into insolvency proceedings. EPCWPL, a co-developer of the project, filed claims worth ₹78.16 crore as an operational creditor in Katerra's CIRP, citing losses due to non-fulfillment of contractual obligations. Katerra disputed the claim and countered with its own demand for ₹160.46 crore, resulting in arbitration proceedings.
EPCWPL contended that its claims and counterclaims, being part of ongoing arbitration, should be adjudicated in that forum rather than being extinguished through the resolution process. It argued that extinguishing EPCWPL’s claims while allowing Katerra’s claims to proceed would be inequitable. The respondent, however, submitted that once a Resolution Plan is approved, all claims not included within the plan are extinguished to ensure the resolution applicant begins on a clean slate without unforeseen liabilities.
The tribunal observed that determining the validity of contractual claims falls outside its jurisdiction and must be addressed by the arbitral tribunal. Referring to Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021), the tribunal reiterated that all claims stand frozen upon the approval of the Resolution Plan, binding on the corporate debtor and extinguishing any claims not explicitly included. The tribunal also noted that the legislative intent behind this principle is to protect the resolution applicant from unexpected liabilities that could disrupt the feasibility and viability of the approved plan.
While referencing the NCLAT ruling in Shaapoorji Pallonji & Co. (P) Ltd. v. Kobra West Power Co. Ltd. (2023), the tribunal acknowledged that parties may pursue their claims in arbitration proceedings post-approval of the Resolution Plan. However, it emphasized that such proceedings cannot impact the approved plan or revive extinguished claims.
The tribunal concluded that the approval of Katerra’s Resolution Plan extinguished all liabilities and claims, including those which are subject to arbitration, thereby upholding the principle of finality in insolvency resolution processes.
Embassy Commercial Projects (Whitefield) Private Limited Versus Pankaj Srivastava
I.A No. 545/2024 In CP (IB) No.74/BB/2023
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