Introduction

The case of Assam Company India Ltd v. Commissioner of Taxes & Others was adjudicated by the National Company Law Tribunal (NCLT), Gauhati Bench, on July 30, 2021. This pivotal case addresses the binding nature of approved Resolution Plans under the Insolvency and Bankruptcy Code, 2016 (IBC), particularly focusing on the extinguishment of claims not included in the approved plan. The Applicant, Assam Company India Ltd., sought the extinguishment of certain tax demands by the Respondents in the wake of a successful Corporate Insolvency Resolution Process (CIRP).

Summary of the Judgment

The NCLT admitted an application under Section 7 of the IBC filed by a Financial Creditor against Assam Company India Ltd. Following the initiation of CIRP, a Resolution Plan was submitted by BRS Ventures Limited and subsequently approved by the Committee of Creditors and the Tribunal. The Applicant, after receiving approval of the Resolution Plan, notified the Respondents to extinguish all claims related to periods prior to the effective date of September 20, 2018, as per the plan.

The Respondents had outstanding tax demands totaling Rs.13,74,80,376/- under Section 19(B) of the Income Tax Act, 1961. However, these claims were not part of the approved Resolution Plan. Referring to recent Supreme Court judgments, the Tribunal held that once a Resolution Plan is approved, it binds all stakeholders, and any claims not included are extinguished. Consequently, the Tribunal extinguished the Respondents' demands for Rs.13,74,80,376/-, while rejecting the Applicant's request for a refund of Rs.4,23,15,716/- related to earlier assessment years.

Analysis

Precedents Cited

The Tribunal's decision heavily relied on two landmark Supreme Court judgments:

• Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited (Civil Appeal No.8129 of 2019): This judgment reaffirmed that once a Resolution Plan is approved by the Adjudicating Authority under Section 31 of the IBC, it becomes binding on all stakeholders, extinguishing any claims not included in the plan.
• Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and others (2020) 8 SCC 531: Commonly referred to as the Essar Judgment, it established that an approved Resolution Plan mandates a fresh start for the corporate debtor, binding all stakeholders and prohibiting any claims outside the plan from being entertained.

Legal Reasoning

The Tribunal interpreted Section 31 of the IBC, which governs the approval of Resolution Plans. Drawing from the cited Supreme Court judgments, the Tribunal emphasized that an approved Resolution Plan freezes the claims of all stakeholders as of the effective date. This provision ensures certainty and stability for the successful Resolution Applicant, allowing them to manage the corporate debtor's affairs without facing unforeseen liabilities.

In the present case, the Respondents failed to submit their claims during the CIRP, and their demands were not incorporated into the approved Resolution Plan. Based on the legal framework and precedents, the Tribunal held that such claims are extinguished, reinforcing the authority of approved Resolution Plans.

Impact

This judgment reinforces the sanctity of approved Resolution Plans under the IBC, ensuring that once a plan is sanctioned, it brings finality to the insolvency proceedings. Stakeholders must diligently submit their claims during the CIRP to be part of the Resolution Plan. Failure to do so implies forfeiture of claims against the corporate debtor, providing clarity and assurance to successful Resolution Applicants. This decision aligns with the broader objective of the IBC to facilitate efficient and predictable insolvency resolutions.

Complex Concepts Simplified

Conclusion

The judgment in Assam Company India Ltd v. Commissioner of Taxes & Others underscores the binding nature of approved Resolution Plans under the Insolvency and Bankruptcy Code, 2016. By aligning with recent Supreme Court jurisprudence, the NCLT reaffirmed that once a plan is sanctioned, it extinguishes any claims not incorporated therein, ensuring legal certainty and facilitating smoother insolvency resolutions. Stakeholders must therefore actively engage in the CIRP and ensure their claims are duly submitted to be protected within the framework of the Resolution Plan.