Introduction

The case of Akshar Plastchem Investment Private Limited v. Shri Bijay Murmuria and Ors. adjudicated by the National Company Law Appellate Tribunal (NCLAT) on May 26, 2022, serves as a critical examination of procedural compliance in the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant, Akshar Plastchem Investment Pvt. Ltd., sought to challenge an order by the Adjudicating Authority (National Company Law Tribunal, Guwahati Bench) which had rejected their Insolvency Application (IA) filed against the Corporate Debtor, Kitply Industries Ltd.

The primary issues revolved around the adequacy of public announcements made during the CIRP and the implications of procedural lapses on creditors' rights. This commentary delves into the background, court's findings, legal reasoning, and the broader impact of this judgment on future insolvency proceedings.

Summary of the Judgment

The appellant, Akshar Plastchem Investment Pvt. Ltd., claimed an outstanding amount of ₹1,21,86,626 from Kitply Industries Ltd., alleging non-payment for goods supplied between February and August 2010. After initial winding-up proceedings were abeyanced due to a BIFR case, the Insolvency and Bankruptcy Code provisions were invoked by IDBI Bank against Kitply Industries. The Resolution Professional (RP), Shri Bijay Murmuria, initiated the CIRP, published public announcements as per regulatory requirements, and ultimately, a Resolution Plan submitted by SREI Multiple Asset Investment Fund was approved.

Akshar Plastchem challenged the approval of the Resolution Plan, contending that the public announcements did not comply with the specific requirements necessary to notify all relevant creditors, particularly those operating in Maharashtra. The NCLAT, however, dismissed the appeal, upholding the Adjudicating Authority's decision. The Court held that the RP had adhered to the statutory requirements for public announcements and that the appellant had failed to file a timely claim within the CIRP framework, thereby extinguishing their claims upon the Resolution Plan's approval.

Analysis

Precedents Cited

The judgment prominently referenced the Supreme Court case Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited (2021) 9 SCC 657. This precedent established that upon the approval of a Resolution Plan, all claims not encompassed within the plan are extinguished. Specifically, Paragraph 102.1 of the Ghanashyam Mishra judgment elucidates that claims outside the Resolution Plan cannot be pursued post-approval, reinforcing the finality and binding nature of the Resolution Plan on all stakeholders.

Legal Reasoning

The Tribunal's legal reasoning centered on the adherence to procedural norms stipulated under Section 15 of the IBC and Regulation 6(1) of the Insolvency Resolution Process for Corporate Persons Regulations, 2016. The appellant's contention was that the RP failed to publish the public announcement in Maharashtra, where Akshar Plastchem operated, thereby denying them the opportunity to file claims.

However, the Tribunal analyzed the statutory requirements, noting that Regulation 6(2)(i) mandates publication in one English and one regional language newspaper with wide circulation at the Corporate Debtor's registered and principal offices, as well as other locations where the Corporate Debtor conducts material business operations. The RP had fulfilled these obligations by publishing in relevant newspapers and uploading the announcement on the Corporate Debtor's and the Board's websites. The Tribunal held that the RP was not required to publish in every locale where suppliers or creditors operated, but rather at locations significant to the Corporate Debtor's business operations.

Furthermore, the Tribunal underscored the importance of timely claim filings. Since Akshar Plastchem failed to submit their claim within the prescribed period, their claims were extinguished upon the Resolution Plan's approval, aligning with the Supreme Court's stance in the Ghanashyam Mishra case.

Impact

This judgment reinforces the necessity for Resolution Professionals to strictly adhere to procedural requirements in public announcements during CIRP. It clarifies that publication obligations are tied to the Corporate Debtor's operational locales rather than every possible creditor's business location. Additionally, it underscores the importance of creditors proactively participating in CIRP timelines to protect their interests.

For future cases, this decision exemplifies the judiciary's support for maintaining procedural rigor in insolvency proceedings while ensuring that resolutions are not derailed by technicalities unless substantial non-compliance is evident. It also highlights the finality of Resolution Plans in extinguishing claims not included therein, thereby encouraging timely and diligent claim submissions by creditors.

Complex Concepts Simplified

Conclusion

The judgment in Akshar Plastchem Investment Pvt. Ltd. v. Shri Bijay Murmuria and Ors. underscores the critical balance between procedural adherence and the rights of creditors within the CIRP framework. By upholding the Resolution Professional's actions as compliant with statutory requirements, the Tribunal affirmed the streamlined nature of the insolvency process, ensuring that it is not hindered by isolated technical disputes. This decision reinforces the principles of efficiency and finality in insolvency resolutions, encouraging creditors to engage proactively and within designated timelines to safeguard their interests.

For legal practitioners and stakeholders in insolvency proceedings, this case serves as a pertinent reminder of the importance of strict compliance with procedural mandates and the implications of delayed or omitted claim filings. As insolvency laws continue to evolve, such judgments contribute to shaping a more predictable and fair resolution environment for all parties involved.