CREDITORS CANNOT INITIATE PROCEEDINGS TO RECOVER CLAIMS NOT A PART OF RESOLUTION PLAN - SC

14th April 2021

Recently, the SC was presented with a bunch of matters with a common issue - whether, after approval of a resolution plan by adjudicating authority, a creditor can initiate any proceedings for recovery of any due (not part of resolution plan) from the corporate debtor.

The creditors in cases presented before the SC were; state mining departments, income tax departments, state commercial tax departments, etc.

The Adjudicating authority in each of the cases had already approved a resolution plan, which was also upheld in an appeal. However, the NCLT gave liberty to a class of creditors who can move to an appropriate court for recovery after passing a resolution plan. Aggrieved by the observations of the NCLT, the Resolution applicants moved to SC.

Decision

Once a resolution plan is approved by the Adjudicating Authority u/s 31, the claims mentioned in the resolution plan shall be binding on all the creditors. All claims, which are not a part of the Resolution plan shall stand extinguished, including statutory dues owed to any government. No person will be entitled to initiate any proceedings in respect of such dues.

Author: Papiha Ghoshal