Holding

A resolution plan approved under Section 31 of the I&B Code is binding on all stakeholders, including the government, and extinguishes any claim not incorporated in the plan; the 2019 amendment to Section 31 is clarificatory and declaratory, and therefore operates retrospectively.

Summary

The Supreme Court considered the corporate insolvency case of Orissa Manganese & Minerals Ltd., where the National Company Law Tribunal approved a resolution plan submitted by GMSPL. The Court examined whether, after approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code (I&B Code), the plan binds all creditors, including the Central and State Governments, and whether any claims not included in the plan are extinguished. It also addressed the nature of the 2019 amendment to Section 31, determining whether it is clarificatory/declaratory and therefore retrospective. The Court held that the approved resolution plan freezes all claims and is binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders, and that any claim not part of the plan is extinguished. The amendment to Section 31 is declared clarificatory and declaratory, giving it retrospective effect from the commencement of the I&B Code. Consequently, statutory dues owed to the government that are not part of the plan cannot be pursued after the plan’s approval. The Court allowed the appeals and the writ petition, quashing contrary orders of lower courts.

Issues considered

Whether a resolution plan approved by the adjudicating authority under Section 31 binds all creditors, including the Central Government, State Governments and local authorities.
Whether the 2019 amendment to Section 31 of the Insolvency and Bankruptcy Code is clarificatory/declaratory or substantive in nature.
Whether a creditor, including government authorities, can initiate or continue proceedings for recovery of dues not included in the approved resolution plan.

Legislation cited

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016s. 13, s. 14, s. 36, s. 6
Insolvency and Bankruptcy Code, 2016s. 14, s. 238, s. 3, s. 30, s. 31, s. 5, s. 61

Subjects

Insolvency and Bankruptcy CodeResolution planSection 31Government duesClarificatory amendmentRetrospective effectMoratoriumCorporate debtorCommittee of CreditorsStatutory debt extinguishment

Judgment

[2021] 13 S.C.R. 737 737

GHANASHYAM MISHRA AND SONS PRIVATE LIMITED A
THROUGH THE AUTHORIZED SIGNATORY
v.
EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED
THROUGH THE DIRECTOR & ORS.
B
(Civil Appeal No. 8129 of 2019)
APRIL 13, 2021
[R. F. NARIMAN, B. R. GAVAI AND HRISHIKESH ROY, JJ.]
Insolvency and Bankruptcy Code, 2016
C
s. 31 – Approval of resolution plan – Corporate Insolvency
Resolution Process – Resolution plan – Extent and scope of, after
approval – Held: Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of s. 31, the claims as
provided in the resolution plan shall stand frozen and would be
D
binding on the Corporate Debtor and its employees, members,
creditors, including the Central Government, any State Government
or any local authority, guarantors and other stakeholders – On the
date of approval of resolution plan by the Adjudicating Authority,
all such claims, which are not a part of resolution plan, shall stand
extinguished and no person would be entitled to initiate or continue E
any proceedings in respect to a claim, which is not part of the
resolution plan – Dominant purposes of the I&B Code is, revival of
the Corporate Debtor and to make it a running concern – Legislative
intent behind this is, to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with any surprise
F
claims – Insolvency and Bankruptcy board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 – rr.
13 and 14.
s. 31 – Amendment to s. 31 by s. 7 of Act 26 of 2019 – Nature
of, clarificatory/declaratory or substantive in nature – Held: 2019
Amendment to s. 31 of the Code is clarificatory and declaratory in G
nature and thus, would be effective from the date on which I&B
Code came into effect.
s. 31 – Approval of resolution plan by the Adjudicating
Authority – Entitlement of creditor including the Central Government,
H
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738 SUPREME COURT REPORTS [2021] 13 S.C.R.

A State Government or any local authority, to initiate any proceedings
for recovery of any of the dues from the Corporate Debtor, which
are not a part of the Resolution Plan approved by the adjudicating
authority – Held: All the dues including the statutory dues owed to
the Central Government, any State Government or any local
authority, if not part of the resolution plan, shall stand extinguished
B
and no proceedings in respect of such dues for the period prior to
the date on which the Adjudicating Authority grants its approval u/
s. 31 could be continued.
Allowing the appeals and the writ petition, the Court
C HELD: 1. Once a resolution plan is duly approved by the
Adjudicating Authority under sub-section (1) of Section 31 of the
Insolvency and Bankruptcy Code, 2016, the claims as provided
in the resolution plan shall stand frozen and will be binding on
the Corporate Debtor and its employees, members, creditors,
including the Central Government, any State Government or any
D local authority, guarantors and other stakeholders. On the date
of approval of resolution plan by the Adjudicating Authority, all
such claims, which are not a part of resolution plan, shall stand
extinguished and no person will be entitled to initiate or continue
any proceedings in respect to a claim, which is not part of the
E resolution plan; that 2019 amendment to Section 31 of the I&B
Code is clarificatory and declaratory in nature and therefore will
be effective from the date on which I&B Code has come into
effect; and consequently all the dues including the statutory dues
owed to the Central Government, any State Government or any
local authority, if not part of the resolution plan, shall stand
F extinguished and no proceedings in respect of such dues for the
period prior to the date on which the Adjudicating Authority grants
its approval under Section 31 could be continued. [Para 95]
[805-D-H; 806-A]
2.1 It could thus be seen, that one of the dominant objects
G of Insolvency and Bankruptcy Code, 2016 is to see to it, that an
attempt has to be made to revive the Corporate Debtor and make
it a running concern. For that, a resolution applicant has to prepare
a resolution plan on the basis of the Information Memorandum.
The Information Memorandum, which is required to be prepared
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GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 739
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
in accordance with Section 29 of I&B Code along with Regulation A
36 of the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016,
is required to contain various details, which have been gathered
by RP after receipt of various claims in response to the statutorily
mandated public notice. The resolution plan is required to provide
B
for the payment of insolvency resolution process costs,
management of the affairs of the Corporate Debtor after approval
of the resolution plan; the implementation and supervision of the
resolution plan. It is only after the Adjudicating Authority satisfies
itself, that the plan as approved by CoC with the requisite voting
share of financial creditors meets the requirement as referred to C
in sub-section (2) of Section 30, grants its approval to it. It is only
thereafter, that the said plan is binding on the Corporate Debtor
as well as its employees, members, creditors, guarantors and
other stakeholders involved in the resolution Plan. The
moratorium order passed by the Adjudicating Authority under
D
Section 14 shall cease to operate, once the Adjudicating Authority
approves the resolution plan. The scheme of I&B Code therefore
is, to make an attempt, by divesting the erstwhile management
of its powers and vesting it in a professional agency, to continue
the business of the Corporate Debtor as a going concern until a
resolution plan is drawn up. Once the resolution plan is approved, E
the management is handed over under the plan to the successful
applicant so that the Corporate Debtor is able to pay back its
debts and get back on its feet. [Para 54][771-G-H; 772-A-E]
2.2 It could be seen, that the legislature has given
paramount importance to the commercial wisdom of CoC and the F
scope of judicial review by Adjudicating Authority is limited to
the extent provided under Section 31 of I&B Code and of the
Appellate Authority is limited to the extent provided under sub-
section (3) of Section 61 of the I&B Code, is no more res integra.
[Para 57][781-F-G]
G
2.3 Bare reading of Section 31 of the I&B Code would also
make it abundantly clear, that once the resolution plan is approved
by the Adjudicating Authority, after it is satisfied, that the
resolution plan as approved by CoC meets the requirements as

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740 SUPREME COURT REPORTS [2021] 13 S.C.R.

A referred to in sub-section (2) of Section 30, it shall be binding on
the Corporate Debtor and its employees, members, creditors,
guarantors and other stakeholders. Such a provision is
necessitated since one of the dominant purposes of the I&B Code
is, revival of the Corporate Debtor and to make it a running
concern. [Para 58][781-G-H; 782-A]
B
2.4 The resolution plan submitted by successful resolution
applicant is required to contain various provisions, viz., provision
for payment of insolvency resolution process costs, provision for
payment of debts of operational creditors, which shall not be less
than the amount to be paid to such creditors in the event of
C liquidation of the Corporate Debtor under section 53; or the
amount that would have been paid to such creditors, if the amount
to be distributed under the resolution plan had been distributed
in accordance with the order of priority in sub-section (1) of section
53, whichever is higher. The resolution plan is also required to
D provide for the payment of debts of financial creditors, who do
not vote in favour of the resolution plan, which also shall not be
less than the amount to be paid to such creditors in accordance
with sub-section (1) of section 53 in the event of a liquidation of
the Corporate Debtor. Explanation 1 to clause (b) of sub-section
(2) of Section 30 of the I&B Code clarifies for the removal of
E doubts, that a distribution in accordance with the provisions of
the said clause shall be fair and equitable to such creditors. The
resolution plan is also required to provide for the management
of the affairs of the Corporate Debtor after approval of the
resolution plan and also the implementation and supervision of
F the resolution plan. Clause (e) of sub-section (2) of Section 30 of
I&B Code also casts a duty on RP to examine, that the resolution
plan does not contravene any of the provisions of the law for the
time being in force. [Para 59][782-B-E]
2.5 Perusal of Section 29 of the I&B Code read with
G Regulation 36 of the Regulations would reveal, that it requires
RP to prepare an information memorandum containing various
details of the Corporate Debtor so that the resolution applicant
submitting a plan is aware of the assets and liabilities of the
Corporate Debtor, including the details about the creditors and

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GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 741
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
the amounts claimed by them. It is also required to contain the A
details of guarantees that have been given in relation to the debts
of the corporate debtor by other persons. The details with regard
to all material litigation and an ongoing investigation or proceeding
initiated by Government and statutory authorities are also
required to be contained in the information memorandum. So also
B
the details regarding the number of workers and employees and
liabilities of the Corporate Debtor towards them are required to
be contained in the information memorandum. [Para 60]
[782-F-H]
2.6 All these details are required to be contained in the
information memorandum so that the resolution applicant is aware, C
as to what are the liabilities, that he may have to face and provide
for a plan, which apart from satisfying a part of such liabilities
would also ensure, that the Corporate Debtor is revived and made
a running establishment. The legislative intent of making the
resolution plan binding on all the stake-holders after it gets the D
seal of approval from the Adjudicating Authority upon its
satisfaction, that the resolution plan approved by CoC meets the
requirement as referred to in sub-section (2) of Section 30 is,
that after the approval of the resolution plan, no surprise claims
should be flung on the successful resolution applicant. The
dominant purpose is, that he should start with fresh slate on the E
basis of the resolution plan approved. [Para 61][783-A-C]
2.7 As such, with respect to the proceedings, which arise
after 16.8.2019, there will be no difficulty. After the amendment,
any debt in respect of the payment of dues arising under any law
for the time being in force including the ones owed to the Central F
Government, any State Government or any local authority, which
does not form a part of the approved resolution plan, shall stand
extinguished. [Para 67][784-E-F]
2.8 If it is held, that the amendment is declaratory or
clarificatory in nature, it will have to be held, that such an G
amendment is retrospective in nature and exists on the statute
book since inception. However, if the answer is otherwise, the
amendment will have to be held to be prospective in nature, having
force from the date on which the amendment is effected in the
statute. [Para 69][784-G-H; 785-A] H
742 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 2.9 Perusal of the “Statement of Objects and Reasons” of
the Insolvency and Bankruptcy Code (Amendment) Bill, 2019-
SOR would reveal, that one of the prime objects of I&B Code
was to provide for implementation of insolvency resolution process
in a time bound manner for maximisation of value of assets in
order to balance the interests of all stakeholders. However, it
B
was noticed, that in some cases there was extensive litigation
causing undue delays resultantly hampering the value
maximisation. It was also found necessary to ensure, that all
creditors are treated fairly. It was therefore in view of the various
difficulties faced and in order to fill the critical gaps in the
C corporate insolvency framework, it was necessary to amend
certain provisions of the I&B Code. Clause (f) of para 3 of the
SOR of the Insolvency and Bankruptcy Code (Amendment) Bill,
2019 would amply make it clear, that the legislative intent in
amending sub-section (1) of Section 31 of I&B Code was to clarify,
that the resolution plan approved by the Adjudicating Authority
D
shall also be binding on the Central Government, any State
Government or any local authority to whom a debt is owed in
respect of payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are
owed, including tax authorities. [Para 71][786-D-G]
E 2.10 It could be seen, that in the speech the Hon’ble
Finance Minister has categorically stated, that Section 238
provides that I&B Code will prevail in case of inconsistency
between two laws. She also stated, that there was question about
indemnity for successful resolution applicant and that the
F amendment was clearly making it binding on the Government.
She stated, that the Government will not make any further claim
after resolution plan is approved. So, that is going to be a major
sense of assurance for the people who are using the resolution
plan. She has categorically stated, that she would want all the
Hon’ble Members to recognize this message and communicate
G further that I&B Code gives that comfort to all new bidders. They
need not be scared that the taxman will come after them for the
faults of the earlier promoters. She further states, that once the
resolution plan is accepted, the earlier promoters will be dealt
with as individuals for their criminality but not the new bidder
H who is trying to restore the company. It could thus be seen, that
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 743
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
the speech made by Hon’ble Finance Minister while explaining A
the amendment could be referred to for ascertaining what was
the reason for moving the Bill. The speech can be used for finding
out: what were the circumstances in which the amendment was
carried out; what was the mischief for which the unamended
section did not provide; and what was sought to be remedied by
B
amended enactment. [Paras 73, 76][787-E-H; 789-B-C]
2.11 It is clear, that the mischief, which was noticed prior
to amendment of Section 31 of I&B Code was, that though the
legislative intent was to extinguish all such debts owed to the
Central Government, any State Government or any local authority,
including the tax authorities once an approval was granted to the C
resolution plan by NCLT; on account of there being some
ambiguity, the State/Central Government authorities continued
with the proceedings in respect of the debts owed to them. In
order to remedy the said mischief, the legislature thought it
appropriate to clarify the position, that once such a resolution D
plan was approved by the Adjudicating Authority, all such claims/
dues owed to the State/Central Government or any local authority
including tax authorities, which were not part of the resolution
plan shall stand extinguished. [Para 77][789-D-E]
2.12 The faulty drafting in the provision was capable of being E
interpreted, that the legislative embargo imposed on a person
from procreating and giving birth to a third child in the context of
holding the office of a member of a municipality remained in
operation for a period of one year only and thereafter it was lifted.
It could be interpreted, that on the date on which Section 13-A
was brought on the statute book i.e. dated 5.4.1994, even if a F
person became disqualified, the disqualification ceased to operate
and he became qualified once again to contest the election and
hold the office of member of a municipality on the expiry of one
year from 5-4-1994. After realizing the error, Section 13-A came
to be amended. It could thus be seen, that what is material is, to G
ascertain the legislative intent. If legislature by an amendment
supplies an obvious omission in a former statute or explains a
former statute, the subsequent statute has a relation back to the
time when the prior Act was passed. [Paras 80, 82][793-E-F;
798-D]
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744 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 2.13 One of the principal objects of I&B Code is, providing
for revival of the Corporate Debtor and to make it a going concern.
I&B Code is a complete Code in itself. Upon admission of petition
under Section 7, there are various important duties and functions
entrusted to RP and CoC. RP is required to issue a publication
inviting claims from all the stakeholders. He is required to collate
B
the said information and submit necessary details in the
information memorandum. The resolution applicants submit their
plans on the basis of the details provided in the information
memorandum. The resolution plans undergo deep scrutiny by
RP as well as CoC. In the negotiations that may be held between
C CoC and the resolution applicant, various modifications may be
made so as to ensure, that while paying part of the dues of financial
creditors as well as operational creditors and other stakeholders,
the Corporate Debtor is revived and is made an on-going concern.
After CoC approves the plan, the Adjudicating Authority is
required to arrive at a subjective satisfaction, that the plan
D
conforms to the requirements as are provided in sub-section (2)
of Section 30 of the I&B Code. Only thereafter, the Adjudicating
Authority can grant its approval to the plan. It is at this stage,
that the plan becomes binding on Corporate Debtor, its
employees, members, creditors, guarantors and other
E stakeholders involved in the resolution Plan. The legislative
intent behind this is, to freeze all the claims so that the resolution
applicant starts on a clean slate and is not flung with any surprise
claims. If that is permitted, the very calculations on the basis of
which the resolution applicant submits its plans, would go haywire
and the plan would be unworkable. [Para 86][802-F-H; 803-A-C]
F
2.14 The word “other stakeholders” would squarely cover
the Central Government, any State Government or any local
authorities. The legislature, noticing that on account of obvious
omission, certain tax authorities were not abiding by the mandate
of I&B Code and continuing with the proceedings, has brought
G out the 2019 amendment so as to cure the said mischief. Thus,
the 2019 amendment is declaratory and clarificatory in nature
and therefore retrospective in operation. “Creditor” therefore
has been defined to mean ‘any person to whom a debt is owed
and includes a financial creditor, an operational creditor, a secured
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 745
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
creditor, an unsecured creditor and a decree-holder’. A
“Operational creditor” has been defined to mean a person to
whom an operational debt is owed and includes any person to
whom such debt has been legally assigned or transferred.
“Operational debt” has been defined to mean a claim in respect
of the provision of goods or services including employment or a
B
debt in respect of the payment of dues arising under any law for
the time being in force and payable to the Central Government,
any State Government or any local authority. [Paras 87, 90]
[803-C-D; 804-A-C]
2.15 It is a cardinal principle of law, that a statute has to be
read as a whole. Harmonious construction of sub-section (10) of C
Section 3 of the I&B Code read with sub-sections (20) and (21)
of Section 5 thereof would reveal, that even a claim in respect of
dues arising under any law for the time being in force and payable
to the Central Government, any State Government or any local
authority would come within the ambit of ‘operational debt’. The D
Central Government, any State Government or any local authority
to whom an operational debt is owed would come within the ambit
of ‘operational creditor’ as defined under sub-section (20) of
Section 5 of the I&B Code. Consequently, a person to whom a
debt is owed would be covered by the definition of ‘creditor’ as
defined under sub-section (10) of Section 3 of the I&B Code. As E
such, even without the 2019 amendment, the Central
Government, any State Government or any local authority to whom
a debt is owed, including the statutory dues, would be covered
by the term ‘creditor’ and in any case, by the term ‘other
stakeholders’ as provided in sub-section (1) of Section 31 of the F
I&B Code. The said provisions leave no manner of doubt to hold,
that the 2019 amendment is declaratory and clarificatory in nature.
Even if 2019 amendment was not effected, still in light of the
view taken by us, the Central Government, any State Government
or any local authority would be bound by the resolution plan, once
it is approved by the Adjudicating Authority (i.e. NCLT). [Paras G
91 and 94][804-C-F; 805-B-C]
3.1 As regards CA No.8129 of 2019, vide the impugned
judgment and order dated 23.4.2019, NCLAT found, that as no

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746 SUPREME COURT REPORTS [2021] 13 S.C.R.

A ground was made out in terms of Section 61(3) of I&B Code, no
relief could be granted in the appeals. The observations by
NCLAT are beyond the scope of the powers available with NCLAT
under sub-section (3) of s. 61 of I & B Code. [Paras 109 and
110][810-C-D; 811-C-D]
B 3.2 NCLAT categorically found that no ground as is available
under sub-section (3) of Section 61 of I&B Code has been made
out and has also categorically found, that the resolution plan
submitted by GMSPL was a better offer than the other two
resolution applicants, including EARC and that the Adjudicating
Authority has rightly approved the resolution plan of GMSPL.
C After coming to such finding, the only option available with
NCLAT was to dismiss the appeals. The observations made, if
permitted to remain, would totally frustrate the object of I&B
Code of revival of a Corporate Debtor and to resurrect it as a
going concern. The successful resolution applicant cannot be flung
D with surprise claims which are not part of the resolution plan.Thus,
it is thus clear, that according to the resolution plan submitted by
EARC itself, had it been a successful applicant, then in that event,
the claims made by it would have been irrevocably waived and
permanently extinguished and written off in full with effect from
the Effective Date. Had the resolution plan of EARC been
E approved, then all such debts would have stood extinguished
without any further act or deed and approval of the said plan by
NCLT would have been a sufficient notice required to be given
to any person for such matter. Undisputedly, the resolution plan
submitted by EARC was on the basis of the information
F memorandum submitted by RP wherein, it was specifically
clarified, that the claims of EARC were not admitted by RP. It is
thus clear, that EARC is trying to blow hot and cold at the same
time. According to it, had its resolution plan been approved by
CoC and NCLT, then the claims, which are now insisted by EARC
would have stood extinguished. However, on its failure to become
G a successful resolution applicant and approval of other applicant
as a successful resolution applicant, its claim would survive. A
party cannot be permitted to apply two different yardsticks. [Paras
111 and 114][811-D-F; 813-D-G]

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GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 747
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THROUGH THE DIRECTOR
3.3 In the instant case, the claim of EARC was rejected on A
22.1.2018. Instead of challenging the said rejection, EARC
participated in the proceedings and was one of the resolution
applicants. Not only that, in the first round, it was a successful
bidder being ranked H1 bidder. However, since in the
negotiations it failed to satisfy CoC, fresh bids were invited from
B
the resolution applicants, which had submitted their EOI. In the
12th meeting of CoC held on 25.4.2018, the resolution plan of
GMSPL was approved by 89.23% of the voting shares. Only
thereafter, EARC filed two applications; one challenging the
approval of resolution plan of GMSPL by CoC and another
challenging rejection of its claims by RP/CoC. It could thus be C
clearly seen, that EARC was taking chances. After rejection of
its claim, it did not choose to challenge the same by an application
under Section 60(5) but waited till the decision of CoC. During
this period, it was actually pursuing its resolution plan. Only after
its resolution plan was not approved and the resolution plan of
D
GMSPL was approved, it filed the aforesaid two applications.
Apart from that, as already observed in the resolution plan of
EARC itself, it has provided for extinguishment of all claims not
forming part of resolution plan. [Paras 120-121][815-B-E]
3.4 Even otherwise, if for the sake of argument, it is held,
that EARC was entitled to be treated as a ‘financial creditor’ and E
entitled for a participation in CoC, still its share was about 9%
and as such, the resolution plan of GMSPL would have been
passed by a majority of 80%, which is much above the statutory
requirement. Therefore, the observation made by NCLAT giving
liberty to EARC to take recourse to such proceedings as available F
in law for raising its claims is totally unsustainable. [Paras 122,
123][815-F-G]
3.5 Insofar as, the observation made with regard to claim
of the Jharkhand Government is concerned, it is to be noted,
that the State of Jharkhand has not even appealed against the G
order passed by NCLT. Insofar as, the claims of Labour and
Workmen are concerned, RP has specifically stated before
NCLAT, that whatever claims were received from the workmen
were duly considered in the resolution plan. Despite that,

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748 SUPREME COURT REPORTS [2021] 13 S.C.R.

A observing that a liberty is available to the workmen to raise their
claims before a Civil Court or Labour Court, is totally in conflict
with the provisions of I&B Code. The same would equally apply
to the observation made in the appeal of DS, claiming to be
‘operational creditor’. Therefore, the appeal is allowed by
expunging the paragraphs nos. 28, 42, 43, 51 and 52 from the
B
judgment of NCLAT dated 23.4.2019. The judgment and order
passed by NCLT dated 22.6.2018 is upheld. [Paras 124 and
125][815-G-H; 816-A-C]
3.6 2019 amendment to Section 31 of I&B Code is
clarificatory and declaratory in nature and therefore will have a
C retrospective operation. As such, when the resolution plan is
approved by NCLT, the claims, which are not part of the resolution
plan, shall stand extinguished and the proceedings related thereto
shall stand terminated. Since the subject matter of the petition
are the proceedings, which relate to the claims of the respondents
D prior to the approval of the plan, same cannot be continued.
Equally the claims, which are not part of the resolution plan, shall
stand extinguished. [Para 130][818-C-D]
4. In CA arising out of SLP 11232 of 2020, relegating the
appellant to the alternative remedy would serve no purpose. A
party cannot be made to run from one forum to another forum in
E respect of the proceedings and the claims, which are not
permissible in law.The impugned judgment and order passed by
the High Court is quashed and set aside. The respondents are
not entitled to recover any claims or claim any debts owed to
them from the Corporate Debtor accruing prior to the transfer
F date. [Paras 131, 132][818-E-F]
5. In ordinary course, WP (C) 117 of 2020 would not have
entertained such a petition directly under Article 32 of the
Constitution. However, a question of law, which arises for
consideration in the instant petition has been considered in this
batch of matters. In that view of the matter, it would not be in the
G
interest of justice to non-suit the instant petitioner, when the
question of law have been specifically decided, which would govern
the present case also. The respondents are not entitled to recover
any claims or claim any debts owed to them from the Corporate
Debtor accruing prior to the transfer date. [Paras 139, 140]
H [820-A-C]
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 749
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
6.1 As regards CA arising out of SLP (C) 7147-50 of 2020, A
it is found that the finding of the High Court, that the dues owed
to the State Government and Central Government would not
come within the definition of ‘operational debt’, is incorrect in
law. So also the finding, that since the order of NCLT is prior to
the date on which Section 31(1) of I&B Code was amended, the
B
provisions of Section 31 would not be applicable, also cannot stand.
[Para 144][821-A-B]
6.2 The High Court erred in holding, that the Appellant-
Company does not have locus to file the writ petitions inasmuch
as, the management has been taken over by V Co. The resolution
plan is in respect of the Corporate Debtor and the successful C
resolution applicant only takes over the management of the
Corporate Debtor in accordance with the resolution plan. The
resolution applicant steps into the shoes of the Corporate Debtor.
As such, the finding in this respect would also not be sustainable
in law. [Para 145][821-B-D] D
6.3 It was submitted that RP/CoC had acted in a fraudulent
manner; and that though a notice inviting claim was required to
be published in local newspapers where the registered office of
the Corporate Debtor was situated, the notice was published in
the newspaper of Kolkata edition. As per Regulation 6(2)(b) of E
the 2016 Regulations, the said notice is required to be published
in one English and one regional language newspaper with wide
circulation at the location of the registered office and corporate
office of the Corporate Debtor. Perusal of the record would reveal,
that the notice was published in Business Standard and Ananda
Bazar Patrika newspapers of the Kolkata edition, which have wide F
circulation in Ranchi. The corporate office of the Corporate
Debtor is at Kolkata whereas its registered office is at Ranchi.
In any case, it is to be noticed, that the Forest Department of the
State Government had filed intervention application before NCLT
as well as NCLAT. When one of the wings of the State G
Government has approached NCLT and NCLAT, it is difficult to
believe, that other organ of the State was not aware about the
said proceedings. [Para 146][821-D-G]

H
750 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 6.4 The submission that finding with regard to non-
compliance of Section 13 is not challenged by the ES Company,
is also incorrect, inasmuch as, ES Company has raised the specific
ground in Grounds ‘U’ to ‘ AA’ to that effect in the appeal memo.
[Para 147][821-G-H]
B 6.5 The impugned judgment and order of the High Court is
quashed and set aside. The respondents are not entitled to
recover any claims or claim any debts owed to them from the
Corporate Debtor accruing prior to the transfer date. [Paras 148-
149][822-A-B]
C Committee of Creditors of Essar Steel India Limited
Through Authorized Signatory v. Satish Kumar Gupta
and Others (2020) 8 SCC 531 : [2019] 16 SCR 275;
K. Shashidhar vs. Indian Overseas Bank and Others
(2019) 12 SCC 150 : [2019] 3 SCR 845; Maharashtra
Seamless Limited vs. Padmanabhan Venkatesh and
D others (2020) 11 SCC 467; Karad Urban Cooperative
Bank Ltd. vs. Swwapnil Bhingardevay & Ors. (2020) 9
SCC 729; Kalpraj Dharamshi and Another vs. Kotak
Investment Advisors Limited and Another 2021 SCC
OnLine SC 204; Banarasi and Another v. Ram Phal
E (2003) 9 SCC 606 : [2003] 2 SCR 22; State Bank of
India vs. V. Ramakrishnan and Another (2018) 17 SCC
394 : [2018] 10 SCR 974; B.K. Educational Services
Private Limited v. Parag Gupta and Associates (2019)
11 SCC 633 : [2018] 12 SCR 794; Innoventive
Industries Ltd. vs. ICICI Bank & Anr (2018) 1 SCC
F 407 : [2017] 8 SCR 33; Pr. Commissioner of Income
Tax vs. Monnet Ispat and Energy Ltd. 2018 (18) SCC
786; K.P. Varghese v. Income Tax Officer, Ernakulam
and Another (1981) 4 SCC 173 : [1982] 1 SCR 629;
Union of India and others vs. Martin Lottery Agencies
G Ltd. (2009) 12 SCC 209 : [2009] 7 SCR 946; Zile Singh
vs. State of Haryana and others (2004) 8 SCC 1 : [2004]
5 Suppl. SCR 272; Commissioner of Income Tax I,
Ahmedabad vs. Gold Coin Health Food Private Limited
(2008) 9 SCC 622 : [2008] 12 SCR 179; State Bank of

H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 751
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR
India vs. V. Ramakrishnan and another (2018) 17 SCC A
394 : [2018] 10 SCR 974; Akshay Jhunjhunwala &
Anr. vs. Union of India through the Ministry of Corporate
Affairs & Ors. 2018 SCC OnLine Cal. 142; Export
Import Bank of India vs. Resolution Professional JEKPL
Private Limited Company Appeal (AT) (Insolvency)
B
No. 304 of 2017; Babu Ram Prakash Chandra
Maheshwari vs. Antarim Zilla Parishad Muzaffar Nagar
[1969] 1 SCR 518; Whirlpool Corporation vs. Registrar
of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 :
[1998] 2 Suppl. SCR 359; Nivedita Sharma vs. Cellular
Operators Association of India & Ors. (2011) 14 SCC C
337; Embassy Property Developments Pvt. Ltd. vs. State
of Karnataka and Others (2020) 13 SCC 308 – referred
to.
Justice G.P. Singh treatise on “The principles of
Statutory Interpretation”, 14th Edition – referred to. D
Case Law Reference
[2019] 16 SCR 275 referred to Para 25
[2019] 3 SCR 845 referred to Para 31
(2020) 11 SCC 467 referred to Para 31 E
(2020) 9 SCC 729 referred to Para 31
[2003] 2 SCR 22 referred to Para 33
[2018] 10 SCR 974 referred to Para 35
[2018] 12 SCR 794 referred to Para 35 F

[2017] 8 SCR 33 referred to Para 49
2018 (18) SCC 786 referred to Para 64
[1982] 1 SCR 629 referred to Para 74
G
[2009] 7 SCR 946 referred to Para75
[2004] 5 Suppl. SCR 272 referred to Para 79
[2008] 12 SCR 179 referred to Para 83
[2018] 10 SCR 974 referred to Para 84
H
752 SUPREME COURT REPORTS [2021] 13 S.C.R.

A [1969] 1 SCR 518 referred to Para 129
[1998] 2 Suppl. SCR 359 referred to Para 129
(2011) 14 SCC 337 referred to Para 129
(2020) 13 SCC 308 referred to Para 129
B CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
No. 8129 of 2019.
From the Judgment and Order dated 23.04.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No. 437 of 2018.
C
With
Civil appeal No. 1554 of 2021, Writ Petition (Civil) No.1177 of
2020 and Civil Appeal Nos. 1550-1553 of 2021.
Dr. Abhishek Manu Singhvi, Neeraj Kishan Kaul, Gopal Jain,
D Jaideep Gupta, Sr. Advs., Mahesh Agarwal, Himanshu Satija, Arshit
Anand, Divyang Chandiramani, Rohan Talwar, Ankur Saigal, Amit
Bhandari, Yojit Mehra, Deepak Joshi, E.C. Agrawala, Ms. Shruti Jose,
Ms. Anne Mathew, Amit Kumar Mishra, Siddharth Sharma, Shashank
Gautam, Shashank Manish, Arvind Thapliyal, Manik Ahluwalia, Ms. Nidhi
Sahay, Yash Kumar, Advs. for the Appellant.
E
V. Shekhar, S. Guru Krishna Kumar, Sr. Advs., Bhakti Vardhan
Singh, Ms. Sheetal Rajpoot, Rajiv Shankar Dvivedi, Kumar Anurag Singh,
Saurabh Jain, Zain Khan, Shwetank Singh, Ms. Aastha Shreshta, Ms.
Tulika Mukherjee, Prashant Bhushan, Sanjay Bhatt, Sumit Nagpal, Pranav
Prashant, Ms. Akansha Srivastava, Rabin Majumder, Mohammed Akhil,
F Rupesh Kumar, Ms. Seema Bengani, B. Krishna Prasad, B.V. Balaram
Das, M.K. Maroria, Sandeep Bajaj, Soayib Qureshi, Ms. Aditi Pundhir,
Ms. Sangya Gupta, Raj Kumar Mehta, Ms. Himanshi Andley, C.K. Rai,
Buddy A Ranganadhan, A.V. Rangam, Advs. for the Respondents.
The Judgment of the Court was delivered by
G
B. R. GAVAI, J.
1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of
2020 and 7147-7150 of 2020.
2. The short but important questions, that arise for consideration
H in this batch of matters, are as under:-
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 753
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
(i) As to whether any creditor including the Central A
Government, State Government or any local authority is
bound by the Resolution Plan once it is approved by an
adjudicating authority under sub-section (1) of Section 31
of the Insolvency and Bankruptcy Code, 2016 (hereinafter
referred to as ‘I&B Code’)?
B
(ii) As to whether the amendment to Section 31 by Section 7
of Act 26 of 2019 is clarificatory/declaratory or substantive
in nature?
(iii) As to whether after approval of resolution plan by the
Adjudicating Authority a creditor including the Central C
Government, State Government or any local authority is
entitled to initiate any proceedings for recovery of any of
the dues from the Corporate Debtor, which are not a part
of the Resolution Plan approved by the adjudicating
authority?
D
3. We will first refer to the facts in each of these matters.
CIVIL APPEAL NO.8129 OF 2019 [GHANASHYAM
MISHRA AND SONS PRIVATE LIMITED Vs. EDELWEISS
ASSET RECONSTRUCTION COMPANY LIMITED &
OTHERS] E
4. Orissa Manganese & Minerals Limited (hereinafter referred
to as “Corporate Debtor” or “OMML”) was engaged in the business of
mining iron ore, graphite, manganese ore and agglomerating iron fines
into pellets through its facilities in Orissa and Jharkhand. The Corporate
Insolvency Resolution Process (hereinafter referred to as “CIRP”) was F
initiated in respect of the Corporate Debtor by an application under
Section 7 of I&B Code filed by the State Bank of India (hereinafter
referred to as “SBI”) before the National Company Law Tribunal, Kolkata
Bench, Kolkata (hereinafter referred to as “NCLT”).
5. Vide order dated 3.8.2017, Company Petition (I.B.) No. 371/
G
KB/2017 filed by SBI was admitted. Shri Sumit Binani was appointed as
Interim Resolution Professional (hereinafter referred to as “IRP”). Upon
admission of the said Company Petition, CIRP was initiated with effect
from 3.8.2017. The appointment of IRP was confirmed by the Committee
of Creditors (hereinafter referred to as “CoC”) in their meeting held on
4.9.2017. The Resolution Professional (hereinafter referred to as “RP”) H
754 SUPREME COURT REPORTS [2021] 13 S.C.R.

A continued with the resolution process by inviting Expression of Interest
(hereinafter referred to as “EOI”) and applications for resolution plan in
accordance with the provisions of the I&B Code and the Regulations
framed thereunder. The initial period of CIRP of 180 days expired on
29.1.2018. At the request of CoC, RP moved an application for extension
of CIRP period, which came to be extended by 90 days i.e. till 29.4.2018.
B
6. In response to the invitation, three Resolution Plans were
received by RP each from, Edelweiss Asset Reconstruction Company
Limited (hereinafter referred to as “EARC”), respondent No.1 herein,
Orissa Mining Private Limited (hereinafter referred to as “OMPL”)
and Ghanashyam Mishra & Sons Private Limited (hereinafter referred
C to as “GMSPL”), the appellant herein, respectively. In the 8 th meeting of
the CoC held on 14.3.2018, EARC was declared as H1 Bidder. However,
EARC failed to satisfy CoC in the negotiations and as such, the resolution
plan submitted by EARC came to be rejected in the 9th meeting of CoC
held on 31.3.2018.
D 7. CoC thereafter proceeded for negotiations with the H2 Bidder
i.e. GMSPL. However, the resolution plan of GMSPL was also found to
be unacceptable to CoC and therefore, in its 10th meeting held on 3.4.2018,
it decided to annul the existing process and initiate a fresh process for
invitation of Resolution Plan only from the applicants, which had earlier
E submitted their EOI. Accordingly, a communication was sent to the
applicants, which had submitted their EOI. In response to the said
invitation, three Resolution Plans were received each from GMSPL,
EARC and Srei Infrastructure Finance Limited (hereinafter referred to
as “SIFL”) respectively. These Resolution Plans were considered by
CoC in its 11th meeting held on 13.4.2018. After evaluation of the
F Resolution Plans, CoC ranked GMSPL as the H1 bidder.
8. Further negotiations were held by CoC with GMSPL. After
several rounds of negotiations, the Resolution Plan of GMSPL was
considered by CoC for its approval. In its 12th meeting held on 21.4.2018,
CoC unanimously took a decision to convene a meeting of CoC on
G 25.4.2018 at 6 PM, for voting on the Resolution Plan proposed by
GMSPL. After being satisfied, that the Resolution Plan submitted by
GMSPL meets all the requirements under sub-section (2) of Section 30
of the I&B Code, the same was placed before the Members of CoC for
voting, and the Resolution Plan came to be approved by more than
H 89.23% of the voting share of financial creditors of the Corporate Debtor.
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 755
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
9. Accordingly, a Company Application being C.A (IB) No. 402/ A
KB/2018 came to be filed by RP for approval of the Resolution Plan
submitted by GMSPL. One application being C.A. (IB) No. 398/KB/
2018 came to be filed by EARC-respondent No.1 herein, challenging
the approval of the Resolution Plan of GMSPL. One more application
came to be filed by EARC being C.A. (IB) No. 470/KB/2018 challenging
B
the decision of RP in not admitting its claim. The said application was
filed, contending, that its claim stood on the strength of corporate guarantee
provided by the Corporate Debtor against the take-out facility provided
to Adhunik Power and Natural Resources Limited (hereinafter referred
to as “APNRL”), being sister concern of the Corporate Debtor. It was
contended, that in not admitting the claim on the strength of corporate C
guarantee, RP violated Regulations 13 and 14 of the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 (hereinafter referred to as “the Regulations”).
It was prayed in the application for a direction to the successful resolution
applicant i.e. GMSPL, to undertake to pay the full amount due and payable
D
under the said corporate guarantee and further to issue directions for
protecting the rights of the lenders of APNRL as pledgee. One more
Application being C.A. (IB) No.509/KB/2018 was filed by the District
Mining Officer, Department of Mining and Geology, Jharkhand
challenging non-admission of its claim to the tune of Rs.93,51,91,724/-
and Rs.760.51 crore. E
10. NCLT by an elaborate order dated 22.6.2018 approved the
Resolution Plan of GMSPL, which was duly approved by CoC by voting
share of more than 89.23%. Rest of the applications including the two
filed by EARC, the respondent No.1 herein, came to be rejected.
11. Being aggrieved by the order passed by NCLT, EARC preferred F
Company Appeal being Company Appeal (AT) (Insolvency) Nos. 437/
2018 and 444/2018 before the National Company Law Appellate Tribunal,
New Delhi (hereinafter referred to as “NCLAT”). Company Appeal
(AT) (Insolvency) No. 437/2018 was against the rejection of claims of
EARC as Financial Creditor and thereby its non-inclusion in CoC. G
Company Appeal (AT) (Insolvency) No. 444/2018 came to be filed with
the grievance, that RP and CoC had erroneously held, that the plan of
GMSPL was better than that of EARC. One more Company Appeal
being Company Appeal (AT) (Insolvency) No. 500/2018 came to be
filed by Sundargarh Mines & Transport Workers Union (hereinafter
H
756 SUPREME COURT REPORTS [2021] 13 S.C.R.

A referred to as “SMTWU”) on behalf of the workmen of the Corporate
Debtor. One another Company Appeal being Company Appeal (AT)
(Insolvency) No.438/2018 came to be filed by one Deepak Singh, an
employee of APNRL, claiming dues of his salary.
12. By the impugned judgment and order dated 23.4.2019, NCLAT
B while holding, that RP was justified in not accepting the claim of EARC
and that NCLT had rightly rejected the application filed by EARC,
however, observed that the rejection of the claim for the purpose of
collating and making it part of the Resolution Plan will not affect the
right of EARC to invoke the Bank Guarantee against the Corporate
Debtor, in case the principal borrower failed to pay the debt amount,
C since the moratorium period had come to an end. NCLAT on comparison
of the plans submitted by EARC and GMSPL further held, that the
resolution plan submitted by GMSPL was a better one than the one
submitted by other applicants and there was no illegality in accepting the
resolution plan of GMSPL.
D 13. Insofar as the Company Appeal (AT) (Insolvency) No. 500/
2018 is concerned, the grievance was, that though there were around
1,476 workmen, RP ignored their rightful wages, statutory dues and other
benefits. NCLAT, in the said order, observed, that after the period of
moratorium, it was open for the persons to move before a civil court or
E to move an application before the court of competent jurisdiction against
the Corporate Debtor. NCLAT therefore observed, that the appellant
therein may move before the civil court or a court of competent jurisdiction
and may file an application before the Labour Court for appropriate
reliefs in favour of the concerned workmen or against the Corporate
Debtor, if they have actually worked and had not been taken care of in
F the Resolution Plan.
14. Insofar as Company Appeal (AT) (Insolvency) No. 438/2018
is concerned, it was the claim of Deepak Singh, appellant therein, that
he had joined APNRL, the holding Company of the Corporate Debtor,
as the President-Group Head HR from 2.6.2014 to 9.3.2015. It was his
G claim, that he had an amount of Rs.17,03,000/- recoverable from the
said APNRL and as such, was an Operational Creditor. It was submitted,
that though the claim of the said appellant was valid, it was illegally
rejected by RP. NCLAT held, that insofar as the said appeal is concerned,
no ground as is permissible under sub-section (3) of Section 61 of I&B
H Code is made out and as such, relief could not be granted in the appeal.
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 757
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
However, it was observed, that the said order passed in the appeal would A
not come in the way of appellant to move the appropriate forum for
appropriate relief.
15. GMSPL, thus, aggrieved by the observations made by NCLAT
to the effect, that the claims of the parties, which are not included in the
Resolution Plan could be agitated by them before the other forums, has B
preferred the present appeal.
CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE
PETITION (CIVIL) NO.11232 OF 2020
[ULTRATECH NATHDWARA CEMENT LIMITED VS.
STATE OF UTTAR PRADESH AND OTHERS C

16. The appellant is a wholly owned subsidiary of UltraTech
Cement Limited and is engaged in the business of manufacturing and
marketing of cement and allied products.
17. On 19.12.2015, the Additional Commissioner, Commercial Tax, D
Ghaziabad passed an order in the appeal preferred by M/s Binani Cement
Limited, thereby, allowing the appeal filed by Binani Cement and setting
aside the order of imposition of fine of Rs.24,71,885/-. Vide another
order dated 22.12.2015, passed in the appeal filed by Binani Cement, the
order of imposition of fine of Rs.59,61,445/- also came to be set aside.
Vide order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, E
Division-10, Ghaziabad held, that Binani Cement was liable to pay Entry
Tax of Rs.40,47,344/- for the Assessment Year 2003-2004. By another
order dated 2.8.2017, the Deputy Commissioner, Commercial Tax,
Division-10, Ghaziabad further held, that Binani Cement was liable to
pay Entry Tax of Rs.43,06,715/- for the Assessment Year 2004-2005. F
18. Since the said Binani Cement was unable to pay the debt to
Bank of Baroda, the Bank of Baroda filed an application being C.A.
(IB) No. 359/KB/2017 before NCLT, Kolkata Bench under Section 7 of
I&B Code. Vide order dated 25.7.2017, NCLT admitted the petition for
initiating the CIRP process. Vide the said order, NCLT also declared
G
moratorium for the purposes referred to in Section 14 of I&B Code.
19. Vide communication dated 10.11.2017, the authorities were
informed about the initiation of the CIRP. However, the authority by an
endorsement made on the application of the appellant herein stated, that
there was no stay granted by NCLT on tax assessment process. It was
H
758 SUPREME COURT REPORTS [2021] 13 S.C.R.

A observed, that if there was any clear order passed by NCLT, the same
should be produced or the Binani Cement should appear on the next
date i.e. 27.11.2017 for hearing of tax assessment process.
20. On 28.7.2017, RP made a public announcement inviting claims
from all the creditors of the Corporate Debtor, as is required under Section
B 15 of I&B Code. The last date for submission of claims was 8.8.2017.
RP upon receipt of the claims maintained a list of creditors alongside the
amount claimed by them and the security interest. RP also invited EOI.
In response, various entities including the present appellant submitted
their EOI as well as resolution plans. CoC in its meeting dated 28.5.2018,
unanimously approved the Resolution Plan submitted by the present
C appellant. Pursuant to the approval by CoC, NCLAT granted approval
to the Resolution Plan of appellant vide order dated 14.11.2018. The
said order came to be challenged before this Court in Civil Appeal No.
10998/2018, which was dismissed by this Court vide order dated
19.11.2018.
21. On 13.12.2018, the name of the Corporate Debtor was changed
D
to UltraTech Nathdwara Cement Limited from Binani Cement Limited
and the management of the Corporate Debtor was taken over by
Ultratech Cement Limited w.e.f. 20.11.2018. Thereafter, the appellant
addressed various communications to the tax authorities, who are
respondents herein informing them, that after the Resolution Plan was
E approved by NCLT, all proceedings instituted against the Corporate
Debtor, arising and pending before the transfer date shall stand
withdrawn. It was also informed, that all the liabilities towards operational
creditors shall be deemed to have been settled by discharge and payment
of the resolution amount by the Corporate Debtor. However, it was
insisted by the tax authorities, that since there was no specific stay,
F proceedings could not be dropped. After various communications
addressed by the appellant to the Joint Commissioner, Commercial Tax
(Corporate Circle), Ghaziabad dated 26.4.2019, the following
endorsements came to be made by the authority on 29.4.2019:-
“After consideration on application presented by you, it is
G found that, by Hon’ble NCLT/NCLAT after transfer, neither
stay is imposed on tax assessment nor on creation of demand.
So the created demand is payable by you. If you are not agree
with it, preferring appeal before higher authority, present its
copy to us. Disposal is done of application presented by you.”
H _______
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 759
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
22. The Commercial Tax Department of the State of Rajasthan A
filed Civil Appeal No. 5889/2019 challenging the Resolution Plan.
However, the said appeal came to be dismissed vide order of this Court
dated 26.7.2019. The appeals being Civil Appeal Nos. 630-634/2020
were also preferred by the Commissioner of Central Excise, Goods and
Services Tax, Jodhpur challenging the Resolution Plan. The same also
B
came to be dismissed by this Court vide order dated 24.1.2020.
23. The appellant therefore filed a Civil Miscellaneous Writ Petition
No. 354/2020 before the High Court of Allahabad challenging the order
passed by the Additional Commissioner Grade 2 (Appeal) dated 30.1.2020,
to the effect, that the proceedings in the State of U.P. would remain
unaffected irrespective of the approval of the Resolution Plan of the C
appellant by NCLT. The appellant also prayed for a declaration, that all
the proceedings pending before different authorities stand abated in terms
of the approval of the Resolution Plan by NCLT. A prayer was also
made for refund of Rs.248.92 lakhs deposited by the appellant under
protest and for return of the Bank Guarantee. D
24. The Division Bench of the Allahabad High Court vide order
dated 6.7.2020 observed, that the contention of the appellant with regard
to the approval of the Resolution Plan by NCLT has been dealt with by
the Assessing Authority as well as by the Appellate Authority and
therefore, it was in the fitness of things that the appellant should avail of E
the alternative remedy of filing a second appeal available under the VAT
Act. Being aggrieved by the same, the appellant has filed the present
appeal.
WRIT PETITION (CIVIL) NO. 1177 OF 2020 M/S
MONNET ISPAT & ENERGY LIMITED AND ANOTHER VS. F
STATE OF ODISHA AND ANOTHER
25. The petitioner Company is a Corporate Debtor in respect of
which CIRP proceedings commenced in July 2017 and ended in July
2018, when NCLT approved the Resolution Plan submitted by a
Consortium of Aion Investment Private Limited and JSW Steel Limited G
(“Aion-JSW” for short). Prior to approval by NCLT, CoC had granted
approval to the said Resolution Plan by a voting majority of 98.97%. It is
the contention of the petitioner, that in accordance with the provisions of
I&B Code, RP had made a public announcement thereby, inviting claims

H
760 SUPREME COURT REPORTS [2021] 13 S.C.R.

A from Creditors. Contending, that the demand notices issued by the
respondents for recovery of Service Tax towards Royalty, District
Mineral Foundation (“DMF” for short) and National Mineral Exploration
Trust (“NMET” for short) against the iron ore purchased by the petitioner
Company are contrary to the law laid down by this Court in the case of
Committee of Creditors of Essar Steel India Limited Through
B
Authorized Signatory v. Satish Kumar Gupta and Others 1, the
petitioner has directly approached this Court by filing a writ petition under
Article 32 of the Constitution of India.
CIVIL APPEALS ARISING OUT OF SPECIAL LEAVE
PETITION (CIVIL) NOS.7147-7150 OF 2020
C
[ELECTROSTEEL STEELS LIMITED, BOKARO,
JHARKHAND VS. STATE OF JHARKHAND AND OTHERS]
26. The appellant is a Corporate Debtor in respect of which the
proceedings under Section 7 were initiated by the SBI. Vide order dated
D 21.7.2017 of NCLT, the application filed by SBI was admitted and Mr.
Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP).
In its meeting dated 21.8.2017, CoC approved the appointment of IRP
as RP. In response to the invitation for submission of resolution plans,
four applicants had submitted their Resolution Plans. CoC had approved
the Resolution Plan of Vedanta Limited by 100% voting share. NCLT
E vide order dated 17.4.2018 approved the Resolution Plan of Vedanta
Limited. The appeal being Company Appeal (AT) (Insolvency) No. 175/
2018 filed by one Renaissance Steel India Private Limited challenging
the order of NCLT came to be dismissed by NCLAT vide order dated
10.8.2018. Challenging the notices issued by the respondent State
F Authorities and the order of SBI asking it to pay an amount of
Rs.37,41,41,602/- on account of tax penalty due under the Jharkhand
VAT Act for the period 2011-12 and 2012-13, the appellant approached
the High Court of Jharkhand. The appellant had also challenged the
letter dated 22.11.2019 issued by State Tax Officer, Bokaro to deposit
the amount of Rs.75,57,000/-. As in the other matters, it is contended by
G the appellant, that in view of Section 31 of I&B Code, since the claim
made by the respondent was not a part of the Resolution Plan, it would
get extinguished on the Resolution Plan being approved by NCLT. The
said writ petition came to be rejected by the High Court on the ground,

1
H (2020) 8 SCC 531
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 761
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
that the petitioner had no locus and that the Resolution Plan was not A
binding on the State Government since it had not participated in the
CIRP proceedings.
SUBMISSIONS IN CIVIL APPEAL NO.8129 OF 2019
[Ghanashyam Mishra and Sons Private Limited vs. Edelweiss
Asset Reconstruction Company Limited & Others] B
27. Dr. A.M. Singhvi, learned Senior Counsel appearing for
GMSPL submitted, that as held by this Court in a catena of decisions,
the commercial wisdom of CoC in accepting or rejecting the Resolution
Plan is paramount. He submitted, that the interference would be
warranted within the limited parameters of judicial review that are C
available under the Statute. The learned Senior Counsel further submitted,
that once the adjudicating authority approves the Resolution Plan, it shall
be binding on everyone including Corporate Debtor and its employees,
Members, Creditors including the Central Government, any State
Government or any local authority, to whom a debt is owed in respect of
the payment of dues arising under any law for the time being in force, D
guarantors and other stake-holders, involved in the Resolution Plan. He
submitted, that once a Resolution Plan is accepted, if any additional liability
is thrust upon the Resolution Plan, the entire plan would become
unworkable, resulting into the frustration of the very purpose of the
enactment i.e. revival of the Corporate Debtor. E
28. Dr. Singhvi further submitted, that perusal of the Resolution
Plan submitted by EARC and particularly Clause 2.1.3 thereof would
reveal, that the said Plan also provides, that all the debts and all dues,
liability or obligations other than the one, which are included in Resolution
Plan, shall be deemed to have been irrevocably waived and permanently F
extinguished and written off in full with effect from the effective date.
He submitted that a similar provision is also made in the Resolution Plan
submitted by GMSPL.
29. The learned Senior Counsel further submitted, that the
Resolution Plan submitted by GMSPL is for an amount of Rs.321.19 G
crore. If additional liability of Rs.648.89 crore is saddled upon the
resolution applicant, the total resolution plan itself would be unworkable.
30. Dr. Singhvi further submitted that NCLT has found the conduct
of EARC not to be bona fide. He submitted, that NCLT has categorically
found, that the application filed by EARC was a deliberate attempt to
H
762 SUPREME COURT REPORTS [2021] 13 S.C.R.

A stage manage an objection against the approval of Resolution Plan
submitted by an entity, other than it. He submitted, that as a matter of
fact, NCLT has imposed costs of Rs. 1 lakh on EARC taking into
consideration its conduct.
31. Dr. Singhvi relied upon the judgments of this Court in the
B cases of K. Shashidhar vs. Indian Overseas Bank and Others2,
Committee of Creditors of Essar Steel India Limited through
Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra)
Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and
others 3 , Karad Urban Cooperative Bank Ltd. vs. Swwapnil
Bhingardevay & Ors.4 and Kalpraj Dharamshi and Another vs.
C Kotak Investment Advisors Limited and Another5.
32. Mr. Prashant Bhushan, learned Counsel appearing on behalf
of the EARC-respondent No.1 submitted, that by the impugned order,
NCLAT has only reserved the right of EARC to invoke the Corporate
Guarantee in its favour. He submitted, that on account of the erroneous
D conduct of the proceedings by RP and CoC, EARC has been put in a
precarious condition. He submitted, that on one hand RP has not
recognized EARC as a financial creditor thereby, depriving its nomination
to CoC and participation in finalization of the proceedings. On the other
hand, denying EARC to encash its bank guarantee would leave EARC
E high and dry. A substantial claim of EARC would be rendered futile, in
the event the order passed by NCLT is to be maintained. He therefore
submitted, that no interference is warranted in the appeal.
33. In reply to the submissions of the appellant that EARC has
not preferred an appeal against the order of NCLAT though its appeal
F was disposed of is concerned, the learned Counsel relying on the judgment
of this Court in the case of Banarasi and Another v. Ram Phal6
submitted, that since the findings recorded by NCLAT are in its favour,
there was no occasion for it to prefer an appeal. He submitted, that in
any event, it can raise the grounds insofar as the findings in the impugned
order, which are adverse to EARC in addition to supporting the final
G judgment in its favour.

2
(2019) 12 SCC 150
3
(2020) 11 SCC 467
4
(2020) 9 SCC 729
5
2021 SCC OnLine SC 204
6
H (2003) 9 SCC 606
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 763
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
34. Shri Neeraj Kishan Kaul, learned Senior Counsel appearing A
on behalf of the appellant submitted, that assuming without admitting
that EARC could be considered as the financial creditor, it could have
had voting right only to the extent of 9% and even in that eventuality,
resolution plan of GMSPL would have been approved by CoC with the
majority of more than 80%.
B
SUBMISSIONS IN CIVIL APPEAL ARISING OUT OF
SPECIAL LEAVE PETITION (CIVIL) NO.11232 OF 2020
[UltraTech Nathdwara Cement Limited v. State of Uttar Pradesh
and Others]
35. Dr. Singhvi, learned Senior Counsel appearing on behalf of C
the appellant-UltraTech Nathdwara Cement Limited submitted, that a
conjoint reading of sub-section (10) of Section 3 and sub-sections (20)
and (21) of Section 5 would show, that even if there was no amendment
to Section 31 of I&B Code by the 2019 Amendment, still the Central
Government and any State Government or the local authorities were
bound by the same and any statutory dues owed to them by the Corporate D
Debtor, which were not included in the resolution plan, shall stand
extinguished. He submitted, that the 2019 Amendment, which amends
Section 31 is clarificatory in nature and only declares and clarifies the
position of law, which has already been in existence i.e. the Central
Government, any State Government and local authorities are bound by E
the CIRP. He submitted, that this Court in the cases of State Bank of
India vs. V. Ramakrishnan and Another 7and B.K. Educational
Services Private Limited v. Parag Gupta and Associates8 has held
the amendment to certain provisions of the I&B Code to be clarificatory
in nature. The learned Senior Counsel submitted, that upon perusal of
the provisions of the I&B Code, it is clear, that once NCLT grants F
approval to the Resolution Plan, all proceedings pending insofar as the
Corporate Debtor is concerned, which are not included in the Resolution
Plan shall stand automatically stayed. He submitted, that perusal of the
chart pertaining to the dues of the respondents, clearly reveal that all of
the said dues are prior to the admission of the Company Petition filed G
under Section 7 of I&B Code and therefore, the respondents are not
entitled to continue the proceedings in respect thereof since the same do
not form part of the approved resolution plan.
7
(2018) 17 SCC 394
8
(2019) 11 SCC 633 H
764 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 36. He submitted, that the orders passed by NCLAT were
challenged before this Court by the Revenue Authorities of the Rajasthan
State as well as the Commissioner of Central Excise (GST), Jodhpur
and this Court had refused to interfere with the order passed by NCLAT.
It is submitted, that in this background, the authorities are totally unjustified
in continuing the proceedings, which are undisputedly with respect to
B
the dues prior to admission of the application under Section 7 of I&B
Code, only on the ground, that there is no specific stay order passed by
NCLT.
37. He submitted, that the High Court has erred in refusing to
entertain the writ petition of the appellant solely on the ground, that an
C alternative remedy by way of a second appeal was available to the
appellant. He submitted, that in catena of judgments, this Court has held,
that non-exercise of jurisdiction under Article 226, despite availability of
alternative remedy is a rule of self-restraint and in the appropriate areas
carved out by this Court, entertaining a petition under Article 226, despite
D availability of alternative remedy, would be permissible. He submitted,
that applying the said principle, the proceedings before the authority since
stand prohibited in view of the provisions of the I&B Code, the High
Court erred in refusing to entertain the petition.
38. The learned Senior Counsel further submitted, that despite
E the pendency of the present appeal, the Joint Commissioner, Commercial
Tax, Ghaziabad has passed an Assessment Order dated 2.2.2021 for the
period prior to admission of Section 7 petition, as such the appellant has
filed IA No.26255/2021 challenging the said assessment order.
39. Dr. Singhvi further submitted, that though the respondent
F authorities were aware of the Resolution Proceedings, they had failed to
submit any claim, in response to the public notices issued by RP.
40. Shri V. Shekhar, learned Senior Counsel appearing on behalf
of the State Authorities justified the impugned order and prayed for
dismissal of the appeal. He submitted, that the order passed by NCLT
G would not come in the way of adjudicatory proceedings, which were
continued by the authorities under the provisions of the relevant Statutes.
He submitted, that the assessment orders which were passed in
accordance with law were duly approved in appeal by the higher authority
and therefore, the High Court was justified in observing that the petition
was not maintainable, in view of the availability of alternative remedy of
H filing a second appeal.
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 765
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
41. The learned Senior Counsel submitted, that the adjudicatory A
authorities acting under the relevant statutes being not a part of CoC are
not bound by the decision of CoC, which is approved by NCLT. He
further submitted, that merely continuation of the adjudicatory proceedings
cannot be a part of coercive action.
42. Shri V. Shekhar submitted, that 2019 Amendment cannot be B
said to be clarificatory in nature and as such, the proceedings, which
were pending prior to the date of the amendment to Section 31, would
not be affected by the 2019 Amendment to Section 31. He therefore
prayed for dismissal of the appeal.
SUBMISSIONS IN WRIT PETITION (CIVIL) NO. 1177 C
OF 2020 [M/s Monnet Ispat & Energy Limited and Another v.
State of Odisha and Another]
43. Shri Kaul, learned Senior Counsel appearing on behalf of the
writ petitioner submitted, that in spite of clear legal position as enunciated
in various judgments of this Court, various authorities in different parts D
of the country are continuing with the proceedings in respect of statutory
dues existing prior to the date of approval of resolution plan by NCLT.
He submitted, that various High Courts have held, relying on the judgments
of this Court, that statutory dues prior to the date of admission of Section
7 application and which are not part of the Resolution Plan shall stand
extinguished and the proceedings in respect thereof would no more E
survive. However, in some States, the authorities of the State are flouting
the law and as such, the petitioner has approached this Court in its
extraordinary jurisdiction under Article 32 of the Constitution so that
there is an authoritative pronouncement by this Court. He submitted,
that the respondent authorities in the present case had failed to file the F
claims in response to the statutory public notice issued by RP. The first
demand by the authorities raised is only after the plan was approved by
CoC on 9.4.2018. He also relied on the speech delivered by the Hon’ble
Finance Minister in Rajya Sabha on 29.7.2019, to buttress his submissions
that the 2019 Amendment of Section 31 of I&B Code is clarificatory in
nature. G
SUBMISSIONS IN APPEALS ARISING OUT OF
SPECIAL LEAVE PETITION (CIVIL) NOS.7147-7150 OF 2020
[Electrosteel Steels Limited, Bokaro, Jharkhand vs. State of
Jharkhand and Others]
H
766 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 44. Dr. Singhvi submitted, that in the present matter though NCLT
had approved the Resolution Plan on 17.4.2018 and NCLAT had
dismissed the appeal on 10.8.2018, only thereafter on 17.8.2018, the re-
assessment order came to be passed for the period 2012-13. He
submitted, that immediately after the appellant discovered about the said
order, the same was challenged in a writ petition. However, the High
B
Court has dismissed the petition on erroneous grounds. It is submitted,
that one of the grounds on which the petition is dismissed is, that it is the
Vedanta Limited, which was an aggrieved party since it was a Resolution
Applicant and as such, the petition at the behest of the present appellant,
which was a Corporate Debtor was not tenable. He submitted, that the
C second ground on which the writ petition is dismissed is that the State
Authorities had not participated in CIRP and the order passed by NCLT
was binding only on the parties, which have participated in the Resolution
process. He submitted, that both the grounds are erroneous inasmuch
as, Vedanta Limited is a successful Resolution Applicant. The Resolution
process is in respect of the present appellant-writ petitioner, which is the
D
Corporate Debtor and as such, the petition at the behest of the present
appellant was very much tenable in law. Insofar as the second ground of
the High Court is concerned, he submitted, that if such a view is accepted,
it will frustrate the entire object of I&B Code and the revival of the
Debtor Companies would be impossible if the successful resolution
E applicants are sprung with the surprise debts, which are not part of the
Resolution Plan.
45. Shri Gurukrishna Kumar, learned Senior Counsel appearing
on behalf of the respondent submitted, that the entire process conducted
by RP and CoC is fraudulent. He submitted, that in accordance with
F Section 29 and specifically, clause H of Regulation 36, RP was required
to furnish the details of the material litigation and an ongoing investigation
or proceedings initiated by Government and Statutory Authorities in the
information memorandum. However, the Resolution Applicant had
fraudulently used I&B Code by suppressing the vital information with
regard to the same and thereby, denying the legitimate dues of public
G exchequer.
46. Dr. Singhvi in rejoinder submitted, that it is respondent’s own
admission that they have not participated in the proceedings conducted
by RP, CoC, NCLT, NCLAT and even this Court. He submitted, that
when the other Departments/Ministries had participated in the
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 767
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
proceedings and raised their claims, it does not lie in the mouth of A
respondents to say, that they were not aware about CIRP proceedings.
47. In the said appeal, an intervention application has also been
filed on behalf of Tata Steel BSL Limited. It is contended in the intervention
application, that though the resolution process in respect of intervener/
applicant was complete, still the Revenue Authorities were continuing B
with the proceedings with respect to the dues owed prior to the date of
approval of resolution plan by NCLT. It is the submission of the
intervener/applicant, that as such, legal position needs to be settled by
this Court and therefore the intervener/applicant has filed the present
intervention application. Shri Jaideep Gupta, learned Senior Counsel
appearing on behalf of the said intervenor - applicant has made C
submissions on similar lines as are advanced by Dr. Singhvi and Shri
Kaul, learned Senior Counsel appearing in the other matters.
CONSIDERATION
48. We have extensively heard the learned counsel appearing for
D
the parties in all the matters, perused the written submissions and materials
on record.
49. The provisions of I&B Code have undergone scrutiny in various
judgments of this Court. We would not like to burden the present judgment
with the provisions of the statute, which have been duly reproduced and
considered in the earlier judgments of this Court. E
50. In the case of Innoventive Industries Ltd. vs. ICICI Bank
& Anr.9 after reproducing the ‘Statement of Objects and Reasons’ of
I&B Code in paragraph 12, this Court observed thus:
“13. One of the important objectives of the Code is to bring
the insolvency law in India under a single unified umbrella F
with the object of speeding up of the insolvency process.
As per the data available with the World Bank in 2016, insolvency
resolution in India took 4.3 years on an average, which was much
higher when compared with the United Kingdom (1 year), USA
(1.5 years) and South Africa (2 years). The World Bank’s Ease G
of Doing Business Index, 2015, ranked India as country number
135 out of 190 countries on the ease of resolving insolvency based
on various indicia.”
[emphasis supplied]
9
(2018) 1 SCC 407 H
768 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 51. This Court thereafter in paragraph 16 reproduced the relevant
paragraphs contained in the report of the Bankruptcy Law Reforms
Committee Report of 2015. Thereafter, this Court reproduced all the
relevant provisions of I&B Code in paragraphs 18 to 26.
52. This Court in the case of Innoventive Industries Ltd. (supra)
B thereafter elaborately discussed the scheme of the various provisions of
the I&B Code in paragraphs 27 to 32, which read thus:
“27. The scheme of the Code is to ensure that when a default
takes place, in the sense that a debt becomes due and is not paid,
the insolvency resolution process begins. Default is defined in
C Section 3(12) in very wide terms as meaning non-payment of a
debt once it becomes due and payable, which includes non-
payment of even part thereof or an instalment amount. For the
meaning of “debt”, we have to go to Section 3(11), which in turn
tells us that a debt means a liability of obligation in respect of a
“claim” and for the meaning of “claim”, we have to go back to
D Section 3(6) which defines “claim” to mean a right to payment
even if it is disputed. The Code gets triggered the moment default
is of rupees one lakh or more (Section 4). The corporate insolvency
resolution process may be triggered by the corporate debtor itself
or a financial creditor or operational creditor. A distinction is made
E by the Code between debts owed to financial creditors and
operational creditors. A financial creditor has been defined under
Section 5(7) as a person to whom a financial debt is owed and a
financial debt is defined in Section 5(8) to mean a debt which is
disbursed against consideration for the time value of money. As
opposed to this, an operational creditor means a person to whom
F an operational debt is owed and an operational debt under Section
5(21) means a claim in respect of provision of goods or services.
28. When it comes to a financial creditor triggering the process,
Section 7 becomes relevant. Under the Explanation to Section
7(1), a default is in respect of a financial debt owed to any financial
G creditor of the corporate debtor — it need not be a debt owed to
the applicant financial creditor. Under Section 7(2), an application
is to be made under sub-section (1) in such form and manner as is
prescribed, which takes us to the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016. Under Rule
H 4, the application is made by a financial creditor in Form 1
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 769
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
accompanied by documents and records required therein. Form 1 A
is a detailed form in 5 parts, which requires particulars of the
applicant in Part I, particulars of the corporate debtor in Part II,
particulars of the proposed interim resolution professional in Part
III, particulars of the financial debt in Part IV and documents,
records and evidence of default in Part V. Under Rule 4(3), the
B
applicant is to dispatch a copy of the application filed with the
adjudicating authority by registered post or speed post to the
registered office of the corporate debtor. The speed, within which
the adjudicating authority is to ascertain the existence of a default
from the records of the information utility or on the basis of evidence
furnished by the financial creditor, is important. This it must do C
within 14 days of the receipt of the application. It is at the stage of
Section 7(5), where the adjudicating authority is to be satisfied
that a default has occurred, that the corporate debtor is entitled to
point out that a default has not occurred in the sense that the
“debt”, which may also include a disputed claim, is not due. A
D
debt may not be due if it is not payable in law or in fact. The
moment the adjudicating authority is satisfied that a default
has occurred, the application must be admitted unless it is
incomplete, in which case it may give notice to the applicant
to rectify the defect within 7 days of receipt of a notice from
the adjudicating authority. Under sub-section (7), the E
adjudicating authority shall then communicate the order passed to
the financial creditor and corporate debtor within 7 days of
admission or rejection of such application, as the case may be.
29. The scheme of Section 7 stands in contrast with the scheme
under Section 8 where an operational creditor is, on the occurrence F
of a default, to first deliver a demand notice of the unpaid debt to
the operational debtor in the manner provided in Section 8(1) of
the Code. Under Section 8(2), the corporate debtor can, within a
period of 10 days of receipt of the demand notice or copy of the
invoice mentioned in sub-section (1), bring to the notice of the
operational creditor the existence of a dispute or the record of the G
pendency of a suit or arbitration proceedings, which is pre-
existing—i.e. before such notice or invoice was received by the
corporate debtor. The moment there is existence of such a dispute,
the operational creditor gets out of the clutches of the Code.
H
770 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 30. On the other hand, as we have seen, in the case of a corporate
debtor who commits a default of a financial debt, the adjudicating
authority has merely to see the records of the information utility
or other evidence produced by the financial creditor to satisfy
itself that a default has occurred. It is of no matter that the debt is
disputed so long as the debt is “due” i.e. payable unless interdicted
B
by some law or has not yet become due in the sense that it is
payable at some future date. It is only when this is proved to the
satisfaction of the adjudicating authority that the adjudicating
authority may reject an application and not otherwise.
31. The rest of the insolvency resolution process is also very
C important. The entire process is to be completed within a period
of 180 days from the date of admission of the application under
Section 12 and can only be extended beyond 180 days for a further
period of not exceeding 90 days if the committee of creditors by a
voting of 75% of voting shares so decides. It can be seen that
D time is of essence in seeing whether the corporate body can be
put back on its feet, so as to stave off liquidation.
32. As soon as the application is admitted, a moratorium in terms
of Section 14 of the Code is to be declared by the adjudicating
authority and a public announcement is made stating, inter alia,
E the last date for submission of claims and the details of the interim
resolution professional who shall be vested with the management
of the corporate debtor and be responsible for receiving claims.
Under Section 17, the erstwhile management of the corporate
debtor is vested in an interim resolution professional who is a
trained person registered under Chapter IV of the Code. This
F interim resolution professional is now to manage the operations of
the corporate debtor as a going concern under the directions of a
committee of creditors appointed under Section 21 of the Act.
Decisions by this committee are to be taken by a vote of not less
than 75% of the voting share of the financial creditors. Under
G Section 28, a resolution professional, who is none other than an
interim resolution professional who is appointed to carry out the
resolution process, is then given wide powers to raise finances,
create security interests, etc. subject to prior approval of the
committee of creditors.”

H [emphasis supplied]
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 771
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
53. After discussing the relevant provisions of I&B Code, this A
Court observed thus:
“33. Under Section 30, any person who is interested in
putting the corporate body back on its feet may submit a
resolution plan to the resolution professional, which is
prepared on the basis of an information memorandum. This B
plan must provide for payment of insolvency resolution
process costs, management of the affairs of the corporate
debtor after approval of the plan, and implementation and
supervision of the plan. It is only when such plan is approved
by a vote of not less than 75% of the voting share of the
financial creditors and the adjudicating authority is satisfied C
that the plan, as approved, meets the statutory
requirements mentioned in Section 30, that it ultimately
approves such plan, which is then binding on the corporate
debtor as well as its employees, members, creditors,
guarantors and other stakeholders. Importantly, and this is a D
major departure from previous legislation on the subject, the
moment the adjudicating authority approves the resolution plan,
the moratorium order passed by the authority under Section 14
shall cease to have effect. The scheme of the Code, therefore,
is to make an attempt, by divesting the erstwhile
management of its powers and vesting it in a professional E
agency, to continue the business of the corporate body as a
going concern until a resolution plan is drawn up, in which
event the management is handed over under the plan so
that the corporate body is able to pay back its debts and
get back on its feet. All this is to be done within a period of 6 F
months with a maximum extension of another 90 days or else the
chopper comes down and the liquidation process begins.”
[emphasis supplied]
54. It could thus be seen, that one of the dominant objects of I&B
Code is to see to it, that an attempt has to be made to revive the Corporate G
Debtor and make it a running concern. For that, a resolution applicant
has to prepare a resolution plan on the basis of the Information
Memorandum. The Information Memorandum, which is required to be
prepared in accordance with Section 29 of I&B Code along with
Regulation 36 of the Regulations, is required to contain various details, H
772 SUPREME COURT REPORTS [2021] 13 S.C.R.

A which have been gathered by RP after receipt of various claims in
response to the statutorily mandated public notice. The resolution plan is
required to provide for the payment of insolvency resolution process
costs, management of the affairs of the Corporate Debtor after approval
of the resolution plan; the implementation and supervision of the resolution
plan. It is only after the Adjudicating Authority satisfies itself, that the
B
plan as approved by CoC with the requisite voting share of financial
creditors meets the requirement as referred to in sub-section (2) of Section
30, grants its approval to it. It is only thereafter, that the said plan is
binding on the Corporate Debtor as well as its employees, members,
creditors, guarantors and other stakeholders involved in the resolution
C Plan. The moratorium order passed by the Adjudicating Authority under
Section 14 shall cease to operate, once the Adjudicating Authority
approves the resolution plan. The scheme of I&B Code therefore is, to
make an attempt, by divesting the erstwhile management of its powers
and vesting it in a professional agency, to continue the business of the
Corporate Debtor as a going concern until a resolution plan is drawn up.
D
Once the resolution plan is approved, the management is handed over
under the plan to the successful applicant so that the Corporate Debtor
is able to pay back its debts and get back on its feet.
55. This Court recently in the case of Kalpraj Dharamshi and
another vs.Kotak Investment Advisors Ltd. and another (supra) has,
E in detail, considered the provisions of Sections 30 and 31 of I&B Code,
the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 and
the judgments of this Court in the case K. Sashidhar (supra), Committee
of Creditors of Essar Steel India Limited through Authorised
Signatory vs. Satish Kumar Gupta & Ors. (supra) and Maharashtra
F Seamless Limited vs. Padmanabhan Venkatesh and others (supra)
and observed thus:
“139. It is thus clear, that the Committee was of the view, that
for deciding key economic question in the bankruptcy process,
the only one correct forum for evaluating such possibilities, and
G making a decision was, a creditors committee, wherein all financial
creditors have votes in proportion to the magnitude of debt that
they hold. The BLRC has observed, that laws in India in the past
have brought arms of the Government (legislature, executive or
judiciary) into the question of bankruptcy process. This has been
strictly avoided by the Committee and it has been provided, that
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 773
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
the decision with regard to appropriate disposition of a defaulting A
firm, which is a business decision, should only be made by the
creditors. It has been observed, that the evaluation of proposals
to keep the entity as a going concern, including decisions about
the sale of business or units, restructuring of debt, etc., are required
to be taken by the Committee of the Financial Creditors. It has
B
been provided, that the choice of the solution to keep the entity as
a going concern will be voted upon by CoC and there are no
constraints on the proposals that the resolution professional can
present to CoC. The requirements, that the resolution professional
needs to confirm to the Adjudicator, are:
(i) that the solution must explicitly require the repayment C
of any interim finance and costs of the insolvency
resolution process will be paid in priority to other
payments;
(ii) that the plan must explicitly include payment to all
creditors not on the creditors committee, within a D
reasonable period after the solution is implemented; and
lastly
(iii) the plan should comply with existing laws governing the
actions of the entity while implementing the solutions.
E
140. The Committee also expressed the opinion, that there should
be freedom permitted to the overall market, to propose solutions
on keeping the entity as a going concern. The Committee opined,
that the details as to how the insolvency is to be resolved or as to
how the entity is to be revived, or the debt is to be restructured
will not be provided in the I&B Code but such a decision will F
come from the deliberations of CoC in response to the solutions
proposed by the market.
141. This Court in the case of K. Sashidhar (supra) observed
thus:
G
“32. Having heard the learned counsel for the parties, the moot
question is about the sequel of the approval of the resolution
plan by CoC of the respective corporate debtor, namely,
KS&PIPL and IIL, by a vote of less than seventy-five per
cent of voting share of the financial creditors; and about the
correctness of the view taken by NCLAT that the percentage H
774 SUPREME COURT REPORTS [2021] 13 S.C.R.

A of voting share of the financial creditors specified in Section
30(4) of the I&B Code is mandatory. Further, is it open to
the adjudicating authority/appellate authority to reckon any
other factor other than specified in Sections 30(2) or 61(3)
of the I&B Code as the case may be which, according to
the resolution applicant and the stakeholders supporting
B
the resolution plan, may be relevant?”
(emphasis supplied)
142. After considering the judgment of this Court in the case
of Arcelormittal India Private Limited v. Satish Kumar
C Gupta46 and the relevant provisions of the I&B Code, this court
further observed in K. Sashidhar (supra) thus:
“52. As aforesaid, upon receipt of a “rejected” resolution plan
the adjudicating authority (NCLT) is not expected to do anything
more; but is obligated to initiate liquidation process under Section
D 33(1) of the I&B Code. The legislature has not endowed the
adjudicating authority (NCLT) with the jurisdiction or authority
to analyse or evaluate the commercial decision of CoC much
less to enquire into the justness of the rejection of the resolution
plan by the dissenting financial creditors. From the legislative
history and the background in which the I&B Code has been
E enacted, it is noticed that a completely new approach has been
adopted for speeding up the recovery of the debt due from the
defaulting companies. In the new approach, there is a calm
period followed by a swift resolution process to be completed
within 270 days (outer limit) failing which, initiation of liquidation
F process has been made inevitable and mandatory. In the earlier
regime, the corporate debtor could indefinitely continue to enjoy
the protection given under Section 22 of the Sick Industrial
Companies Act, 1985 or under other such enactments which
has now been forsaken. Besides, the commercial wisdom of
CoC has been given paramount status without any judicial
G intervention, for ensuring completion of the stated
processes within the timelines prescribed by the I&B Code.
There is an intrinsic assumption that financial creditors
are fully informed about the viability of the corporate debtor
and feasibility of the proposed resolution plan. They act
H on the basis of thorough examination of the proposed
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 775
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
resolution plan and assessment made by their team of A
experts. The opinion on the subject-matter expressed by
them after due deliberations in CoC meetings through
voting, as per voting shares, is a collective business
decision. The legislature, consciously, has not provided any
ground to challenge the “commercial wisdom” of the
B
individual financial creditors or their collective decision
before the adjudicating authority. That is made non-
justiciable.”
(emphasis supplied)
143. This Court has held, that it is not open to the Adjudicating C
Authority or Appellate Authority to reckon any other factor other
than specified in Sections 30(2) or 61(3) of the I&B Code. It has
further been held, that the commercial wisdom of CoC has been
given paramount status without any judicial intervention for
ensuring completion of the stated processes within the timelines
prescribed by the I&B Code. This Court thus, in unequivocal terms, D
held, that there is an intrinsic assumption, that financial creditors
are fully informed about the viability of the corporate debtor and
feasibility of the proposed resolution plan. They act on the basis
of thorough examination of the proposed resolution plan and
assessment made by their team of experts. It has been held, that E
the opinion expressed by CoC after due deliberations in the
meetings through voting, as per voting shares, is a collective
business decision. It has been held, that the legislature has
consciously not provided any ground to challenge the “commercial
wisdom” of the individual financial creditors or their collective
decision before the Adjudicating Authority and that the decision F
of CoC’s ‘commercial wisdom’ is made non-justiciable.
144. This Court in Committee of Creditors of Essar Steel India
Limited through Authorised Signatory (supra) after referring
to the judgment of this Court in the case of K. Sashidhar (supra)
observed thus: G
“64. Thus, what is left to the majority decision of the
Committee of Creditors is the “feasibility and viability” of a
resolution plan, which obviously takes into account all aspects
of the plan, including the manner of distribution of funds among
the various classes of creditors. As an example, take the case H
776 SUPREME COURT REPORTS [2021] 13 S.C.R.

A of a resolution plan which does not provide for payment of
electricity dues. It is certainly open to the Committee of Creditors
to suggest a modification to the prospective resolution applicant
to the effect that such dues ought to be paid in full, so that the
carrying on of the business of the corporate debtor does not
become impossible for want of a most basic and essential
B
element for the carrying on of such business, namely, electricity.
This may, in turn, be accepted by the resolution applicant with
a consequent modification as to distribution of funds, payment
being provided to a certain type of operational creditor, namely,
the electricity distribution company, out of upfront payment
C offered by the proposed resolution applicant which may also
result in a consequent reduction of amounts payable to other
financial and operational creditors. What is important is that
it is the commercial wisdom of this majority of creditors
which is to determine, through negotiation with the
prospective resolution applicant, as to how and in what
D
manner the corporate resolution process is to take place.”
(emphasis supplied)
145. This Court held, that what is left to the majority decision of
CoC is the “feasibility and viability” of a resolution plan, which is
E required to take into account all aspects of the plan, including the
manner of distribution of funds among the various classes of
creditors. It has further been held, that CoC is entitled to suggest
a modification to the prospective resolution applicant, so that
carrying on the business of the Corporate Debtor does not become
impossible, which suggestion may, in turn, be accepted by the
F resolution applicant with a consequent modification as to
distribution of funds, etc. It has been held, that what is important
is, the commercial wisdom of the majority of creditors, which is to
determine, through negotiation with the prospective resolution
applicant, as to how and in what manner the corporate resolution
G process is to take place.
146. The view taken in the case of K. Sashidhar (supra)
and Committee of Creditors of Essar Steel India Limited
through Authorised Signatory (supra) has been reiterated by
another three Judges Bench of this Court in the case
H of Maharashtra Seamless Limited (supra).
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 777
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
147. In all the aforesaid three judgments of this Court, the scope A
of jurisdiction of the Adjudicating Authority (NCLT) and the
Appellate Authority (NCLAT) has also been elaborately
considered. It will be relevant to refer to paragraph 55 of the
judgment in the case of K. Sashidhar (supra), which reads thus:
“55. Whereas, the discretion of the adjudicating authority B
(NCLT) is circumscribed by Section 31 limited to scrutiny of
the resolution plan “as approved” by the requisite per cent of
voting share of financial creditors. Even in that enquiry, the
grounds on which the adjudicating authority can reject the
resolution plan is in reference to matters specified in Section
30(2), when the resolution plan does not conform to the stated C
requirements. Reverting to Section 30(2), the enquiry to be
done is in respect of whether the resolution plan provides : (i)
the payment of insolvency resolution process costs in a specified
manner in priority to the repayment of other debts of the
corporate debtor, (ii) the repayment of the debts of operational D
creditors in prescribed manner, (iii) the management of the
affairs of the corporate debtor, (iv) the implementation and
supervision of the resolution plan, (v) does not contravene any
of the provisions of the law for the time being in force, (vi)
conforms to such other requirements as may be specified by
the Board. The Board referred to is established under Section E
188 of the I&B Code. The powers and functions of the Board
have been delineated in Section 196 of the I&B Code. None
of the specified functions of the Board, directly or indirectly,
pertain to regulating the manner in which the financial creditors
ought to or ought not to exercise their commercial wisdom F
during the voting on the resolution plan under Section 30(4) of
the I&B Code. The subjective satisfaction of the financial
creditors at the time of voting is bound to be a mixed baggage
of variety of factors. To wit, the feasibility and viability of the
proposed resolution plan and including their perceptions about
the general capability of the resolution applicant to translate G
the projected plan into a reality. The resolution applicant may
have given projections backed by normative data but still in the
opinion of the dissenting financial creditors, it would not be
free from being speculative. These aspects are completely
within the domain of the financial creditors who are called H
778 SUPREME COURT REPORTS [2021] 13 S.C.R.

A upon to vote on the resolution plan under Section 30(4) of the
I&B Code.”
148. It has been held, that in an enquiry under Section 31, the
limited enquiry that the Adjudicating Authority is permitted is, as
to whether the resolution plan provides:
B (i) the payment of insolvency resolution process costs in a specified
manner in priority to the repayment of other debts of the corporate
debtor,
(ii) the repayment of the debts of operational creditors in
prescribed manner,
C
(iii) the management of the affairs of the corporate debtor,
(iv) the implementation and supervision of the resolution plan,
(v) the plan does not contravene any of the provisions of the law
for the time being in force,
D
(vi) conforms to such other requirements as may be specified by
the Board.
149. It will be further relevant to refer to the following observations
of this Court in K. Sashidhar (supra):
E 57. …Indubitably, the remedy of appeal including the width of
jurisdiction of the appellate authority and the grounds of appeal,
is a creature of statute. The provisions investing jurisdiction
and authority in NCLT or NCLAT as noticed earlier, have
not made the commercial decision exercised by CoC of not
approving the resolution plan or rejecting the same,
F justiciable. This position is reinforced from the limited
grounds specified for instituting an appeal that too against
an order “approving a resolution plan” under Section 31.
First, that the approved resolution plan is in contravention of
the provisions of any law for the time being in force. Second,
G there has been material irregularity in exercise of powers “by
the resolution professional” during the corporate insolvency
resolution period. Third, the debts owed to operational creditors
have not been provided for in the resolution plan in the
prescribed manner. Fourth, the insolvency resolution plan costs
have not been provided for repayment in priority to all other
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 779
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
debts. Fifth, the resolution plan does not comply with any other A
criteria specified by the Board. Significantly, the matters or
grounds—be it under Section 30(2) or under Section 61(3) of
the I&B Code —are regarding testing the validity of the
“approved” resolution plan by CoC; and not for approving the
resolution plan which has been disapproved or deemed to have
B
been rejected by CoC in exercise of its business decision.”
[emphasis supplied]
150. It will therefore be clear, that this Court, in unequivocal terms,
held, that the appeal is a creature of statute and that the statute
has not invested jurisdiction and authority either with NCLT or C
NCLAT, to review the commercial decision exercised by CoC of
approving the resolution plan or rejecting the same.
151. The position is clarified by the following observations in
paragraph 59 of the judgment in the case of K. Sashidhar (supra),
which reads thus: D
“59. In our view, neither the adjudicating authority (NCLT)
nor the appellate authority (NCLAT) has been endowed with
the jurisdiction to reverse the commercial wisdom of the
dissenting financial creditors and that too on the specious ground
that it is only an opinion of the minority financial creditors…..” E
152. This Court in Committee of Creditors of Essar Steel India
Limited through Authorised Signatory (supra) after reproducing
certain paragraphs in K. Sashidhar (supra) observed thus:
“Thus, it is clear that the limited judicial review available, which
can in no circumstance trespass upon a business decision of F
the majority of the Committee of Creditors, has to be within
the four corners of Section 30(2) of the Code, insofar as the
Adjudicating Authority is concerned, and Section 32 read with
Section 61(3) of the Code, insofar as the Appellate Tribunal is
concerned, the parameters of such review having been clearly
G
laid down in K. Sashidhar”
153. It can thus be seen, that this Court has clarified, that the
limited judicial review, which is available, can in no circumstance
trespass upon a business decision arrived at by the majority of
CoC.
H
780 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 154. In the case of Maharashtra Seamless Limited (supra),
NCLT had approved the plan of appellant therein with regard to
CIRP of United Seamless Tubulaar (P) Ltd. In appeal, NCLAT
directed, that the appellant therein should increase upfront payment
to Rs. 597.54 crore to the “financial creditors”, “operational
creditors” and other creditors by paying an additional amount of
B
Rs. 120.54 crore. NCLAT further directed, that in the event the
“resolution applicant” failed to undertake the payment of additional
amount of Rs. 120.54 crore in addition to Rs. 477 crore and deposit
the said amount in escrow account within 30 days, the order of
approval of the ‘resolution plan’ was to be treated to be set aside.
C While allowing the appeal and setting aside the directions of
NCLAT, this Court observed thus:
“30. The appellate authority has, in our opinion, proceeded on
equitable perception rather than commercial wisdom. On the
face of it, release of assets at a value 20% below its liquidation
D value arrived at by the valuers seems inequitable. Here, we
feel the Court ought to cede ground to the commercial wisdom
of the creditors rather than assess the resolution plan on the
basis of quantitative analysis. Such is the scheme of the Code.
Section 31(1) of the Code lays down in clear terms that for
final approval of a resolution plan, the adjudicating authority
E has to be satisfied that the requirement of sub-section (2) of
Section 30 of the Code has been complied with. The proviso to
Section 31(1) of the Code stipulates the other point on which
an adjudicating authority has to be satisfied. That factor is that
the resolution plan has provisions for its implementation. The
F scope of interference by the adjudicating authority in limited
judicial review has been laid down in Essar Steel [Essar Steel
India Ltd. Committee of Creditors v. Satish Kumar
Gupta, (2020) 8 SCC 531], the relevant passage (para 54) of
which we have reproduced in earlier part of this judgment.
The case of MSL in their appeal is that they want to run the
G company and infuse more funds. In such circumstances, we
do not think the appellate authority ought to have interfered
with the order of the adjudicating authority in directing the
successful resolution applicant to enhance their fund inflow
upfront.”
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 781
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
155. This Court observed, that the Court ought to cede ground to A
the commercial wisdom of the creditors rather than assess the
resolution plan on the basis of quantitative analysis. This Court
clearly held, that the appellate authority ought not to have interfered
with the order of the adjudicating authority by directing the
successful resolution applicant to enhance their fund inflow upfront.
B
156. It would thus be clear, that the legislative scheme, as
interpreted by various decisions of this Court, is unambiguous.
The commercial wisdom of CoC is not to be interfered with,
excepting the limited scope as provided under Sections 30 and 31
of the I&B Code.”
C
56. Another three Judges Bench of this Court in the case of Karad
Urban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors.
(supra), taking a similar view, has observed thus:
“14. The principles laid down in the aforesaid decisions, make
one thing very clear. If all the factors that need to be taken into D
account for determining whether or not the corporate debtor can
be kept running as a going concern have been placed before the
Committee of Creditors and CoC has taken a conscious decision
to approve the resolution plan, then the adjudicating authority will
have to switch over to the hands off mode. It is not the case of
the corporate debtor or its promoter/Director or anyone else that E
some of the factors which are crucial for taking a decision
regarding the viability and feasibility, were not placed before CoC
or the resolution professional….”
57. It could thus be seen, that the legislature has given paramount
importance to the commercial wisdom of CoC and the scope of judicial F
review by Adjudicating Authority is limited to the extent provided under
Section 31 of I&B Code and of the Appellate Authority is limited to the
extent provided under sub-section (3) of Section 61 of the I&B Code, is
no more res integra.
58. Bare reading of Section 31 of the I&B Code would also make G
it abundantly clear, that once the resolution plan is approved by the
Adjudicating Authority, after it is satisfied, that the resolution plan as
approved by CoC meets the requirements as referred to in sub-section
(2) of Section 30, it shall be binding on the Corporate Debtor and its
employees, members, creditors, guarantors and other stakeholders. Such
H
782 SUPREME COURT REPORTS [2021] 13 S.C.R.

A a provision is necessitated since one of the dominant purposes of the
I&B Code is, revival of the Corporate Debtor and to make it a running
concern.
59. The resolution plan submitted by successful resolution applicant
is required to contain various provisions, viz., provision for payment of
B insolvency resolution process costs, provision for payment of debts of
operational creditors, which shall not be less than the amount to be paid
to such creditors in the event of liquidation of the Corporate Debtor
under section 53; or the amount that would have been paid to such
creditors, if the amount to be distributed under the resolution plan had
been distributed in accordance with the order of priority in sub-section
C (1) of section 53, whichever is higher. The resolution plan is also required
to provide for the payment of debts of financial creditors, who do not
vote in favour of the resolution plan, which also shall not be less than the
amount to be paid to such creditors in accordance with sub-section (1)
of section 53 in the event of a liquidation of the Corporate Debtor.
D Explanation 1 to clause (b) of sub-section (2) of Section 30 of the I&B
Code clarifies for the removal of doubts, that a distribution in accordance
with the provisions of the said clause shall be fair and equitable to such
creditors. The resolution plan is also required to provide for the
management of the affairs of the Corporate Debtor after approval of
the resolution plan and also the implementation and supervision of the
E resolution plan. Clause (e) of sub-section (2) of Section 30 of I&B Code
also casts a duty on RP to examine, that the resolution plan does not
contravene any of the provisions of the law for the time being in force.
60. Perusal of Section 29 of the I&B Code read with Regulation
36 of the Regulations would reveal, that it requires RP to prepare an
F information memorandum containing various details of the Corporate
Debtor so that the resolution applicant submitting a plan is aware of the
assets and liabilities of the Corporate Debtor, including the details about
the creditors and the amounts claimed by them. It is also required to
contain the details of guarantees that have been given in relation to the
G debts of the corporate debtor by other persons. The details with regard
to all material litigation and an ongoing investigation or proceeding initiated
by Government and statutory authorities are also required to be contained
in the information memorandum. So also the details regarding the number
of workers and employees and liabilities of the Corporate Debtor towards
them are required to be contained in the information memorandum.
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 783
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
61. All these details are required to be contained in the information A
memorandum so that the resolution applicant is aware, as to what are
the liabilities, that he may have to face and provide for a plan, which
apart from satisfying a part of such liabilities would also ensure, that the
Corporate Debtor is revived and made a running establishment. The
legislative intent of making the resolution plan binding on all the stake-
B
holders after it gets the seal of approval from the Adjudicating Authority
upon its satisfaction, that the resolution plan approved by CoC meets the
requirement as referred to in sub-section (2) of Section 30 is, that after
the approval of the resolution plan, no surprise claims should be flung on
the successful resolution applicant. The dominant purpose is, that he
should start with fresh slate on the basis of the resolution plan approved. C
62. This aspect has been aptly explained by this Court in the case
of Committee of Creditors of Essar Steel India Limited through
Authorised Signatory (supra).
“107. For the same reason, the impugned Nclat judgment
[Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC D
OnLine NCLAT 388] in holding that claims that may exist apart
from those decided on merits by the resolution professional and
by the Adjudicating Authority/Appellate Tribunal can now be
decided by an appropriate forum in terms of Section 60(6) of the
Code, also militates against the rationale of Section 31 of the Code. E
A successful resolution applicant cannot suddenly be faced with
“undecided” claims after the resolution plan submitted by him has
been accepted as this would amount to a hydra head popping up
which would throw into uncertainty amounts payable by a
prospective resolution applicant who would successfully take over
the business of the corporate debtor. All claims must be submitted F
to and decided by the resolution professional so that a prospective
resolution applicant knows exactly what has to be paid in order
that it may then take over and run the business of the corporate
debtor. This the successful resolution applicant does on a fresh
slate, as has been pointed out by us hereinabove. For these G
reasons, Nclat judgment must also be set aside on this count.”
63. In view of this legal position, we could have very well stopped
here and held, that, the observation made by NCLAT in the appeal filed
by EARC to the effect, that EARC was entitled to take recourse to
such remedies as are available to it in law, is impermissible in law. H
784 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 64. As held by this Court in the case of Pr. Commissioner of
Income Tax vs. Monnet Ispat and Energy Ltd.10, in view of provisions
of Section 238 of I&B Code, the provisions thereof will have an overriding
effect, if there is any inconsistency with any of the provisions of the law
for the time being in force or any instrument having effect by virtue of
any such law. As such, the observations made by NCLAT to the aforesaid
B
effect, if permitted to remain, would frustrate the very purpose for which
the I&B Code is enacted.
65. However, in Civil Appeal arising out of Special Leave Petition
(Civil) No.11232 of 2020, Writ Petition (Civil) No.1177 of 2020 and Civil
Appeals arising out of Special Leave Petition (Civil) Nos. 7147-7150 of
C 2020,the issue with regard to the statutory claims of the State Government
and the Central Government in respect of the period prior to the approval
of resolution plan by NCLT, will have to be considered.
66. Vide Section 7 of Act No.26 of 2019 (vide S.O. 2953(E),
dated 16.8.2019 w.e.f. 16.8.2019), the following words have been inserted
D in Section 31 of the I&B Code.
“including the Central Government, any State Government or any
local authority to whom a debt in respect of the payment of dues
arising under any law for the time being in force, such as authorities
to whom statutory dues are owed”
E
67. As such, with respect to the proceedings, which arise after
16.8.2019, there will be no difficulty. After the amendment, any debt in
respect of the payment of dues arising under any law for the time being
in force including the ones owed to the Central Government, any State
Government or any local authority, which does not form a part of the
F approved resolution plan, shall stand extinguished.
68. The only question, which remains is, what happens to such
dues if they pertain to a period wherein Section 7 petitions have been
admitted prior to 16.8.2019.
69. To answer the said question, we will have to consider, as to
G
whether the said amendment is clarificatory/declaratory in nature or a
substantive one. If it is held, that it is declaratory or clarificatory in nature,
it will have to be held, that such an amendment is retrospective in nature
and exists on the statute book since inception. However, if the answer is

10
H SLP(C) No.6483/2018 (order dated 10.8.2018)
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 785
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
otherwise, the amendment will have to be held to be prospective in nature, A
having force from the date on which the amendment is effected in the
statute.
70. It will be relevant to refer to the “Statement of Objects and
Reasons” (hereafter referred to as “SOR”) of the Insolvency and
Bankruptcy Code (Amendment) Bill, 2019, which read thus: B
“The Insolvency and Bankruptcy Code, 2016 (the Code) was
enacted with a view to consolidate and amend the laws relating to
reorganisation and insolvency resolution of corporate persons,
partnership firms and individuals in a time-bound manner for
maximisation of value of assets of such persons, to promote C
entrepreneurship, availability of credit and balance the interests
of all the stakeholders including alteration in the order or priority
of payment of Government dues and to establish an Insolvency
and Bankruptcy Board of India.
2. The Preamble to the Code lays down the objects of the
D
Code to include “the insolvency resolution” in a time bound manner
for maximisation of value of assets in order to balance the interests
of all the stakeholders. Concerns have been raised that in some
cases extensive litigation is causing undue delays, which may
hamper the value maximisation. There is a need to ensure that all
creditors are treated fairly, without unduly burdening the E
Adjudicating Authority whose role is to ensure that the resolution
plan complies with the provisions of the Code. Various stakeholders
have suggested that if the creditors were treated on an equal
footing, when they have different pre-insolvency entitlements, it
would adversely impact the cost and availability of credit. Further,
views have also been obtained so as to bring clarity on the voting F
pattern of financial creditors represented by the authorised
representative.
3. In view of the aforesaid difficulties and in order to fill the
critical gaps in the corporate insolvency framework, it has become
necessary to amend certain provisions of the Insolvency and G
Bankruptcy Code. The Insolvency and Bankruptcy Code
(Amendment) Bill, 2019, inter alia, provides for the following,
namely:–
(a) ……………………………………..;
(b) ……………………………………..; H
786 SUPREME COURT REPORTS [2021] 13 S.C.R.

A (c) ……………………………………..;
(d) ……………………………………..;
(e) ……………………………………;
(f) to amend sub-section (1) of section 31 of the Code to
B clarify that the resolution plan approved by the Adjudicating
Authority shall also be binding on the Central Government,
any State Government or any local authority to whom a debt
in respect of payment of dues arising under any law for the
time being in force, such as authorities to whom statutory dues
are owed, including tax authorities;
C
(g) ………………………………..”
[emphasis supplied]
71. Perusal of the SOR would reveal, that one of the prime objects
of I&B Code was to provide for implementation of insolvency resolution
D process in a time bound manner for maximisation of value of assets in
order to balance the interests of all stakeholders. However, it was noticed,
that in some cases there was extensive litigation causing undue delays
resultantly hampering the value maximisation. It was also found necessary
to ensure, that all creditors are treated fairly. It was therefore in view of
the various difficulties faced and in order to fill the critical gaps in the
E
corporate insolvency framework, it was necessary to amend certain
provisions of the I&B Code. Clause (f) of para 3 of the SOR of the
Insolvency and Bankruptcy Code (Amendment) Bill, 2019 would amply
make it clear, that the legislative intent in amending sub-section (1) of
Section 31 of I&B Code was to clarify, that the resolution plan approved
F by the Adjudicating Authority shall also be binding on the Central
Government, any State Government or any local authority to whom a
debt is owed in respect of payment of dues arising under any law for the
time being in force, such as authorities to whom statutory dues are owed,
including tax authorities.
G 72. In the Rajya Sabha debates, on 29.7.2019, when the Bill for
amending I&B Code came up for discussion, there were certain issues
raised by certain Members. While replying to the issues raised by certain
Members, the Hon’ble Finance Minister stated thus:
“IBC has actually an overriding effect. For instance, you asked
H whether IBC will override SEBI. Section 238 provides that IBC
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 787
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
will prevail in case of inconsistency between two laws. Actually, A
Indian courts will have to decide, in specific cases, depending
upon the material before them, but largely, yes, it is IBC. […]
There is also this question about indemnity for successful resolution
applicant. The amendment now is clearly making it binding on the
Government. It is one of the ways in which we are providing that. B
The Government will not raise any further claim. The Government
will not make any further claim after resolution plan is approved.
So, that is going to be a major, major sense of assurance for the
people who are using the resolution plan. Criminal matters alone
would be proceeded against individuals and not company. There
will be no criminal proceedings against successful resolution C
applicant. There will be no criminal proceedings against successful
resolution applicant for fraud by previous promoters. So, I hope
that is absolutely clear. I would want all the hon. Members to
recognize this message and communicate further that this Code,
therefore, gives that comfort to all new bidders. So now, they D
need not be scared that the taxman will come after them for the
faults of the earlier promoters. No. Once the resolution plan is
accepted, the earlier promoters will be dealt with as individuals
for their criminality but not the new bidder who is trying to restore
the company. So, that is very clear ……………..
E
(emphasis supplied)”
73. It could thus be seen, that in the speech the Hon’ble Finance
Minister has categorically stated, that Section 238 provides that I&B
Code will prevail in case of inconsistency between two laws. She also
stated, that there was question about indemnity for successful resolution F
applicant and that the amendment was clearly making it binding on the
Government. She stated, that the Government will not make any further
claim after resolution plan is approved. So, that is going to be a major
sense of assurance for the people who are using the resolution plan. She
has categorically stated, that she would want all the Hon’ble Members
to recognize this message and communicate further that I&B Code gives G
that comfort to all new bidders. They need not be scared that the taxman
will come after them for the faults of the earlier promoters. She further
states, that once the resolution plan is accepted, the earlier promoters
will be dealt with as individuals for their criminality but not the new
bidder who is trying to restore the company. H
788 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 74. This Court in the case of K.P. Varghese v. Income Tax
Officer, Ernakulam and Another11 had an occasion to consider the
question, as to whether the speech made by the Hon’ble Finance Minister,
explaining the reason for the introduction of the Bill could be referred
for the purpose of ascertaining the mischief sought to be remedied by
the legislation. This Court observed thus:
B
“Now it is true that the speeches made by the Members of the
Legislature on the floor of the House when a Bill for enacting a
statutory provision is being debated are inadmissible for the purpose
of interpreting the statutory provision but the speech made by the
C Mover of the Bill explaining the reason for the introduction of the
Bill can certainly be referred to for the purpose of ascertaining
the mischief sought to be remedied by the legislation and the object
and purpose for which the legislation is enacted. This is in accord
with the recent trend in juristic thought not only in western countries
but also in India that interpretation of a statute being an exercise
D in the ascertainment of meaning, everything which is logically
relevant should be admissible. In fact there are at least three
decisions of this Court, one in Loka Shikshana
Trust v. CIT [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 : 101 ITR
234 : 1976 LR 1] , the other in Indian Chamber of
E Commerce v. Commissioner of Income Tax [(1976) 1 SCC 324
: 1976 SCC (Tax) 41 : 101 ITR 796 : 1976 Tax LR 210] and the
third in Additional Commissioner of Income Tax v. Surat Art
Silk Cloth Manufacturers’ Association [(1980) 2 SCC 31 : 1980
SCC (Tax) 170 : 121 ITR 1] where the speech made by the Finance
Minister while introducing the exclusionary clause in Section 2,
F
clause (15) of the Act was relied upon by the Court for the purpose
of ascertaining what was the reason for introducing that clause.
The speech made by the Finance Minister while moving the
amendment introducing sub-section (2) clearly states what were
the circumstances in which sub-section (2) came to be passed,
G what was the mischief for which Section 52 as it then stood did
not provide and which was sought to be remedied by the enactment
of sub-section (2) and why the enactment of sub-section (2) was
found necessary…..”

11
H (1981) 4 SCC 173
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 789
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
75. This Court in the case of Union of India and others vs. A
Martin Lottery Agencies Ltd.12, in paragraph 38has relied on the
aforesaid observations made in the judgment of K.P. Varghese (supra).
76. It could thus be seen, that the speech made by Hon’ble Finance
Minister while explaining the amendment could be referred to for
ascertaining what was the reason for moving the Bill. The speech can B
be used for finding out:
(1) what were the circumstances in which the amendment was
carried out;
(2) what was the mischief for which the unamended section
did not provide; and C

(3) what was sought to be remedied by amended enactment.
77. It is clear, that the mischief, which was noticed prior to
amendment of Section 31 of I&B Code was, that though the legislative
intent was to extinguish all such debts owed to the Central Government, D
any State Government or any local authority, including the tax authorities
once an approval was granted to the resolution plan by NCLT; on account
of there being some ambiguity, the State/Central Government authorities
continued with the proceedings in respect of the debts owed to them. In
order to remedy the said mischief, the legislature thought it appropriate
to clarify the position, that once such a resolution plan was approved by E
the Adjudicating Authority, all such claims/dues owed to the State/Central
Government or any local authority including tax authorities, which were
not part of the resolution plan shall stand extinguished.
78. In Justice G.P. Singh treatise on “The principles of Statutory
Interpretation”, 14th Edition, Revised by Justice A.K. Patnaik, former F
Judge of this Court, it is observed thus:
“
(i) Declaratory Statutes
The presumption against retrospective operation is not applicable G
to declaratory statutes. As stated in CRAIES and approved by
the Supreme Court: “For modern purposes a declaratory Act may
be defined as an Act to remove doubts existing as to the common

12
(2009) 12 SCC 209 H
790 SUPREME COURT REPORTS [2021] 13 S.C.R.

A law, or the meaning or effect of any statute. Such Acts are usually
held to be retrospective. The usual reason for passing a declaratory
Act is to set aside what Parliament deems to have been a judicial
error, whether in the statement of the common law or in the
interpretation of statutes. Usually, if not invariably, such an Act
contains a preamble, and also the word ‘declared’ as well as the
B
word ‘enacted’. ”13 But the use of the words ‘it is declared’ is not
conclusive that the Act is declaratory for these words may, at
times, be used to introduce new rules of law and the Act in the
latter case will only be amending the law and will not necessarily
be retrospective14. In determining, therefore, the nature of the
C Act, regard must be had to the substance rather than to the form15.
If a new Act is ‘to explain’ an earlier Act, it would be without
object unless construed retrospective16. An explanatory Act is
generally passed to supply an obvious omission or to clear up
doubts as to the meaning of the previous Act17. It is well settled
that if a statute is curative or merely declaratory of the previous
D
law retrospective operation is generally intended18. The language
‘shall be deemed always to have meant’19 or ‘shall be deemed

13
CRAIES : Statute Law, 7 th Edition, p. 58, approved in Central Bank of India v. Their
Workmen, AIR 1960 SC 12, p. 27 : (1960) 1 SCR 200. See Jones v. Bennet, (1890) 63
E LT 705, p. 708 (LORD COLERIDGE, C.J.); Madras Marine & Co. v. State of Madras,
(1986) 3 SCC 552, p. 563 : AIR 1986 SC 1760; Satnam Overseas (Export) v. State of
Haryana, AIR 2003 SC 66, p. 84 : (2003) 1 SCC 561.
14
Harding v. Queensland Stamp Commissioners, (1898) AC 769, pp. 775, 776 (PC)
15
Ibid
16
R. V. Dursley (Inhabitants), (1832) 110 ER 168, p. 169
17
Keshavlal Jethalal Shah v. Mohanlal, AIR 1968 SC 1336, p. 1339 : (1968) 3 SCR 623.
F The question whether an ‘explanation’ added by an amending Act is really explanatory
or not would depend on its construction. In S. K. Govindan and Sons v. Commr. Of
Income-tax, Cochin, AIR 2001 SC 254 p. 260 : (2001) 1 SCC 460 : (2001) 247 ITR 192,
Explanation 2 inserted in section 139(8) of the Income-tax Act, 1961 was held to be
clarificatory. But in Birla Cement Works v. The Central Board of Direct Taxes, JT 2001
(3) SC 256, p. 262 : (2001) 9 SCC 35 : AIR 2001 SC 1080, it was held that mere addition
of an ‘explanation’ by an amending Act in a taxing Act cannot, without more, be held to
G
be clarificatory and retrospective. In Commissioner of Income-tax Bhopal v. Shelly
Products, (2003) 5 SCC 461, pp. 477, 478 : AIR 2003 SC 2532 provisos (a) and (b)
added in section 240 of the Income-tax Act, 1961 by amending Act which came into
force on 1-4-1989 were held to be clarificatory and retrospective.
18
Channan Singh v. Jai Kuar (Smt.), AIR 1970 SC 349, p. 349, p. 351 : (1969) 2 SCC
429
19
H CIT v. Straw Products, AIR 1966 SC 1113 : 1966 (2) SCR 881
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 791
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
never to have included’20 is declaratory, and is in plain terms A
retrospective. In the absence of clear words indicating that the
amending Act is declaratory, it would not be so construed when
the pre-amended provision was clear and unambiguous21. An
amending Act may be purely clarificatory to clear a meaning of a
provision of the principal Act which was already implicit. A
B
clarificatory amendment of this nature will have retrospective effect
and, therefore, if the principal Act was existing law when the
constitution came into force, the amending Act also will be part of
the existing law22.
The above statement of the law relating to the nature and effect
of a declaratory statute has been quoted with approval by the C
Supreme Court from earlier editions of this book in a number of
cases 23.
“In Mithilesh Kumari v. Prem Bihari Khare24, section 4 of the
Benami Transactions (Prohibition) Act, 1988 was, it is submitted,
wrongly held to be an Act declaratory in nature for it was not D
passed to clear any doubt existing as to the common law or the
meaning or effect of any statute. The conclusion, however, that
section 4 applied also to past benami transactions may be
supportable on the language used in the section.” These
observations and criticism of Mithilesh Kumari’s case also E
received the approval in R. Rajgopal Reddy v. Padmini
Chandrasekharan25, where the Supreme Court after quoting

20
Union of India v. S. Muthyam Reddy, JT 1999 (7) SC 596, p. 597 : 1999 (7) SCC 545
: AIR 1994 SC 3881 F
21
Sakuru v. Tanoji, (1985) 3 SCC 590, p. 594 : AIR 1985 SC 1279
22
Punjab Traders v. State of Punjab, AIR 1990 SC 2300, p. 2304 : 1991 (1) SCC 86
23
R. Rajgopal Reddy v. Padmini Chandrasekharan, 1995 (1) Scale 692, p. 704 : AIR
1996 SC 238, p. 246 : (1995) 2 SCC 630; Allied Motors (P. ) Ltd. v. CIT, AIR 1997 SC
1361, pp. 1366, 1367 : 1997 (3) SCC 472; CIT v. Podar Cement Pvt. Ltd., AIR 1997 SC
2523, pp. 2537, 2538 : 1997 (5) SCC 482; Shyam Sunder v. Ram Kumar, AIR 2001 SC
2472, p. 2487 : (2001) 8 SCC 24; Zile Singh v. State of Haryana, (2004) 8 SCC 1, p. 9
G
: AIR 2004 SC 5100, pp. 5103, 5104; Commissioner of Income Tax I, Ahmedabad v.
Gold Coin Health Food Pvt. Ltd., (2008) 9 SCC 622 paras 19, 20 : (2009) 9 JT 312. See
further S. B. Bhattacharjee v. S. D. Majumdar, AIR 2007 SC 2102 (paras 26 to 29) :
(2007) 7 JT 381.
24
AIR 1989 SC 1247, p. 1255 : 1989 (2) SCC 95
25
1995 (1) Scale 692 : 1995 AIR SCW 1422 : AIR 1996 SC 238 H
792 SUPREME COURT REPORTS [2021] 13 S.C.R.

A them (from 5th Edition pp. 315, 316) said : “No exception can be
taken to the above observations”.26
A proviso added from 1.4.1988 to section 43 B inserted in the
Income Tax Act, 1961 from 1.4.1984 came up for consideration
in AlliedMotors(P.) Ltd. v. Commissioner of Income-tax27 and
B it was given retrospective effect from the inception of the section
on the reasoning that the proviso was added to remedy unintended
consequences and supply an obvious omission so that the section
may be given a reasonable interpretation and that in fact the
amendment to insert the proviso would not serve its object unless
it is construed as retrospective. In Commissioner of Income-
C Tax, Bombay v. Podar Cement Pvt. Ltd.,28the Supreme Court
held that amendments introduced by the Finance Act, 1987 in so
far they related to section 27(iii), (iiia) and (iiib) which redefined
the expression ‘owner of house property’, in respect of which
there was a sharp divergence of opinion amongst the High Courts,
D was clarificatory and declaratory in nature and consequently
retrospective. Similarly, in Brij Mohan Das Laxman Das v.
Commissioner of Income – tax29. Explanation 2 added to section
40 of the Income-tax Act, 1961 from 1.4.1985 on a question on
which there was a divergence of opinion was held to be declaratory
in nature and, therefore, retrospective. And in Zile Singh v. State
E of Haryana,30substitution of the word ‘upto’ for the word ‘after’
in the proviso to section 13A (added in 1994) in Haryana Municipal
Act, 1973 by the Haryana Municipal (Second Amendment) Act,
1994 was held to be correction of an obvious drafting error to

F 26
Ibid, p. 704 (Scale) : p. 246 (AIR)
27
AIR 1997 Sc 1361, pp. 1366, 1367 : 1997 (3) SCC 472; Similarly in Commissioner of
Income Tax v. Suresh N. Gupta, (2008) 4 SCC 362 paras 38 and 39 : AIR 2008 SC 572,
proviso inserted in section 113 of the Income-tax Act with effect from 1-6-2002 was
held to be clarificatory and retrospective. Again in Commissioner of Income Tax v.
Alom Extensions Ltd., (2010) 1 SCC 489 : (2009) 14 JT 441 deletion of a second
proviso and consequent amendment in second proviso to section 43B of Income-tax
G Act, 1961 by the Finance Act, 2003 was held to be curative and retrospective.
28
AIR 1997 SC 2523, p. 2538 : (1997) 5 SCC 482.
29
AIR 1997 SC 1651, p. 1654 : 1997 (1) SCC 352; Affirmed in Suwalal Anandlal Jain
v. Commr. Of Income-tax, AIR 1997 SC 1279 : (1997) 4 SCC 89 and Commissioner of
Income-tax Bombay v. Kanji Shivji and co., AIR 2000 SC 774 : (2000) 2 SCC 253. See
further cases in note 42, supra.
30
(2004) 8 SCC 1 : AIR 2004 SC 5100
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 793
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
bring about the text in conformity with the legislative intent and, A
therefore, retrospective. Even without the amendment of the
proviso, the court in all probability would have read and interpreted
the section as corrected by the amendment31.”
79. In the case of Zile Singh vs. State of Haryana and others32,
this Court had an occasion to consider the provisions ofSection13-A of B
the Haryana Municipal Act, 1973, which, prior to amendment, read thus:
“13-A. Disqualification for membership.—(1) A person shall
be disqualified for being chosen as and for being a member of a
municipality—
*** C

(c) if he has more than two living children:
Provided that a person having more than two children on or
after the expiry of one year of the commencement of this
Act, shall not be deemed to be disqualified. D
***”
[emphasis supplied]
80. The faulty drafting in the provision was capable of being
interpreted, that the legislative embargo imposed on a person from
procreating and giving birth to a third child in the context of holding the E
office of a member of a municipality remained in operation for a period
of one year only and thereafter it was lifted. It could be interpreted, that
on the date on which Section 13-A was brought on the statute book i.e.
dated 5.4.1994, even if a person became disqualified, the disqualification
ceased to operate and he became qualified once again to contest the
F
election and hold the office of member of a municipality on the expiry of
one year from 5-4-1994. After realizing the error, Section 13-A came to
be amended as under:
“2. In the proviso to clause (c) of sub-section (1) of Section 13-
A of the Haryana Municipal Act, 1973 (hereinafter called the
principal Act), for the word ‘after’, the word ‘upto’ shall be G
substituted.”
[emphasis supplied]

31
Ibid, p. 23 (SCC).
32
(2004) 8 SCC 1 H
794 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 81. This Court while observing, that the amendment was
clarificatory in nature, held thus:
“14. The presumption against retrospective operation is not
applicable to declaratory statutes…. In determining, therefore,
the nature of the Act, regard must be had to the substance
B rather than to the form. If a new Act is “to explain” an earlier
Act, it would be without object unless construed retrospectively.
An explanatory Act is generally passed to supply an obvious
omission or to clear up doubts as to the meaning of the previous
Act. It is well settled that if a statute is curative or merely
declaratory of the previous law retrospective operation is
C generally intended…. An amending Act may be purely
declaratory to clear a meaning of a provision of the principal
Act which was already implicit. A clarificatory amendment of
this nature will have retrospective effect (ibid., pp. 468-69).
15. Though retrospectivity is not to be presumed and rather there
D is presumption against retrospectivity, according to Craies (Statute
Law, 7th Edn.), it is open for the legislature to enact laws having
retrospective operation. This can be achieved by express enactment
or by necessary implication from the language employed. If it is a
necessary implication from the language employed that the
E legislature intended a particular section to have a retrospective
operation, the courts will give it such an operation. In the absence
of a retrospective operation having been expressly given, the
courts may be called upon to construe the provisions and
answer the question whether the legislature had sufficiently
expressed that intention giving the statute retrospectivity. Four
F factors are suggested as relevant: (i) general scope and
purview of the statute; (ii) the remedy sought to be applied;
(iii) the former state of the law; and (iv) what it was the
legislature contemplated. (p. 388) The rule against retrospectivity
does not extend to protect from the effect of a repeal, a privilege
G which did not amount to accrued right. (p. 392)
16. Where a statute is passed for the purpose of supplying an
obvious omission in a former statute or to “explain” a former
statute, the subsequent statute has relation back to the time
when the prior Act was passed. The rule against retrospectivity
H is inapplicable to such legislations as are explanatory and
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 795
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
declaratory in nature. A classic illustration is the case of Attorney A
General v. Pougett [(1816) 2 Price 381 : 146 ER 130] (Price at
p. 392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a duty was
imposed upon hides of 9s 4d, but the Act omitted to state that it
was to be 9s 4d per cwt., and to remedy this omission another
Customs Act (53 Geo. 3, c. 105) was passed later in the same
B
year. Between the passing of these two Acts some hides were
exported, and it was contended that they were not liable to pay
the duty of 9s 4d per cwt., but Thomson, C.B., in giving judgment
for the Attorney General, said: (ER p. 134)
“The duty in this instance was, in fact, imposed by the first
Act; but the gross mistake of the omission of the weight, for C
which the sum expressed was to have been payable, occasioned
the amendment made by the subsequent Act: but that had
reference to the former statute as soon as it passed, and they
must be taken together as if they were one and the same Act;”
(Price at p. 392) D
17. Maxwell states in his work on Interpretation of Statutes (12th
Edn.) that the rule against retrospective operation is a presumption
only, and as such it “may be overcome, not only by express words
in the Act but also by circumstances sufficiently strong to displace
it” (p. 225). If the dominant intention of the legislature can be E
clearly and doubtlessly spelt out, the inhibition contained in the
rule against perpetuity becomes of doubtful applicability as the
“inhibition of the rule” is a matter of degree which would “vary
secundum materiam” (p. 226). Sometimes, where the sense of
the statute demands it or where there has been an obvious mistake
in drafting, a court will be prepared to substitute another word or F
phrase for that which actually appears in the text of the Act (p.
231).
18. In a recent decision of this Court in National Agricultural
Coop. Marketing Federation of India Ltd. v. Union of
India [(2003) 5 SCC 23] it has been held G
that there is no fixed formula for the expression of legislative
intent to give retrospectivity to an enactment. Every legislation
whether prospective or retrospective has to be subjected to
the question of legislative competence. The retrospectivity is
liable to be decided on a few touchstones such as: (i) the words H
796 SUPREME COURT REPORTS [2021] 13 S.C.R.

A used must expressly provide or clearly imply retrospective
operation; (ii) the retrospectivity must be reasonable and not
excessive or harsh, otherwise it runs the risk of being struck
down as unconstitutional; (iii) where the legislation is introduced
to overcome a judicial decision, the power cannot be used to
subvert the decision without removing the statutory basis of
B
the decision. There is no fixed formula for the expression of
legislative intent to give retrospectivity to an enactment. A
validating clause coupled with a substantive statutory change
is only one of the methods to leave actions unsustainable under
the unamended statute, undisturbed. Consequently, the absence
C of a validating clause would not by itself affect the retrospective
operation of the statutory provision, if such retrospectivity is
otherwise apparent.
19. The Constitution Bench in Shyam Sunder v. Ram
Kumar [(2001) 8 SCC 24] has held: (SCC p. 49, para 39)
D “Ordinarily when an enactment declares the previous law, it
requires to be given retroactive effect. The function of a
declaratory statute is to supply an omission or to explain a
previous statute and when such an Act is passed, it comes into
effect when the previous enactment was passed. The legislative
E power to enact law includes the power to declare what was
the previous law and when such a declaratory Act is passed,
invariably it has been held to be retrospective. Mere absence
of use of the word ‘declaration’ in an Act explaining what was
the law before may not appear to be a declaratory Act but if
the court finds an Act as declaratory or explanatory, it has to
F be construed as retrospective.” (p. 2487).
20. In Bengal Immunity Co. Ltd. v. State of Bihar [(1955) 2 SCR
603 : AIR 1955 SC 661] , Heydon case [(1584) 3 Co Rep 7a : 76
ER 637] was cited with approval. Their Lordships have said: (SCR
pp. 632-33)
G
“It is a sound rule of construction of a statute firmly established
in England as far back as 1584 when Heydon case [(1584) 3
Co Rep 7a : 76 ER 637] was decided that—
‘… for the sure and true interpretation of all statutes in
general (be they penal or beneficial, restrictive or enlarging
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 797
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
of the common law) four things are to be discerned and A
considered—
1st. What was the common law before the making of the
Act.
2nd. What was the mischief and defect for which the
common law did not provide. B
3rd. What remedy Parliament hath resolved and appointed
to cure the disease of the Commonwealth, and
4th. The true reason of the remedy; and then the office of
all the judges is always to make such construction as shall
C
suppress the mischief, and advance the remedy, and to
suppress subtle inventions and evasions for continuance of
the mischief, and pro privato commodo, and to add force
and life to the cure and remedy, according to the true intent
of the makers of the Act, pro bono publico.’ “
21. In Allied Motors (P) Ltd. v. CIT [(1997) 3 SCC 472] certain D
unintended consequences flowed from a provision enacted by
Parliament. There was an obvious omission. In order to cure the
defect, a proviso was sought to be introduced through an
amendment. The Court held that literal construction was liable to
be avoided if it defeated the manifest object and purpose of the E
Act. The rule of reasonable interpretation should apply.
“A proviso which is inserted to remedy unintended
consequences and to make the provision workable, a proviso
which supplies an obvious omission in the section and is required
to be read into the section to give the section a reasonable F
interpretation, requires to be treated as retrospective in operation
so that a reasonable interpretation can be given to the section
as a whole.” (SCC pp. 479-80, para 13)
22. The State Legislature of Haryana intended to impose a
disqualification with effect from 5-4-1995 and that was done. Any G
person having more than two living children was disqualified
on and from that day for being a member of a municipality.
However, while enacting a proviso by way of an exception
carving out a fact situation from the operation of the newly
introduced disqualification the draftsman’s folly caused the
creation of trouble. A simplistic reading of the text of the proviso H
798 SUPREME COURT REPORTS [2021] 13 S.C.R.

A spelled out a consequence which the legislature had never
intended and could not have intended. It is true that the Second
Amendment does not expressly give the amendment a
retrospective operation. The absence of a provision expressly
giving a retrospective operation to the legislation is not
determinative of its prospectivity or retrospectivity. Intrinsic
B
evidence may be available to show that the amendment was
necessarily intended to have retrospective effect and if the
Court can unhesitatingly conclude in favour of retrospectivity,
the Court would not hesitate in giving the Act that operation
unless prevented from doing so by any mandate contained in
C law or an established principle of interpretation of statutes.”
[emphasis supplied]
82. It could thus be seen, that what is material is, to ascertain the
legislative intent. If legislature by an amendment supplies an obvious
omission in a former statute or explains a former statute, the subsequent
D statute has a relation back to the time when the prior Act was passed.
83. The law laid down in Zile Singh (supra)has been subsequently
followed in various judgments of this Court, including in the case of
Commissioner of Income Tax I, Ahmedabad vs. Gold Coin Health
Food Private Limited33 (three Judges’ Bench).
E
84. This Court recently in the case of State Bank of India vs. V.
Ramakrishnan and another34, had an occasion to consider the question,
as to whether the amendment to sub-section (3) of Section 14 of I&B
Code by Amendment Act 26 of 2018 was clarificatory in nature or not.
By the said amendment, sub-section (3) of Section 14 of I&B Code was
F substituted to provide, that the provisions of sub-section (1) of Section
14 shall not apply to a surety in a contract of guarantee for Corporate
Debtor. Considering the said issue, this Court observed thus:
“30. We now come to the argument that the amendment of 2018,
which makes it clear that Section 14(3), is now substituted to read
G that the provisions of sub-section (1) of Section 14 shall not apply
to a surety in a contract of guarantee for corporate debtor. The
amended section reads as follows:

33
(2008) 9 SCC 622
34
H (2018) 17 SCC 394
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 799
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
“14. Moratorium.—(1)-(2) * * * A
(3) The provisions of sub-section (1) shall not apply to—
(a) such transactions as may be notified by the Central
Government in consultation with any financial sector regulator;
(b) a surety in a contract of guarantee to a corporate debtor.” B
31. The Insolvency Law Committee, appointed by the Ministry
of Corporate Affairs, by its Report dated 26-3-2018, made certain
key recommendations, one of which was:
“(iv) to clear the confusion regarding treatment of assets of
guarantors of the corporate debtor vis-à-vis the moratorium C
on the assets of the corporate debtor, it has been
recommended to clarify by way of an explanation that all
assets of such guarantors to the corporate debtor shall be
outside scope of moratorium imposed under the Code;”
(emphasis supplied) D
32. The Committee insofar as the moratorium under Section 14
is concerned, went on to find:
“5.5. Section 14 provides for a moratorium or a stay on
institution or continuation of proceeding, suits, etc. against the
corporate debtor and its assets. There have been contradicting E
views on the scope of moratorium regarding its application to
third parties affected by the debt of the corporate debtor, like
guarantors or sureties. While some courts have taken the view
that Section 14 may be interpreted literally to mean that it only
restricts actions against the assets of the corporate debtor, a F
few others have taken an interpretation that the stay applies
on enforcement of guarantee as well, if a CIRP is going on
against the corporate debtor.”
***
“5.7. The Allahabad High Court subsequently took a differing G
view in Sanjeev Shriya v. SBI [Sanjeev Shriya v. SBI, 2017
SCC OnLine All 2717 : (2018) 2 All LJ 769 : (2017) 9 ADJ
723] , by applying moratorium to enforcement of guarantee
against personal guarantor to the debt. The rationale being that
if a CIRP is going on against the corporate debtor, then the H
800 SUPREME COURT REPORTS [2021] 13 S.C.R.

A debt owed by the corporate debtor is not final till the resolution
plan is approved, and thus the liability of the surety would also
be unclear. The Court took the view that until debt of the
corporate debtor is crystallised, the guarantor’s liability may
not be triggered. The Committee deliberated and noted that
this would mean that surety’s liabilities are put on hold if a
B
CIRP is going on against the corporate debtor, and such an
interpretation may lead to the contracts of guarantee being
infructuous, and not serving the purpose for which they have
been entered into.
5.8. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan,
C 2018 SCC OnLine Nclat 384] , Nclat took a broad interpretation
of Section 14 and held that it would bar proceedings or actions
against sureties. While doing so, it did not refer to any of the
above judgments but instead held that proceedings against
guarantors would affect the CIRP and may thus be barred by
D moratorium. The Committee felt that such a broad interpretation
of the moratorium may curtail significant rights of the creditor
which are intrinsic to a contract of guarantee.
5.9. A contract of guarantee is between the creditor, the principal
debtor and the surety, whereunder the creditor has a remedy
E in relation to his debt against both the principal debtor and the
surety (National Project Construction Corpn. Ltd. v. Sadhu
and Co. [National Project Construction Corpn.
Ltd. v. Sadhu and Co., 1989 SCC OnLine P&H 1069 : AIR
1990 P&H 300] ). The surety here may be a corporate or a
natural person and the liability of such person goes as far the
F liability of the principal debtor. As per Section 128 of the
Contract Act, 1872, the liability of the surety is co-extensive
with that of the principal debtor and the creditor may go against
either the principal debtor, or the surety, or both, in no particular
sequence (Chokalinga Chettiar v. Dandayuthapani
G Chettiar [Chokalinga Chettiar v. Dandayuthapani Chettiar,
1928 SCC OnLine Mad 236 : AIR 1928 Mad 1262] ). Though
this may be limited by the terms of the contract of guarantee,
the general principle of such contracts is that the liability of the
principal debtor and the surety is co-extensive and is joint and
several (Bank of Bihar Ltd. v. Damodar Prasad [Bank of
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 801
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297] ). The A
Committee noted that this characteristic of such contracts i.e.
of having remedy against both the surety and the corporate
debtor, without the obligation to exhaust the remedy against
one of the parties before proceeding against the other, is of
utmost importance for the creditor and is the hallmark of a
B
guarantee contract, and the availability of such remedy is in
most cases the basis on which the loan may have been
extended.
5.10. The Committee further noted that a literal interpretation
of Section 14 is prudent, and a broader interpretation may not
be necessary in the above context. The assets of the surety C
are separate from those of the corporate debtor, and
proceedings against the corporate debtor may not be seriously
impacted by the actions against assets of third parties like
sureties. Additionally, enforcement of guarantee may not have
a significant impact on the debt of the corporate debtor as the D
right of the creditor against the principal debtor is merely shifted
to the surety, to the extent of payment by the surety. Thus,
contractual principles of guarantee require being respected even
during a moratorium and an alternate interpretation may not
have been the intention of the Code, as is clear from a plain
reading of Section 14. E

5.11. Further, since many guarantees for loans of corporates
are given by its promoters in the form of personal guarantees,
if there is a stay on actions against their assets during a CIRP,
such promoters (who are also corporate applicants) may file
frivolous applications to merely take advantage of the stay and F
guard their assets. In the judgments analysed in this relation,
many have been filed by the corporate applicant under Section
10 of the Code and this may corroborate the above apprehension
of abuse of the moratorium provision. The Committee
concluded that Section 14 does not intend to bar actions against G
assets of guarantors to the debts of the corporate debtor and
recommended that an explanation to clarify this may be inserted
in Section 14 of the Code. The scope of the moratorium may
be restricted to the assets of the corporate debtor only.”

H
802 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 33. The Report of the said Committee makes it clear that the
object of the amendment was to clarify and set at rest what the
Committee thought was an overbroad interpretation of Section
14. That such clarificatory amendment is retrospective in nature,
would be clear from the following judgments”
B 85. In the case of B.K. Educational Services Private Limited
vs. Parag Gupta and Associates (supra), this Court considered the
question, as to whether the 2018 amendment which inserted Section
238A to the I&B Code was clarificatory in nature or not. After considering
various earlier judgments of this Court, this Court observed thus:
C “26. In the present case also, it is clear that the amendment of
Section 238-A would not serve its object unless it is construed as
being retrospective, as otherwise, applications seeking to resurrect
time-barred claims would have to be allowed, not being governed
by the law of limitation.

D 27. We may also refer to a recent decision of this Court in SBI v. V.
Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394] ,
where this Court, after referring to the selfsame Insolvency Law
Committee Report, held that the amendment made to Section 14
of the Code, in which the moratorium prescribed by Section 14
was held not to apply to guarantors, was held to be clarificatory,
E and therefore, retrospective in nature, the object being that an
overbroad interpretation of Section 14 ought to be set at rest by
clarifying that this was never the intention of Section 14 from the
very inception.
86. As discussed hereinabove, one of the principal objects of I&B
F Code is, providing for revival of the Corporate Debtor and to make it a
going concern. I&B Code is a complete Code in itself. Upon admission
of petition under Section 7, there are various important duties and functions
entrusted to RP and CoC. RP is required to issue a publication inviting
claims from all the stakeholders. He is required to collate the said
G information and submit necessary details in the information memorandum.
The resolution applicants submit their plans on the basis of the details
provided in the information memorandum. The resolution plans undergo
deep scrutiny by RP as well as CoC. In the negotiations that may be
held between CoC and the resolution applicant, various modifications
may be made so as to ensure, that while paying part of the dues of
H financial creditors as well as operational creditors and other stakeholders,
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 803
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
the Corporate Debtor is revived and is made an on-going concern. After A
CoC approves the plan, the Adjudicating Authority is required to arrive
at a subjective satisfaction, that the plan conforms to the requirements
as are provided in sub-section (2) of Section 30 of the I&B Code. Only
thereafter, the Adjudicating Authority can grant its approval to the plan.
It is at this stage, that the plan becomes binding on Corporate Debtor, its
B
employees, members, creditors, guarantors and other stakeholders
involved in the resolution Plan. The legislative intent behind this is, to
freeze all the claims so that the resolution applicant starts on a clean
slate and is not flung with any surprise claims. If that is permitted, the
very calculations on the basis of which the resolution applicant submits
its plans, would go haywire and the plan would be unworkable. C
87. We have no hesitation to say, that the word “other stakeholders”
would squarely cover the Central Government, any State Government
or any local authorities. The legislature, noticing that on account of
obvious omission, certain tax authorities were not abiding by the mandate
of I&B Code and continuing with the proceedings, has brought out the D
2019 amendment so as to cure the said mischief. We therefore hold, that
the 2019 amendment is declaratory and clarificatory in nature and
therefore retrospective in operation.
88. There is another reason, which persuades us to take the said
view. Sub-section (10) of Section 3 of the I&B Code defines “creditor” E
thus:
“(10) “creditor” means any person to whom a debt is owed and
includes a financial creditor, an operational creditor, a secured
creditor, an unsecured creditor and a decree-holder;”
89. Sub-sections (20) and (21) of Section 5 of the I&B Code F
define “operational creditor” and “operational debt” respectively as such:
(20) “operational creditor” means a person to whom an operational
debt is owed and includes any person to whom such debt has
been legally assigned or transferred;
G
(21) “operational debt” means a claim in respect of the provision
of goods or services including employment or a debt in respect of
the payment of dues arising under any law for the time being in
force and payable to the Central Government, any State
Government or any local authority;
H
804 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 90. “Creditor” therefore has been defined to mean ‘any person
to whom a debt is owed and includes a financial creditor, an operational
creditor, a secured creditor, an unsecured creditor and a decree-holder’.
“Operational creditor” has been defined to mean a person to whom
an operational debt is owed and includes any person to whom such debt
B has been legally assigned or transferred.
“Operational debt” has been defined to mean a claim in respect
of the provision of goods or services including employment or a debt in
respect of the payment of dues arising under any law for the time being
in force and payable to the Central Government, any State Government
C or any local authority.
91. It is a cardinal principle of law, that a statute has to be read as
a whole. Harmonious construction of sub-section (10) of Section 3 of
the I&B Code read with sub-sections (20) and (21) of Section 5 thereof
would reveal, that even a claim in respect of dues arising under any law
D for the time being in force and payable to the Central Government, any
State Government or any local authority would come within the ambit of
‘operational debt’. The Central Government, any State Government or
any local authority to whom an operational debt is owed would come
within the ambit of ‘operational creditor’ as defined under sub-section
(20) of Section 5 of the I&B Code. Consequently, a person to whom a
E debt is owed would be covered by the definition of ‘creditor’ as defined
under sub-section (10) of Section 3 of the I&B Code. As such, even
without the 2019 amendment, the Central Government, any State
Government or any local authority to whom a debt is owed, including the
statutory dues, would be covered by the term ‘creditor’ and in any case,
F by the term ‘other stakeholders’ as provided in sub-section (1) of Section
31 of the I&B Code.
92. The Division Bench of the Rajasthan High Court in D.B. Civil
Writ Petition No.9480 of 2019 in the case of Ultra Tech Nathdwara
Cement Ltd. vs. Union of India & Ors., by judgment and order dated
G 7.4.2020 has taken a view, that the demand notices, issued by the Central
Goods and Service Tax Department, for a period prior to the date on
which NCLT has granted its approval to the resolution plan, are not
permissible in law. While doing so, the Rajasthan High Court has relied
on the judgment of this Court in the case of Committee of Creditors of
Essar Steel India Limited through Authorised Signatory (supra).
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 805
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
93. The Calcutta High Court in the case of Akshay Jhunjhunwala A
& Anr. vs. Union of India through the Ministry of Corporate Affairs
& Ors.35 has also taken a view, that the claim of operational creditor will
also include a claim of a statutory authority on account of money
receivable pursuant to an imposition by a statute. We are in agreement
with the views taken by these Courts.
B
94. Therefore, in our considered view, the aforesaid provisions
leave no manner of doubt to hold, that the 2019 amendment is declaratory
and clarificatory in nature. We also hold, that even if 2019 amendment
was not effected, still in light of the view taken by us, the Central
Government, any State Government or any local authority would be bound
by the resolution plan, once it is approved by the Adjudicating Authority C
(i.e. NCLT).
CONCLUSION
95. In the result, we answer the questions framed by us as under:
(i) That once a resolution plan is duly approved by the D
Adjudicating Authority under sub-section (1) of Section 31,
the claims as provided in the resolution plan shall stand frozen
and will be binding on the Corporate Debtor and its
employees, members, creditors, including the Central
Government, any State Government or any local authority, E
guarantors and other stakeholders. On the date of approval
of resolution plan by the Adjudicating Authority, all such
claims, which are not a part of resolution plan, shall stand
extinguished and no person will be entitled to initiate or
continue any proceedings in respect to a claim, which is not
part of the resolution plan; F
(ii) 2019 amendment to Section 31 of the I&B Code is
clarificatory and declaratory in nature and therefore will be
effective from the date on which I&B Code has come into
effect;
G
(iii) Consequently all the dues including the statutory dues owed
to the Central Government, any State Government or any
local authority, if not part of the resolution plan, shall stand
extinguished and no proceedings in respect of such dues

35
2018 SCC OnLine Cal. 142 H
806 SUPREME COURT REPORTS [2021] 13 S.C.R.

A for the period prior to the date on which the Adjudicating
Authority grants its approval under Section 31 could be
continued.
96. In the light of what has been held by us hereinabove, we now
proceed to decide individual matters.
B CIVIL APPEAL NO.8129 OF 2019
97. In the said appeal, admittedly, the Company Petition filed by
the SBI under Section 7 of I&B Code in respect of OMML/Corporate
Debtor came to be admitted on 3.8.2017. Correspondingly, order of
moratorium and appointment of IRP also came to be passed on the said
C date. By a public notice, RP invited claims from the creditors. The last
date for submission of such claims was 18.8.2017. RP also invited EOI
as well as resolution plans. In response to the said invitation, both GMSPL
and EARC had submitted their resolution plans. In the 8 th meeting of
CoC held on 14.3.2018, the resolution plan submitted by EARC was
D found to be most competitive and as such, it was declared as H1 bidder.
However, during negotiation, the resolution plan of EARC was not found
to be satisfactory by CoC and as such, in the 9th meeting of CoC held on
31.3.2018, resolution plan of EARC came to be rejected.
98. Thereafter, since GMSPL was H2 bidder, negotiations were
E held with it. However, the resolution plan submitted by GMSPL was
also not found to be satisfactory and therefore in the 10th meeting of
CoC held on 3.4.2018, it was decided to annul the existing proceedings
and initiate a fresh process for invitation for submission of resolution
plan. This was restricted only to such entities, which had submitted their
EOI for submission of resolution plan. In response to the fresh invitation
F for submission of resolution plan, three bidders, namely, GMSPL, EARC
and SIFL submitted their resolution plans. In the 11th meeting of CoC
held on 13.4.2018, the resolution plan submitted by GMSPL was found
to be most competitive and as such, CoC declared it as H1 bidder. After
holding several rounds of negotiations, in the 12th meeting of CoC held
G on 21.4.2018, CoC unanimously decided to convene a meeting of the
CoC on 25.4.2018 for voting on the resolution plan proposed by GMSPL.
In the meeting of the CoC held on 25.4.2018, CoC being satisfied that
the resolution plan submitted by GMSPL meets all the requirements under
sub-section (2) of Section 30 of I&B Code, placed the same for voting.
The said resolution plan of GMSPL was approved by more than 89.23%
H of voting share of financial creditors of the Corporate Debtor. Accordingly,
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 807
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
an application being CA (IB) No.402/KB/2018came to be filed by RP A
for grant of approval to the resolution plan submitted by GMSPL before
the NCLT. EARC filed application being CA (IB) No.398/KB/2018,
challenging the approval granted by CoC to the resolution plan submitted
by GMSPL. It also filed CA (IB) No. 470/KB/2018, challenging the
decision of RP in not admitting its claim. One Application being CA(IB)
B
No.509/KB/2018 came to be filed by the District Mining Officer,
Department of Mining and Geology, Jharkhand challenging the non-
admission of its claim to the tune of Rs.93,51,91,724/- and Rs.760.51
crores.
99. By common order dated 22.6.2018, application being CA(IB)
No.402/KB/2018 filed by RP, came to be allowed thereby, granting C
approval under the provisions of Section 31(1) of the I&B Code and
declaring that the same will be binding on the Corporate Debtor, its
employees, members, creditors, guarantors and other stakeholders
involved in the resolution Plan. Application being CA (IB) No.398/KB/
2018 filed by EARC challenging the approval granted by CoC to the D
resolution plan submitted by GMSPL was dismissed. Vide same order
dated 22.6.2018, application being CA (IB) No.470/KB/2018 filed by
EARC challenging the decision of the RP in not admitting its claim and
application being CA(IB) No.509/KB/2018 filed by the District Mining
Officer, Department of Mining and Geology, Jharkhand challenging the
non-admission of its claim were also dismissed with cost of Rs.1,00,000/ E
- each.
100. While allowing the application filed by RP, granting approval
to the resolution plan of GMSPL (i.e. CA No.402/KB/2018) and rejecting
the application of EARC challenging the grant of approval to the resolution
plan of GMSPL by CoC (i.e. CA No.398/KB/2018), NCLT found, that F
RP had followed the entire procedure as required under the I&B Code
and the Regulations. It also found, that CoC after applying its mind found,
that the resolution plan submitted by GMSPL was in conformity with the
requirements under Section 30(2) of the I&B Code.
101. Insofar as the application filed by EARC with regard to non- G
admission of its claim submitted to RP is concerned, NCLT found, that
the Corporate Debtor had executed guarantee securing loan received
by APNRL, which had been given by India Infrastructure Finance
Company Limited (“IIFCL” for short). The corporate guarantee executed
by the Corporate Debtor was in favour of IIFCL. The Corporate Debtor H
808 SUPREME COURT REPORTS [2021] 13 S.C.R.

A also owned share in APNRL, which was pledged with IIFCL to secure
the loan given by IIFCL to APNRL. IIFCL assigned its rights to EARC.
EARC being the assignee of the aforesaid submitted its claims to the
RP.
102. NCLT found, that by email dated 6.1.2018,EARC had
B submitted its claim in Form ‘C’ for an amount of Rs.648,89,62,395/-. In
response to the said email, RP sought a clarification, as to whether the
corporate guarantee had been invoked by the applicant. RP had not
received any response till 21.2.2018 from EARC. Despite repeated
requests made by RP, EARC did not respond to the query made by RP.
From the record placed before NCLT, it was clear, that EARC had not
C invoked the corporate guarantee. NCLT therefore posed a question to
itself, as to whether an uninvoked corporate guarantee could be considered
as matured claim of the applicant. NCLT found, that once the moratorium
was applied under Section 14 of I&B Code, EARC was prevented from
invoking the corporate guarantee. NCLT further found, that the OMML’s
D guarantee had not been invoked by EARC till the date of completion of
CIRP process and once the moratorium was imposed, it could not invoke
the corporate guarantee. NCLT therefore found, that there is no illegality
or irregularity in not admitting the claim of EARC.
103. NCLT found, that the entire information was uploaded in the
E virtual data room to which EARC had access since it was also one of
the resolution applicants. NCLT found, that the information with regard
to claim of all financial creditors inclusive of EARC’s claim was available
in the virtual data room. The record also revealed, that the claim of
EARC was not admitted for the reason that the corporate guarantee in
question was uninvoked as on date.
F
104. Insofar as the second objection of EARC with regard to the
shares owned by the Corporate Debtor in APNRL, which were pledged
with IIFCL to secure the loan given by IIFCL to APNRL and which
were assigned to EARC being invoked on 30.4.2018 is concerned, NCLT
found the same claim also to be without merit. NCLT found, that on
G 30.4.2018, the moratorium was in force and therefore invocation of pledge
by EARC on 30.4.2018 was not permissible in law. It was further found,
that RP had rightly not admitted the said claim.
105. It was sought to be argued on behalf of EARC, that CIRP
process was complete on 29.4.2018 and therefore, invocation of pledge
H by EARC on 30.4.2018 was legal and valid. However, NCLT found,
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 809
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
that unless the application filed by RP under Section 31(1) for approval A
of the plan was decided and an order either approving or rejecting the
resolution plan was passed, the moratorium declared under Section 14
would continue to have force. As such, invocation of pledge on 30.4.2018
was held to be not permissible in law. It would be relevant to refer to the
observations made by NCLT with regard to conduct of EARC.
B
“It appears to us that it is a deliberate attempt to stage
mange an objection against the approval of a resolution plan other
than the plan submitted by the resolution applicant. We also found
that CA 398 of 2018 filed for rejection of the resolution plan is
liable to be dismissed since the very same applicant not at all
succeeds in proving its contention and that the applicant approaches C
the Bench without any clean hand. Instances of challenging
resolution plan by unsuccessful resolution applicant is at the
increase. Filing like petition is also one among the reason for the
delay in approving the resolution plan passed by the CoC in
compliance of the provisions of the Code. This is a unique case in D
which the applicant herein filed the application without any valid
grounds. Dismissing like petition without cost may encourage the
applicant like the applicant to file like petition. It would also amount
to allowing the applicant to abuse the process of the Tribunal as
well as deliberately delaying the completion of CIRP process.
Accordingly, we hold that this application is liable to be dismissed E
with costs of Rs.1,00,000/-. Awarding cost of Rs.1,00,000/- in the
peculiar nature and circumstances of the case in hand is found
reasonable.”
106. Insofar as application being CA No.509/KB/2018 filed by
the District Mining Officer is concerned, NCLT found, that RP had sought F
clarification from the said applicant with regard to its claim made in
Form ‘B’ since the information supplied therein was found to be
inadequate. It was found, that in spite of the said request, the District
Mining Officer had failed to place on record any supportive document
or affidavit as required under the Regulations. NCLT found no merit in G
the contentions raised on behalf of the District Mining Officer with regard
to the claim on the basis of Section 25 of the Mines and Mineral
(Development and Regulation) Amendment Act, 1972.It was found, that
in view of the provisions of Section 238 of I&B Code, the provisions of
I&B Code have an overriding effect over any other law.
H
810 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 107. It was therefore found, that no error was committed by RP
in not admitting the claim of the District Mining Officer since it was not
supported by any document or affidavit. NCLT therefore rejected the
said application with cost of Rs.1,00,000/-.
108. The order dated 22.6.2018 passed by NCLT was challenged
B by way of four appeals before NCLAT; two appeals being Company
Appeal (AT) (Insolvency) Nos.437 and 444 of 2018 filed by EARC; one
appeal being Company Appeal (AT) (Insolvency) No. 438 of 2018 filed
by one Deepak Singh and one appeal being Company Appeal (AT)
(Insolvency) No. 500 of 2018 filed by Sundargarh Mines & Transport
Workers Union.
C
109. Vide the impugned judgment and order dated 23.4.2019,
NCLAT found, that as no ground was made out in terms of Section
61(3) of I&B Code, no relief could be granted in the appeals. However,
while doing so, NCLAT observed thus:
“28. However, we make it clear that the rejection of the claim for
D the purpose of collating the claim and making it part of the
‘Resolution Plan’ will not affect the right of the Appellant-
‘Edelweiss Asset Reconstruction Limited’ to invoke the Bank
Guarantee against the ‘Corporate Debtor’ in case the ‘Principal
Borrower’ failed to pay the debt amount, the ‘Moratorium’ period
E having come to an end.
42. From the aforesaid provisions, it is clear that after period of
Moratorium it is open to the person to move before a Civil Court
or to move an application before the Court of Competent
Jurisdiction against the ‘Corporate Debtor’.
F 43. In the present case, since it is not possible either for the
Adjudicating Authority or for this Appellate Tribunal to give any
specific finding, we are of the view that the Appellant may move
before the Civil Court or Court of Competent Jurisdiction and
may file an application before the Labour Court for appropriate
relief in favour of the concerned workmen or against the
G
‘Corporate Debtor’ if they have actually worked and have not
been taken care in the ‘Resolution Plan’ due to lack of knowledge
and non-filing of the claim within time.
51. In the present case, as no ground has been made out in terms
of sub-section (3) of Section 61 of the ‘I&B Code’ and the decision
H of the ‘Resolution Professional’ was not challenged by the
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 811
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
Appellant, no relief can be granted. However, this order will not A
come in the way of the Appellant to move before appropriate
forum for appropriate relief if the claim is not barred by limitation.
52. In so far dues of State of Jharkhand is concerned, we hold
that the statutory dues shall be payable to the State of Jharkhand
in terms of existing law which comes within the meaning of B
‘operational debt’ as defined in Section 5(20) read with Section
5(21) and held in “Pr. Director Company Appeal (AT) (Insolvency)
Nos. 437, 438, 444 & 500 of 2018 General of Income Tax (Admn.
& TPS) Vs. M/s. Spartek Ceramics India Ltd. & Anr.- Company
Appeal (AT) (Insolvency) No. 160 of 2017”.
C
Except the aforesaid observations, in absence of any appeal
filed by the State of Jharkhand, no order is passed.”
110. We find, that the aforesaid observations are beyond the scope
of the powers available with NCLAT under sub-section (3) of Section
61 of I&B Code. We also find, that the said observations run totally
D
contrary to the consistent view taken by this Court in the line of judgments
starting from K. Sashidhar (supra) to Kalpraj Dharamshi (supra).
111. NCLAT has categorically found, that no ground as is available
under sub-section (3) of Section 61 of I&B Code has been made out
and has also categorically found, that the resolution plan submitted by
GMSPL was a better offer than the other two resolution applicants, E
including EARC and that the Adjudicating Authority has rightly approved
the resolution plan of GMSPL. After coming to such finding, the only
option available with NCLAT was to dismiss the appeals. In our view,
the observations made in the aforesaid paragraphs, if permitted to remain,
would totally frustrate the object of I&B Code of revival of a Corporate F
Debtor and to resurrect it as a going concern. As held by this Court, the
successful resolution applicant cannot be flung with surprise claims which
are not part of the resolution plan.
112. It will also be relevant to refer to the conduct of EARC.
Clause 2.1.3 of the resolution plan submitted by EARC reads as under:
G
“2.1.3 Financial Creditors other than Identified Financial Creditors
(i) Liabilities
We have been informed by the RP that other than the
Identified Financial Creditors, there are no other Financial
Creditors of the Company, whether secured or unsecured. H
812 SUPREME COURT REPORTS [2021] 13 S.C.R.

A Other than the Assigned Debt, any and all dues to, liabilities
or obligations payable to, claims, counter claims, demands,
actions or penalties made or imposed by (including but not
limited to all interests, damages, losses, expenses and third
party claims), and any right, title, interest enjoyed by, any
actual or potential Financial Creditor or in connection with
B
any Financial Debt, whether, or not claimed, whether or
not filed, whether or not crystallised, whether or not accrued,
whether or not admitted, whether or not notional, whether
or not known, whether due or contingent, whether or not
disputed, present or future, whether or not being adjudicated
C in any proceeding, whether or not decreed, whether or not
reflected in the financial statements of the Company, or
whether or not reflected in any record, document, statement,
statutory or otherwise, arising prior to or after the Effective
Date, but pertaining to a period prior to the Effective Date,
or arising in connection with the Assignment or acquisition
D
of shares of the Company by the Investors or conversion
of the Conversion Debt into equity or restructuring of the
Assigned Debt or in any other manner as a result of or in
connection with this Plan, shall be deemed to have been
irrevocably waived and permanently extinguished and
E written off in full with effect from the Effective Date. To
give effect to such waiver and extinguishment, any contract,
agreement, deed or document; whether oral or written,
express or implied, statutory or otherwise, pursuant to which
any such dues, liabilities, obligations, claims, counter claims,
demands, actions, penalties, right, title or interest is claimed
F
(other than as specifically mentioned herein) shall stand
modified with effect from the Effective Date without any
further act or deed, and approval of this Plan by NCLT
shall be deemed to be sufficient notice which may be
required to be given to any Person for such matter and no
G further notice shall be required to be given. “
113. It will also be relevant to refer to similar provisions made in
the resolution plan submitted by GMSPL, which read as under:
“7. Withdrawal of litigations initiated by the Financial Creditors
against OMML, issue no-dues certificate(s) in favour of OMML
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 813
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
and release their respective charges on the securities in full and A
complete satisfaction of all debts owed to the Financial Creditors
by OMML / the respective SPVs as the case may be, including
all guarantees which may have been provided to the Financial
Creditors, for credit facilities availed by OMML.
8. Extinguishment and waiver of all dues to the Incumbent B
Promoter Group by OMML.
9. Directions to ensure that the Proposed Merger application shall
stand withdrawn. Relinquishment of corporate guarantee issued
by OMML in favour of or on behalf of any of its subsidiaries,
associates, group companies or any third party. Directions to the C
effect that the guarantees provided by any and all members of
Incumbent Promoter Group or their respective promoters or any
person associated with the Incumbent Promoter Group, may
continue with the Financial Creditors. However, the same shall
not result in any liability towards OMML or the Resolution
Applicants.” D

114. It is thus clear, that according to the resolution plan submitted
by EARC itself, had it been a successful applicant, then in that event,
the claims made by it would have been irrevocably waived and
permanently extinguished and written off in full with effect from the
Effective Date. Had the resolution plan of EARC been approved, then E
all such debts would have stood extinguished without any further act or
deed and approval of the said plan by NCLT would have been a sufficient
notice required to be given to any person for such matter. Undisputedly,
the resolution plan submitted by EARC was on the basis of the information
memorandum submitted by RP wherein, it was specifically clarified, that F
the claims of EARC were not admitted by RP. It is thus clear, that
EARC is trying to blow hot and cold at the same time. According to it,
had its resolution plan been approved by CoC and NCLT, then the claims,
which are now insisted by EARC would have stood extinguished.
However, on its failure to become a successful resolution applicant and
approval of other applicant as a successful resolution applicant, its claim G
would survive. A party cannot be permitted to apply two different
yardsticks.
115. Shri Bhushan, learned counsel appearing on behalf of EARC,
strongly relying on the judgment of NCLAT dated 14.8.2018 passed in
H
814 SUPREME COURT REPORTS [2021] 13 S.C.R.

A Export Import Bank of India vs. Resolution Professional JEKPL
Private Limited36, submits, that NCLAT itself in the said case had held,
that invocation of corporate guarantee has no nexus with filing of the
claim pursuant to public announcement made under Section 13(1)(b)
read with Section 15(1)(c) of the I&B Code and also for collating the
claim under Section 18(1)(b) or for updating claim under Section 25(2)(e).
B
He submits, that Civil Appeal challenging the said judgment and order
has been dismissed by this Court vide order dated 23.1.2019.
116. He submits, that NCLAT itself in the said case had directed
EXIM Bank and Axis Bank to be treated as ‘financial creditors’ and had
further directed them to be given representation on CoC. He submits,
C that, however, in the present case, NCLAT has taken a contrary view.
He therefore submits, that in the alternative this Court should direct RP/
CoC to treat EARC as a ‘financial creditor’ and give it representation
on CoC and take a decision in accordance with law.
117. We find, that the said case, on facts, would not be applicable
D to the case at hand. No doubt, that the appeal filed against the judgment
and order of NCLAT dated 14.8.2018 has been dismissed by this Court
on 23.1.2019. However, it is a settled law, that dismissal of a Special
Leave Petition/Appeal does not amount to affirmation of the view taken
in the judgment impugned in the Special Leave Petition/Appeal. It will
E also be relevant to refer to the order passed by this Court dated 23.1.2019
while dismissing the appeal, which reads thus:
“Civil Appeal No.10134/2018
We have heard learned counsel for the parties and perused
the relevant material on record.
F
The Civil Appeal is dismissed.
It will be open for the appellant to urge all points as may be
available to it in law before the appropriate forum, if so advised.”
118. It will thus be clearly seen, that this Court while dismissing
G the appeal has reserved the liberty to the appellant to urge all points as
may be available to it in law before the appropriate forum.
119. It is to be noted, that in the appeal before NCLAT, the EXIM
Bank as well as Axis Bank had taken steps immediately after the claim

36
H Company Appeal (AT) (Insolvency) No.304 of 2017 and connected matters.
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 815
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
of said Banks on the basis of corporate guarantee came to be rejected A
by RP/CoC. After rejection of the claim, said Banks had filed an
application under Section 60(5) before NCLT. On NCLT rejecting the
said claim, those Banks had approached NCLAT in appeals, which were
allowed and the order, as stated hereinabove, was passed.
120. In the present case, the claim of EARC was rejected on B
22.1.2018. Instead of challenging the said rejection, EARC participated
in the proceedings and was one of the resolution applicants. Not only
that, in the first round, it was a successful bidder being ranked H1 bidder.
However, since in the negotiations it failed to satisfy CoC, fresh bids
were invited from the resolution applicants, which had submitted their
EOI. In the 12th meeting of CoC held on 25.4.2018, the resolution plan C
of GMSPL was approved by 89.23% of the voting shares. Only thereafter,
EARC filed two applications; one challenging the approval of resolution
plan of GMSPL by CoC and another challenging rejection of its claims
by RP/CoC.
121. It could thus be clearly seen, that EARC was taking chances. D
After rejection of its claim, it did not choose to challenge the same by an
application under Section 60(5)but waited till the decision of CoC. During
this period, it was actually pursuing its resolution plan. Only after its
resolution plan was not approved and the resolution plan of GMSPL was
approved, it filed the aforesaid two applications. Apart from that, as E
already observed hereinabove, in the resolution plan of EARC itself, it
has provided for extinguishment of all claims not forming part of resolution
plan.
122. Even otherwise, if for the sake of argument, it is held, that
EARC was entitled to be treated as a ‘financial creditor’ and entitled for F
a participation in CoC, still its share was about 9% and as such, the
resolution plan of GMSPL would have been passed by a majority of
80%, which is much above the statutory requirement.
123. We are therefore of the considered view, that the observation
made by NCLAT giving liberty to EARC to take recourse to such G
proceedings as available in law for raising its claims is totally
unsustainable.
124. Insofar as, the observation made with regard to claim of the
Jharkhand Government is concerned, it is to be noted, that the State of
Jharkhand has not even appealed against the order passed by NCLT.
H
816 SUPREME COURT REPORTS [2021] 13 S.C.R.

A Insofar as, the claims of Labour and Workmen are concerned, RP has
specifically stated before NCLAT, that whatever claims were received
from the workmen were duly considered in the resolution plan. Despite
that, observing that a liberty is available to the workmen to raise their
claims before a Civil Court or Labour Court, in our view, is totally in
conflict with the provisions of I&B Code. The same would equally apply
B
to the observation made in the appeal of Mr. Deepak Singh, claiming to
be ‘operational creditor’.
125. We are therefore of the considered view, that the appeal
deserves to be allowed by expunging the paragraphs nos. 28, 42, 43, 51
and 52 from the judgment of NCLAT dated 23.4.2019. It is ordered
C accordingly. The judgment and order passed by NCLT dated 22.6.2018
is upheld. No costs.
CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE
PETITION (CIVIL) NO.11232 OF 2020
D 126. The present appeal arises out of the judgment and order
passed by the Division Bench of the Allahabad High Court dated 6.7.2020
thereby, dismissing the petition filed by the appellant on the ground of
availability of alternate remedy. The petition being Civil Misc. Writ Petition
(Tax) No.354 of 2020 came to be filed seeking following reliefs:

E “i. Issue a writ, order or direction in the nature of certiorari
quashing the order dated 30.01.2020 passed by the Additional
Commissioner Grade – 2 (Appeal) rejecting the appeal preferred
by the petitioner in respect of Assessment Year 2015-16 (U.P. V
A T) and affirming a demand of Rs. 232.60 Lacs raised on the
petitioner;
F
ii. Issue a writ, order or direction in the nature of certiorari quashing
the Communications/orders of the Joint Commissioner (Corporate),
Ghaziabad holding that the proceedings in the State of U.P. would
remain unaffected irrespective of the Resolution Plan of the
petitioner being approved by the NCLT under the Insolvency and
G Bankruptcy Code as the NCLT order does not specifically prohibit
these proceedings;
iii. Issue a writ, order or direction in the nature of mandamus
directing refund of the amount which the petitioner is entitled to
as a result of orders passed by the respondents;
H
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 817
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
iv. Issue a declaration that all proceedings pending before different A
authorities (assessing authority, first appellate authority or
Commercial Tax Tribunal, Ghaziabad Bench) in respect of
transactions entered into by the petitioner prior to the Transfer
Date involving a consolidated amount of Rs. 769.73 Lacs stand
abated in terms of the Resolution Plan approved by the NCLT
B
under the Insolvency and Bankruptcy Code, 2016;
v. Issue a writ, order or direction in the nature of mandamus
directing the Respondents to refund Rs. 248.92 Lacs/- deposited
by the petitioner under protest in these proceedings and also to
return the bank guarantee submitted for Rs. 16.31 Lacs/-.
C
vi. Issue a writ, order or direction in the nature of mandamus
restraining the Respondents from passing any orders including
penalty orders, raising any further demands, imposing any liability
or taking any coercive steps including continuing with pending
assessments / proceedings / litigation / appeals / revisions in respect
of period prior to Transfer Date.” D
127. The High Court found, that the appellant has an alternative
efficacious remedy of filing the Second Appeal and as such, deemed it
fit to not to entertain the said petition. The basic grievance of the appellant
in the writ petition was, that after the resolution application was approved
by the Adjudicating Authority and the management of the Corporate E
Debtor was transferred to the resolution applicant, all the claims stood
extinguished and the proceedings in respect thereof could not continue.
128. The main ground raised on behalf of the respondent is, with
regard to availability of alternate remedy. The second ground raised is,
since the transfer date is prior to 2019 amendment to Section 31 of I&B F
Code, the said amendment would not be applicable to the debts owed to
the State Government or Central Government.
129. As held by this Court in catena of cases including in the
cases of Babu Ram Prakash Chandra Maheshwari vs. Antarim Zilla
Parishad Muzaffar Nagar37, Whirlpool Corporation vs. Registrar G
of Trade Marks, Mumbai & Ors.38, Nivedita Sharma vs. Cellular
Operators Association of India & Ors. 39 , Embassy Property

37
(1969) 1 SCR 518
38
(1998) 8 SCC 1
39
(2011) 14 SCC 337 H
818 SUPREME COURT REPORTS [2021] 13 S.C.R.

A Developments Pvt. Ltd. vs. State of Karnataka and Others40 and
recently in the case of Kalpraj Dharamshi (supra), that non-exercise
of jurisdiction under Article 226 is a rule of self-restraint. It has been
consistently held, that the alternate remedy would not operate as a bar in
at least three contingencies, namely, (1) where the writ petition has been
filed for the enforcement of any of the Fundamental Rights; (2) where
B
there has been a violation of the principle of natural justice; and (3)
where the order or proceedings are wholly without jurisdiction or the
vires of an Act is challenged.
130. In the foregoing paragraphs, we have held, that 2019
amendment to Section 31 of I&B Code is clarificatory and declaratory
C in nature and therefore will have a retrospective operation. As such,
when the resolution plan is approved by NCLT, the claims, which are
not part of the resolution plan, shall stand extinguished and the proceedings
related thereto shall stand terminated. Since the subject matter of the
petition are the proceedings, which relate to the claims of the respondents
D prior to the approval of the plan, in the light of the view taken by us, the
same cannot be continued. Equally the claims, which are not part of the
resolution plan, shall stand extinguished.
131. In this view of the matter, we find, that relegating the appellant
to the alternative remedy would serve no purpose. A party cannot be
E made to run from one forum to another forum in respect of the
proceedings and the claims, which are not permissible in law.
132. The appeal therefore is allowed. The impugned judgment
and order dated 6.7.2020 passed by the Allahabad High Court is quashed
and set aside. We hold and declare, that the respondents are not entitled
F to recover any claims or claim any debts owed to them from the Corporate
Debtor accruing prior to the transfer date. Needless to state, that the
consequences thereof shall follow.
WRIT PETITION (CIVIL) NO.1177 OF 2020
133. For the reasons stated, I.A. for change of name of the
G petitioner No.1. is allowed. Cause title be amended accordingly.
134. The present writ petition has been filed by the petitioners
under Article 32 of the Constitution. In this case also, the resolution plan
in respect of the Corporate Debtor (petitioner – Company) has been
40
H (2020) 13 SCC 308
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 819
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
approved by the Adjudicating Authority on 24.7.2018. Pursuant thereto, A
the management of the Corporate Debtor (petitioner – Company) was
transferred to the successful resolution applicant i.e. Aion-JSW.
135. After the completion of CIRP on 5.1.2019, the respondent
No.2 issued a reminder to the petitioner to pay an amount of
Rs.4,49,34,917.00 towards the service tax deposited by it towards royalty, B
DMF and NMET for the period between 1.4.2016 and 30.6.2017. The
petitioner replied to the said notice pointing out to the authorities the
provisions of I&B Code and stating therein, that the demand made by
the respondent were not permissible in view of I&B Code. The petitioners
had also requested for refund of an amount of Rs.5,25,15,880/- deposited
as advance against supply of iron ore. C

136. In this background, the petitioners have approached this Court
challenging the demand notice dated 20.7.2018 and 28.4.2020.
137. The present case would also be covered by the view taken
by us hereinabove. D
138. It is further to be noted, that the Income Tax Authorities had
approached this Court with respect to income tax dues concerning the
present petitioner by way of Special Leave Petition (Civil) No.6483 of
2018. This Court passed the following order in the said Special Leave
Petition on 10.8.2018: E
“Heard.
Delay, if any, is condoned.
Given Section 238 of the Insolvency and Bankruptcy Code, 2016,
it is obvious that the Code will override anything inconsistent
contained in any other enactment, including the Income-Tax Act. F

We may also refer in this Connection to Dena Bank vs. Bhikhabhai
Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its
progeny, making it clear that income-tax dues, being in the nature
of Crown debts, do not take precedence even over secured
creditors, who are private persons. G
We are of the view that the High Court of Delhi, is, therefore,
correct in law.
Accordingly, the Special Leave Petitions are dismissed.
Pending applications, if any, stand disposed of.” H
820 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 139. In ordinary course, we would not have entertained such a
petition directly under Article 32 of the Constitution. However, a question
of law, which arises for consideration in the present petition has been
considered by us in this batch of matters. In that view of the matter, we
find, that it would not be in the interest of justice to non-suit the present
petitioner, when we have specifically decided question of law, which
B
would govern the present case also. As such, the present petition is
allowed.
140. We hold and declare, that the respondents are not entitled to
recover any claims or claim any debts owed to them from the Corporate
Debtor accruing prior to the transfer date. Needless to state, that the
C
consequences thereof shall follow.
CIVIL APPEALS ARISING OUT OF SPECIAL LEAVE
PETITION (CIVIL) NOS.7147-7150 OF 2020
141. For the reasons stated, I.A. for intervention on behalf of the
D applicant – TATA Steel BSL Limited is allowed.
142. In the present case, the appellant challenges the judgment
and order passed by the Division Bench of the Jharkhand High Court
dated 1.5.2020 vide which the petitions filed by the appellant, challenging
the action of the respondent – authorities thereby, seeking to recover the
E Jharkhand Value Added Tax (JVAT) for the period between 2011-2012
and 2012-2013, have been rejected. Both the learned Judges have written
separate judgments.
143. In the judgment authored by H.C. Mishra, J, the petitions
filed by the appellant were rejected on two grounds, viz., one, that since
F the management of the appellant was taken over by M/s Vedanta Limited
on 4.6.2018, it was only M/s Vedanta Limited, which had locus to file
writ petitions. Secondly, it was debatable whether the amount of JVAT
shall be covered by the expressions “debt in respect of the payment of
dues arising under any law for the time being in force and payable to the
G Central Government, any State Government” so as to bring it within the
definition of “operational debt”.
144. Insofar as, the judgment authored by Deepak Roshan, J. is
concerned, the learned Judge has observed, that since the resolution
plan was approved by NCLT on 17.4.2018, 2019 amendment to Section
H 31(1) of I&B Code would not apply to the said plan. We find, that the
GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 821
SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD.
THROUGH THE DIRECTOR [B. R. GAVAI, J.]
finding of the High Court, that the dues owed to the State Government A
and Central Government would not come within the definition of
‘operational debt’, is incorrect in law in the light of the view that is taken
by us. So also the finding, that since the order of NCLT is prior to the
date on which Section 31(1) of I&B Code was amended, the provisions
of Section 31 would not be applicable, also cannot stand in view of the
B
foregoing observations made by us hereinabove.
145. We also find, that the High Court has erred in holding, that
the Appellant – Company does not have locus to file the writ petitions
inasmuch as, the management has been taken over by M/s Vedanta
Limited. The resolution plan is in respect of the Corporate Debtor and
the successful resolution applicant only takes over the management of C
the Corporate Debtor in accordance with the resolution plan. The
resolution applicant steps into the shoes of the Corporate Debtor. As
such, the finding in this respect would also not be sustainable in law.
146. Shri Gurukrishna Kumar, learned Senior Counsel, strenuously
argued, that RP/CoC had acted in a fraudulent manner. It is submitted, D
that though a notice inviting claim was required to be published in local
newspapers where the registered office of the Corporate Debtor was
situated, the notice was published in the newspaper of Kolkata edition.
As per Regulation 6(2)(b) of the 2016 Regulations, the said notice is
required to be published in one English and one regional language E
newspaper with wide circulation at the location of the registered office
and corporate office of the Corporate Debtor. Perusal of the record
would reveal, that the notice was published in Business Standard and
Ananda Bazar Patrika newspapers of the Kolkata edition, which have
wide circulation in Ranchi. The corporate office of the Corporate Debtor
is at Kolkata whereas its registered office is at Ranchi. In any case, it is F
to be noticed, that the Forest Department of the State Government had
filed intervention application before NCLT as well as NCLAT. When
one of the wings of the State Government has approached NCLT and
NCLAT, it is difficult to believe, that other organ of the State was not
aware about the said proceedings. G
147. The contention of Shri Gurukrishna Kumar, learned Senior
Counsel, that finding with regard to non-compliance of Section 13 is not
challenged by the Electrosteel Steels Limited, is also incorrect, inasmuch
as, Electrosteel Steels Limited has raised the specific ground in Grounds
‘U’ to ‘ AA’ to that effect in the appeal memo. H
822 SUPREME COURT REPORTS [2021] 13 S.C.R.

A 148. In the result, the appeals deserve to be allowed. It is ordered
accordingly. The impugned judgment and order of the Jharkhand High
Court dated 1.5.2020 is quashed and set aside.
149. We hold and declare, that the respondents are not entitled to
recover any claims or claim any debts owed to them from the Corporate
B Debtor accruing prior to the transfer date. Needless to state, that the
consequences thereof shall follow.

Nidhi Jain Appeals and Writ Petition allowed.

C

D

E

F

G

H