M/S. RPS INFRASTRUCTURE LTD.versusMUKUL KUMAR & ANR.

                 [2023] 12 S.C.R. 150 : 2023 INSC 816



                            CASE DETAILS

                 M/S. RPS INFRASTRUCTURE LTD.
                                     v.
                       MUKUL KUMAR & ANR.
                     (Civil Appeal No. 5590 of 2021)
                         SEPTEMBER 11, 2023
  [SANJAY KISHAN KAUL AND SUDHANSHU DHULIA, JJ.]
                             HEADNOTES
      Issue for consideration: Whether the commercial entity’s claim
pertaining to an arbitral award, in appeal u/s. 37 of the Arbitration and
Conciliation Act, 1996, is liable to be included at a belated stage-after
the resolution plan approved by the Committee of Creditors and pending
approval by the adjudicating authority.
      Insolvency and Bankruptcy Code, 2016 – Initiation of Corporate
Insolvency Resolution Process against the Corporate Debtor –
Resolution plan approved by the Committee of Creditors-CoC
and pending approval by the adjudicating authority – Inclusion of
commercial entity’s claim pertaining to an arbitral award, in an appeal
u/s. 37 after the delay of 287 days, if permissible:
      Held: It is difficult to release the undecided claims on the resolution
applicant – Court is cautioned against allowing claims after the resolution
plan has been accepted by the COC – Process followed by the resolution
applicant not flawed in any manner – Public announcement of the CIRP
through newspapers would constitute deemed knowledge on the entity –
Commercial entity ought to have been vigilant enough to find out whether
the Corporate Debtor was undergoing CIRP – Plea of not being aware of
newspaper pronouncements could not be available to the entity – Mere fact
that the Adjudicating Authority has yet not approved the plan does not imply
that the plan can go back and forth, thereby making the CIRP an endless
process – This would result in the reopening of the whole issue – Thus,
NCLAT’s judgment rejecting the claim of the entity, upheld – Arbitration
                                    150
               M/S. RPS INFRASTRUCTURE LTD. v.                         151
                     MUKUL KUMAR & ANR.

and Conciliation Act, 1996 – s. 37 – Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016. [Paras 17-22]

        LIST OF CITATIONS AND OTHER REFERENCES

     Committee of Creditors of Essar Steel India Limited through Authorised
Signatory v. Satish Kumar Gupta and Ors. (2020) 8 SCC 534 – relied on.
     Brilliant Alloys Private Limited v. Mr. S. Rajagopal & Ors. (2022) 2
SCC 544; State Tax Officer v. Rainbow Papers Limited 2022 SCCOnline
SC 1162; Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd.
& Ors. 2023 SCC OnLine SC 842 – referred to.

        OTHER CASE DETAILS INCLUDING IMPUGNED
               ORDER AND APPEARANCES

       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5590 of
2021
   From the Judgment and Order dated 30.07.2021 of the National
Company Law Appellate Tribunal, Principal Bench, New Delhi in
Company Appeal (AT) (Insolvency) No.1050 of 2020.
       Appearances:

      Dr. Menaka Guruswamy, Sr. Adv., Tejas Patel, Ms. Meera Kaura
Patel, Utkarsh Pratap, Saket, Ms. Muskaan Gandhi, Lavkesh Bhambhani,
Harshwardhan Thakur, Pawan Aneja, Thejus Purushothaman, Gagan
Gupta, Manu Manchanda, Nitin Singh, Ankur Yadav, Ms. Ritu Yadav,
Kuldeep Yadav, Shashank Shekhar, Apoorva Singh, Advs. for the
Appellant.

     Rajiv K Virmani, Arjun Agarwal, Anuj Malhotra, Abhinav Agrawal,
Apoorv Agarwal, Vaibhav Manu Srivastava, Ms. Riya Thomas, Abhijeet
Sinha, Adhish Sharma, Nitin Pandey, Deepak Chawla, Aruj Dhingra,
Aakash Khattar, Navpreet S Ahluwalia, Aakash Chatterjee, Umesh
Kumar Khaitan, Saurabh Kalia, Ms. Aastha Agarwal, Ms. Supriya Juneja,
Advs. for the Respondents.
152          SUPREME COURT REPORTS                         [2023] 12 S.C.R.



       JUDGMENT / ORDER OF THE SUPREME COURT
                               JUDGMENT
      SANJAY KISHAN KAUL, J.
      Factual Background
      1. An agreement was entered into on 02.08.2006 between the appellant
and M/s KST Infrastructure Private Limited (hereinafter referred to as ‘the
Corporate Debtor’), for development of land licensed with the appellant
admeasuring 8 acres into a residential group housing complex at Faridabad,
Haryana. However, the appellant, being aggrieved by the Corporate Debtor’s
alleged misconduct in advertising the project under its own name and without
mentioning the name of the appellant, sought reference to arbitration on
02.05.2011.
      2. The arbitral proceedings culminated in an award dated 01.08.2016
in favour of the appellant. In addition to awarding a monetary claim, the
award inter alia directed the Corporate Debtor to apply to the authorities for
transfer of the requisite licenses to the appellant. Aggrieved by the award,
the Corporate Debtor filed a petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Arbitration Act’) on
26.09.2016. It appears that on the same date, the appellant filed execution
proceedings in respect of the said award. Those execution proceedings were
ultimately adjourned sine die on 22.12.2017 on account of the pendency of
the proceedings under Section 34 of the Arbitration Act. These proceedings
under Section 34 of the Arbitration Act culminated in the award being
upheld by the A.D.J. (Special Commercial Court, Gurugram), albeit with
some modifications, on 25.04.2019. An appeal filed against the same under
Section 37 of the Arbitration Act is stated to be pending.
      3. Meanwhile, the Corporate Insolvency Resolution Process (‘CIRP’)
was initiated against the Corporate Debtor in respect of three real estate
projects viz. (i) Sector 114, Gurugram, (ii) Sector 89, Faridabad, and (iii)
KST Whispering Heights in Sector 88, Faridabad by certain homebuyers
who had invested in these projects. This application under Section 7 of
the Insolvency and Bankruptcy Code (hereinafter referred to as ‘the IBC’)
was admitted on 27.03.2019 by the Adjudicating Authority. On the same
date, an Interim Resolution Professional (‘IRP’) was appointed. The IRP
            M/S. RPS INFRASTRUCTURE LTD. v.       153
      MUKUL KUMAR & ANR. [SANJAY KISHAN KAUL, J.]

issued a public announcement inviting claims from creditors, in accordance
with Section 15 of the IBC read with Regulation 6 of the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 (hereinafter referred to as the ‘IBBI Regulations’)
on 30.03.2019. After receipt of the claims, the IRP constituted the Committee
of Creditors (‘COC’) on 06.11.2019 and circulated the draft information
memorandum and invited expressions of interest from prospective resolution
applicants. Five such applications were received.
      4. Thereafter, the IRP was replaced and respondent no. 1 was appointed
as Resolution Professional (RP) of the Corporate Debtor by the COC on
18.06.2020. The resolution plan submitted by KST Whispering Heights
Residential Welfare Association was approved by the COC by a majority vote
of 80.74% on 11.07.2020. This plan was then submitted by respondent no. 1
to the Adjudicating Authority for approval under Section 31 of the IBC on
08.09.2020. We may note that the Corporate Debtor is not a party before us.
However, the Resolution Professional has been arrayed as respondent no.1,
while respondent no.2 is the successful resolution applicant. Respondent
no.2 was impleaded in the present civil appeal by this Court’s order dated
29.10.2021.
      5. The appellant sent an email on 19.08.2020 to respondent no.1
highlighting their pending claim of Rs.35,67,05,337 against the Corporate
Debtor arising from the arbitral award dated 01.08.2016, confirmed with
certain modifications in the proceedings under Section 34 of the said Act.
However, respondent no.1 rejected this claim on 25.08.2020 on the ground
that the time period for submitting the claim was within 90 days of initiation
of CIRP and the applicant was 287 days late. A Resolution plan had already
been passed by the COC.
     6. The appellant filed an application under Section 60(5) of the IBC.
During the pendency of respondent’s no. 1 application for approval of the
plan before the Adjudicating Authority, seeking directions to respondent
no.1 that the appellant’s claim may be considered on merits. This relief
was granted to the appellant by the Adjudicating Authority vide an order
dated 03.11.2020 predicated on the following grounds: (a) respondent no.1
could not have summarily rejected appellant’s claim, as this claim would
have appeared in the Corporate Debtor’s books of accounts; (b) in case such
154              SUPREME COURT REPORTS                               [2023] 12 S.C.R.


books of accounts were not available, respondent No. 1 had a duty to obtain
them and verify the financial position; and (c) as such announcement was
made through public newspapers, it was likely that the appellant missed out
on the same.
      7. Respondent No. 1 thereafter preferred an appeal under Section 61 of
the IBC before the National Company Law Appellate Tribunal, New Delhi
(‘NCLAT’) against the Adjudicating Authority’s order.
     8. The challenge by the respondent no.1 before the NCLAT was
primarily based on the potential consequences of allowing such a belated
claim when the COC had already approved the Resolution Plan. The
appellant having made the claim more than a year after the invitation of
claims by the public notice dated 30.03.2019; it was urged that allowing such
claims would set the clock back on the CIRP and set a precedent, thereby
making CIRP prolonged and inefficacious. In support of this plea, reliance
was placed on the judgment in Committee of Creditors of Essar Steel India
Limited through Authorised Signatory v. Satish Kumar Gupta and Ors 1.
, where this Court opined that a successful resolution applicant cannot be
faced with undecided claims after the resolution plan has been accepted.
This Court observed:
       “...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 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 reasons, NCLAT judgment must also be set
       aside on this count.”


1     (2020) 8 SCC 534 (hereinafter referred to as ‘Essar Steel’).
            M/S. RPS INFRASTRUCTURE LTD. v.       155
      MUKUL KUMAR & ANR. [SANJAY KISHAN KAUL, J.]

      On the other hand, the appellant explained that it could not file the
claim in time as it was unaware of the public announcement. A belated claim
should not be shut out as the time-periods in the IBC are merely directory and
not mandatory as per Brilliant Alloys Private Limited v. Mr. S. Rajagopal
& Ors.2, and in any case the resolution plan was yet to be approved by the
Adjudicating Authority. The appellant contended that respondent no.1 had
failed to discharge his duty to include the appellant’s claim in the information
memorandum as a contingent liability.
      9. The NCLAT, vide the impugned order dated 30.07.2021, did not
favour the view adopted by the Adjudicating Authority. Their reasoning was
as follows:
     (i) Respondent no.1 had effectuated proper service for inviting claims
     in accordance with Regulation 6 of the IBBI Regulations which only
     mandates a pronouncement through newspapers and not through
     personal service - an aspect that was not disputed by the appellant;
     (ii) the appellant failed to show that it filed its claim as soon as
     it came to know of the initiation of the CIRP. The appellant even
     issued a Special Power of Attorney on 26.07.2019 in favour of
     the Corporate Debtor after confirmation of the arbitral award on
     25.04.2019;
     (iii) respondent no.1 even filed an application under Section 19 of
     the IBC before the Adjudicating Authority seeking that a direction be
     issued to the ex-management to provide all records. Although nothing
     came of this attempt, it reflected his sincere efforts;
     (iv) Regulations 12 and 13 of the IBBI Regulations obliged the RP
     to accept claims filed within the extended period of 90 days of the
     commencement of CIRP. Brilliant Alloys3 dealt with the timelines
     under Section 12A of the IBC and Regulation 30A of the IBBI
     Regulations. These provisions pertained to the withdrawal of an
     application. In this context it was held that that IBBI Regulations can
     be directory depending on the facts of each case; and


2   (2022) 2 SCC 544 (hereinafter referred to as ‘Brilliant Alloys’).
3   (supra).
156             SUPREME COURT REPORTS                              [2023] 12 S.C.R.


       (v) the resolution plan, as approved by the COC, would be jeopardised
       if new claims were entertained.
     10. The aforesaid view of the NCLAT resulted in the appellant
approaching this Court.
       Appellant’s pleas before the Supreme Court:
      11. The appellant contended that the claim in terms of the award was
a contingent claim as proceedings under Section 37 of the Arbitration Act
remain pending before the High Court of Punjab and Haryana against the
dismissal of the Corporate Debtor’s challenge. There ought to be a provision
for contingent claims in the resolution plan, as provided in State Tax
Officer v. Rainbow Papers Limited4. Thus, if the appeal is dismissed and
the award becomes crystallized, the appellant’s claim, if not provided for
in the contingent claim, will be rendered nugatory. It was further submitted
that the timeline provided under Section 12 of the IBC for completion of
CIRP was only directory as per the judgment in Essar Steel5. Since the
Adjudicating Authority was yet to approve the resolution plan, respondent
No.1 should have included the same as a contingent liability. This was also
the view taken by the adjudicating agency. It was thus submitted that there
was no cause for NCLAT to interfere with the same. The appellant also
sought to contend their lack of awareness about the CIRP. It was urged that
the Corporate Debtor did not disclose that the CIRP had been initiated, either
during the pendency of the proceedings under Section 34 of the Arbitration
Act or in appeal under Section 37 of the Arbitration Act. Had the appellant
known of the CIRP, it may not have filed an application for restoration of
the execution petition on 16.11.2019.
     12. It was urged that the appellant urged that respondent No.1 could
have easily found this information from the Corporate Debtor’s books of
accounts.
       Respondent No.1’s pleas before the Supreme Court:
     13. Respondent no.1, on the other hand, contended that the appellant
had deemed knowledge of the CIRP as the applicable procedure for inviting


4     2022 SCCOnline SC 1162 (hereinafter referred to as ‘Rainbow Papers’).
5     (supra).
            M/S. RPS INFRASTRUCTURE LTD. v.       157
      MUKUL KUMAR & ANR. [SANJAY KISHAN KAUL, J.]

claims under the IBC and the IBBI Regulations was followed. Respondent
No.1 made sincere efforts to collate all claims, including filing an application
under Section 19 of the IBC for procuring the Corporate Debtor’s records,
although the same were not made available. The appellant’s belated claim
had the potential to open floodgates of litigation if the same was allowed.
      14. It was urged that there was no need to create an arrangement for
contingent claims as the resolution plan had been prepared on the basis of
the information memorandum. The plan was comprehensive and took care
of the claims of the homebuyers.
      15. Finally, it was contended that a recent judgment of this Court in
Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. & Ors.6
had confined the dicta in Rainbow Papers7 to the facts of that case alone.
At this stage, we may notice that the question of law in the two judgments
was different.
     Our view:
      16. We have examined the aforesaid submissions. The only issue before
us is whether the appellant’s claim pertaining to an arbitral award, which
is in appeal under Section 37 of the said Act, is liable to be included at a
belated stage – i.e. after the resolution plan has been approved by the COC.
      17. It is undisputed that the process followed by respondent no. 1 was
not flawed in any manner, except to the extent of whether an endeavour
should have been made by respondent no. 1 to locate the liabilities pertaining
to the said award from the records of the Corporate Debtor.
      18. If we analyse the aforesaid plea, it is quite obvious that respondent
no. 1 did what could be done to procure the Corporate Debtor’s records by
even moving an application under Section 19 of the IBC. That it was not
fruitful is a consequence of the Corporate Debtor not making available the
material. It is thus not even known whether there was a reflection in the
records on this aspect or not.


6   2023 SCC OnLine SC 842 (hereinafter referred to as ‘Paschimanchal’).
7   (supra).
158             SUPREME COURT REPORTS                      [2023] 12 S.C.R.


      19. The second question is whether the delay in the filing of claim by
the appellant ought to have been condoned by respondent no. 1. The IBC is
a time bound process. There are, of course, certain circumstances in which
the time can be increased. The question is whether the present case would
fall within those parameters. The delay on the part of the appellant is of 287
days. The appellant is a commercial entity. That they were litigating against
the Corporate Debtor is an undoubted fact. We believe that the appellant
ought to have been vigilant enough in the aforesaid circumstances to find
out whether the Corporate Debtor was undergoing CIRP. The appellant has
been deficient on this aspect. The result, of course, is that the appellant to
an extent has been left high and dry.
     20. Section 15 of the IBC and Regulation 6 of the IBBI Regulations
mandate a public announcement of the CIRP through newspapers. This
would constitute deemed knowledge on the appellant. In any case, their plea
of not being aware of newspaper pronouncements is not one which should
be available to a commercial party.
      21. The mere fact that the Adjudicating Authority has yet not approved
the plan does not imply that the plan can go back and forth, thereby making
the CIRP an endless process. This would result in the reopening of the whole
issue, particularly as there may be other similar persons who may jump onto
the bandwagon. As described above, in Essar Steel8, the Court cautioned
against allowing claims after the resolution plan has been accepted by the
COC.
     22. We have thus come to the conclusion that the NCLAT’s impugned
judgment cannot be faulted to reopen the chapter at the behest of the
appellant. We find it difficult to unleash the hydra-headed monster of
undecided claims on the resolution applicant.
     23. The result of the aforesaid is that the appeal is dismissed leaving
the parties to bear their own costs.



Headnotes prepared by:                                         Appeal dismissed.
Nidhi Jain



8     (supra)