Name of the case: M/s. RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr.

Case Number: [Civil Appeal No. 5590 of 2021]

Name of Judges: Hon’ble Judges Sanjay Kishan Kaul and Sudhanshu Dhulia

Order Date: 11/09/2023

Facts of the Case:

• In this case, an agreement was entered into between the appellant and M/s KST Infrastructure Private Limited (‘the Corporate Debtor’), for development of land licensed with the appellant admeasuring 8 acres into a residential group housing complex at Faridabad, Haryana. The appellant sought an arbitration when the Corporate Debtor advertised the project under its own name. The arbitral award was given in favour of the appellant, which 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. On the date of the application of the said petition, an execution petition was filed by the appellant, which was adjourned sine die on account of the pendency of the proceedings under Section 34 of the Arbitration Act. In the proceedings under S. 34 of the 1996 Act, the arbitral award was upheld by A.D.J. (Special Commercial Court, Gurugram), though with some modifications. An appeal was further filed under Section 37 of the 1996 Act which is pending.
• Meanwhile, the Corporate Insolvency Resolution Process (‘CIRP’) was initiated against the Corporate Debtor in respect of three real estate projects. The IRP issued a public announcement inviting claims from creditors. The IRP was replaced by Respondent No. 1, who was appointed as the RP by the CoC. 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. 
• 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. 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.
• Respondent No. 1 preferred an appeal under Section 61 of the IBC before the NCLAT, New Delhi, against the Adjudicating Authority’s order. 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.

The Hon’ble Supreme Court Observed and Held as Follows:

• 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 commercial entity, litigating against the Corporate Debtor. 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. 
• 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.
• 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. 
• The result of the aforesaid is that the appeal is dismissed leaving the parties to bear their own costs.