2023INSC816

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5590 OF 2021

M/s. RPS INFRASTRUCTURE LTD. …Appellant

Versus
MUKUL KUMAR & ANR. …Respondents

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.

Signature Not Verified 2. The arbitral proceedings culminated in an award dated

Digitally signed by
Charanjeet Kaur
Date: 2023.09.11
15:46:16 IST
01.08.2016 in favour of the appellant. In addition to awarding a
Reason:

CA No.5590/2021 Page 1 of 12
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

CA No.5590/2021 Page 2 of 12
(‘IRP’) was appointed. The IRP 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.

CA No.5590/2021 Page 3 of 12
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 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.

CA No.5590/2021 Page 4 of 12
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
1
(2020) 8 SCC 534 (hereinafter referred to as ‘Essar Steel’).

CA No.5590/2021 Page 5 of 12
 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.”

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

2
(2022) 2 SCC 544 (hereinafter referred to as ‘Brilliant Alloys’).

CA No.5590/2021 Page 6 of 12
 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

3
(supra).

CA No.5590/2021 Page 7 of 12
 (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
4
2022 SCCOnline SC 1162 (hereinafter referred to as ‘Rainbow Papers’).
5
(supra).

CA No.5590/2021 Page 8 of 12
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 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.

CA No.5590/2021 Page 9 of 12
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
6
2023 SCC OnLine SC 842 (hereinafter referred to as ‘Paschimanchal’).
7
(supra).

CA No.5590/2021 Page 10 of 12
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.

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.

CA No.5590/2021 Page 11 of 12
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 Steel,8 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.

...................……………………J.
[Sanjay Kishan Kaul]

...................……………………J.
[Sudhanshu Dhulia]
New Delhi.
September 11, 2023.

8
(supra)

CA No.5590/2021 Page 12 of 12