Once Resolution Plan is sanctioned, the debt payout approved becomes binding on all Creditors- (D.B. Civil Writ Petition No. 9480/ 2019) - Rajasthan High Court

Facts of the Case:    Ultra Tech was one of the Resolution Applicants in the CIRP of Binani Cement Ltd. initiated by the financial creditor, Bank of Baroda, for non-payment of debt under Section 7 of the Insolvency and Bankruptcy Code, 2016 and filed before the Kolkata Bench of National Company Law Tribunal. UltraTech Nathdwara Cement Ltd. approached the Rajasthan High Court being aggrieved of the demands raised through various notices by the Respondent, Central Goods and Service Tax (“GST”) Department.

Decision of the Rajasthan High Court: The Honourable Rajasthan High Court held that the said issue is whether the resolution plan approved by the Committee of Creditors (CoCs) is binding on the GST department or not. In this regard, as per the amended Section 31 of the IBC, 2016, the approved resolution plan has been made binding on the corporate debtor, its employees and all creditors 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 is owed. Section 31(1) of the Code makes it clear that once a resolution plan is approved/ sanctioned by the Committee of Creditors (CoCs), it shall be binding on all stakeholders, including the corporate debtor, its employees, members and all creditors including the Central Government, Any State Government or any local authority, including guarantors.

This is due to the reason that this provision ensures that the successful resolution Applicant starts running the business of the corporate debtor on a fresh slate as it were. The impugned demand notices/orders and any further demands which were pending as on the date of finalization of the resolution plan issues/raised by the GST Department, the respondents, were been quashed and struck down by the Honourable High Court of Rajasthan. It further held that the respondents would be acting arbitrarily by sending multiple/ various notices which are impugned in this writ petition. The notices of the GST Department were held to be illegal and hence cannot be supported.