M/S RPS Infrastructure Ltd. vs. Mukul Kumar,2023

CITATION	CIVIL APPEAL NO. 5590 OF 2021
DATE OF JUDGMENT	11 September,2023
COURT	Supreme Court of India
APPELLANT	M/s. RPS INFRASTRUCTURE LTD.
RESPONDENT	MUKUL KUMAR & ANR.
BENCH	Sanjay Kishan Kaul, Sudhanshu Dhulia

Introduction:

“M/S RPS Infrastructure Ltd. vs. Mukul Kumar” is a notable legal case that took place in the Indian judicial system. The case involves M/S RPS Infrastructure Ltd. as the appellant, and Mukul Kumar as the respondent. The case is related to legal disputes or matters involving M/S RPS Infrastructure Ltd. and Mukul Kumar.  In this case, the Supreme Court of India addressed the issue of whether a claim related to an arbitral award should be considered in the Corporate Insolvency Resolution Process (CIRP) after the approval of the resolution plan by the Committee of Creditors (COC). The appellant, M/S RPS Infrastructure Ltd., claimed that its pending arbitral award should be treated as a contingent claim, while the respondent, Mukul Kumar, the Resolution Professional (RP), argued against entertaining this belated claim.

Facts of the Case:

In 2006, the appellant entered into an agreement with the Corporate Debtor (M/s KST Infrastructure Private Limited) for the development of land into a residential group housing complex. The appellant filed for arbitration in 2011, alleging misconduct by the Corporate Debtor. The arbitral proceedings resulted in an award in favor of the appellant in 2016. The Corporate Debtor challenged the award under Section 34 of the Arbitration and Conciliation Act, of 1996. The Corporate Debtor faced the initiation of CIRP in 2019 due to petitions from homebuyers who had invested in its projects. The Resolution Professional, Mukul Kumar, was appointed, and a resolution plan was approved by the COC. The appellant filed a claim of INR 35,67,05,337 against the Corporate Debtor based on the arbitral award after the COC approved the resolution plan. Mukul Kumar rejected the claim, citing that it was filed late and that the COC had already approved the resolution plan.

Issues Raised:

1. Should the belated claim related to an arbitral award be considered in the CIRP after the approval of the resolution plan?

2. Is the timeline for filing claims under the Insolvency and Bankruptcy Code (IBC) mandatory or directory?

3. Should a provision for contingent claims be made in the resolution plan?

Appellant’s Contention:

1. The claim is contingent on the outcome of the pending appeal against the arbitral award.

2. The timeline provided in the IBC is a directory, not mandatory, as per the judgment in “Brilliant Alloys Private Limited v. Mr. S. Rajagopal & Ors.”

3. The appellant was unaware of the CIRP and its claim should have been included as a contingent liability in the resolution plan.

4. The Corporate Debtor did not disclose the initiation of CIRP during the ongoing legal proceedings.

Respondent’s Contention:

1. The appellant had deemed knowledge of the CIRP because the process for inviting claims was followed according to IBC and IBBI Regulations.

2. Sincere efforts were made to obtain the Corporate Debtor’s records to include all claims in the information memorandum.

3. Allowing belated claims could open the door to a flood of litigation and disrupt the CIRP process.

Judgment:

1. The Supreme Court dismissed the appeal and upheld the decision of the National Company Law Appellate Tribunal (NCLAT). 

2. The Court concluded that the belated claim based on the arbitral award could not be considered during the CIRP after the COC had approved the resolution plan.

3. The IBC’s timeline for filing claims was considered a directory, but the delay in the appellant’s claim could not be condoned.

4. The Court emphasized that allowing belated claims could disrupt the CIRP process and warned against “unleashing the hydra-headed monster of undecided claims on the resolution applicant.” 

5. The public announcement of CIRP in newspapers constituted deemed knowledge for the appellant, and their lack of awareness was not a valid argument for a commercial entity.

Cases for Reference:

1.”Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors.”

2.”Brilliant Alloys Private Limited v. Mr. S. Rajagopal & Ors.”

3.”State Tax Officer v. Rainbow Papers Limited”

4.”Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. & Ors.”

Conclusion:

The case of M/S RPS Infrastructure Ltd. vs. Mukul Kumar clarified that belated claims, especially those related to arbitral awards, cannot be entertained in the Corporate Insolvency Resolution Process (CIRP) once the Committee of Creditors (COC) has approved the resolution plan. The Court stressed the importance of adhering to timelines in the Insolvency and Bankruptcy Code (IBC) to avoid disruptions in the resolution process.

The ruling hinges on the interpretation and application of the Insolvency and Bankruptcy Code, 2016 (the Code) and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (the Regulations). These legal frameworks serve as the cornerstone for addressing corporate insolvency in India. The judgment diligently upholds the core tenets of a creditor-driven and time-bound resolution process, both of which are fundamental objectives of the Code.

One of the primary takeaways from the judgment is the pivotal role accorded to creditors, underscoring their primary responsibility in shaping the destiny of the corporate debtor. The judgment underscores that the resolution process must adhere to specific timelines, a requirement aimed at optimizing asset value and minimizing losses for all stakeholders involved.

Furthermore, the judgment solidifies the principles of conclusiveness and the legally binding nature inherent in the resolution plan, which are foundational elements within the insolvency and bankruptcy framework. Importantly, the ruling explicitly elucidates that the resolution plan does not obstruct creditors from pursuing their claims against corporate debtor assets that fall beyond the ambit of the resolution plan. This ensures that the rights of creditors remain intact for claims not covered by the plan.

References

1. https://indiankanoon.org/doc/97646663/
2. https://ksandk.com/newsletter/m-s-rps-infrastructure-ltd-v-mukul-kumar-and-anr/https://www.advocatekhoj.com/library/judgments/announcement.php?WID=16808

This Article is written by Jaishree Sharma student at Rajasthan University, Jaipur; and an Intern at Legal Vidhiya.

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