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Washout of Prior-period Claims in Resolution Plans: Rajasthan HC closes the door for pre-CIRP claims after revival of Corporate Debtor

Megha Mittal & Shreya Jain

resolution@vinodkothari.com

Colloquially referred to as a ‘rebirth’, a resolution plan is the revival route for the corporate debtor, free of its past liabilities and dues, paid in accordance with the approved plan. Having said so, it might be noted that resolution plans assume the status of a statutory binding contract once approved by the adjudicating authority. Recently, the Hon’ble Rajasthan High Court, in Ultra Tech Nathdwara Cement Ltd., (formerly known as Binani Cements Ltd.) vs. Commissioner, Central Goods And Service Tax and Central Excise Commissionerate and Ors.[1], held that no demands can be raised by any statutory body, for a period prior to the approval and finalization of resolution plan, after the resolution plan is successfully implemented.

The details of the case have been discussed below.

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Accumulated welfare benefits of employees and treatment under Resolution Plans

Megha Mittal

(resolution@vinodkothari.com)

The preamble of the Insolvency and Bankruptcy Code, 2016 (“Code”) enshrines the principle of balance of interests of all stakeholders. A major part of the stakeholders is represented by employees and workmen. Employees and workmen are one of the most significant pillars on which the economy runs, and hence, it becomes important to understand their footing under the Code and ensure that they have necessary safeguards from being put in a helpless position in a situation where the employer gets into insolvency.

It must be noted that section 5(20) read with section 5(21) includes claims in respect of employment under the ambit of “operational debt”, and as such empowers employees to initiate an application for insolvency against its employer, under section 9 of the Code, that is, as an operational creditor. Further, section 53 of the Code accords priority to the workmen dues at par with secured creditors, and next priority is given to employee dues. Hence, while on one hand their position as an applicant is secured, the position of its claims, especially terminal claims remains a rather unexplored sphere.

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