Case Analysis on RPS Infrastructure Ltd. vs. Mukul Kumar & Anr.
Adv. Gurupriyan.S
(LL.M in Corporate & Financial Law & Policy, OP Jindal Global University, Sonipat)
Introduction
The case of RPS Infrastructure Ltd. vs. Mukul Kumar & Anr (Civil Appeal No. 5590 of 2021)(2023) ibclaw.in 102 SC is a significant legal battle that reached the Supreme Court of India. This case study aims to dissect the intricate legal dispute, emphasizing the IBC’s procedural provisions. In particular, it highlights the significance of meeting the deadlines for submitting claims through the Corporate Insolvency Resolution Process (CIRP).
The conflict arises from an arbitration over a development project between RPS Infrastructure Ltd. and KST Infrastructure Private Limited (the Corporate Debtor)[1]. A challenge was filed under Section 34 of the Arbitration and Conciliation Act, 1996 against RPS Infrastructure Ltd.’s attempt to enforce an arbitral ruling. The Committee of Creditors (CoC) authorized a resolution plan and CIRP was launched against the Corporate Debtor while this challenge was pending.
- After the resolution plan was authorized, RPS Infrastructure Ltd tried to enforce its claim deriving from the arbitral ruling. This led to a legal dispute over whether or not such a claim could be accepted within the CIRP framework. The claim was denied by the Resolution Professional (RP) for being submitted after the deadline; this ruling was challenged by the Supreme Court.
Whether the period specified in the public notification passed, can the appellant who had obtained an arbitral decision against the corporate debtor file its claim before the resolution professional, and if the appellant’s claim was filed after the deadline, whether the resolution professional still has the authority and responsibility to confirm and accept it?
The objectives of the case analysis of RPS Infrastructure Ltd. vs. Mukul Kumar & Anr (Civil Appeal No. 5590 of 2021) (2023) ibclaw.in 102 SC is to comprehend how the Supreme Court interpreted the Insolvency and Bankruptcy Code (IBC) about time-barred obligations and the meaning of “default.” The purpose of the study is to clarify the court’s position in filing insolvency proceedings against corporate debtors whose debts may have past the statute of limitations for recovery. In addition, the case analysis aims to clarify the legal options available in situations involving contested or pa Lst-due financial obligations by examining the court’s ruling’s effects on creditors, corporate debtors, and the larger insolvency resolution process within the Indian legal system.
Background
The case stems from a contractual agreement between RPS Infrastructure Ltd vs KST Infrastructure Private Limited (the Corporate Debtor) for developing a residential project in Faridabad, Haryana. RPS Infrastructure filed for arbitration as conflicts emerged when the Corporate Debtor promoted the project under its name. A ruling in favor of RPS Infrastructure came from the arbitration, and the Corporate Debtor was ordered to give RPS Infrastructure certain licenses Following the arbitration, the Corporate Debtor filed a challenge against the decision under Section 34 of the 1996 Arbitration and Conciliation Act, which addresses requests to have arbitral awards set aside.
Meanwhile, the Insolvency and Bankruptcy Code, 2016 (IBC) was used to start the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. RPS Infrastructure tried to file a claim during the CIRP based on the arbitration ruling; however, the Resolution Professional (RP) rejected the claim since it was submitted after the 90-day timeframe required by the Insolvency and Bankruptcy Board of India (IBBI) Regulations.
RPS Infrastructure appealed the RP’s judgment under Section 61 of the IBC, which permits appeals to the National Company Law Appellate Tribunal (NCLAT) of decisions made by the National Company Law Tribunal (NCLT), the adjudicating authority. Also, the key legal provisions involved in the case are: A party may, under certain circumstances, be a court to set aside an arbitral ruling under Section 34 of the Arbitration and Conciliation Act, 1996. The IBC’s Sections 7 and 9 provide the procedures for financial and operational creditors, respectively to initiate CIRP.
Section 31 of the IBC: This section deals with the adjudicating authority’s approval of the resolution.
The NCLT is given authority over corporate person liquidation proceedings and insolvency resolution under Section 60(5) of the IBC. The procedure for appealing the NCLT’s rulings to the NCLAT is outlined in Section 61 of the IBC.
Main legal issue
The main legal issue in RPS Infrastructure Ltd. vs. Mukul Kumar & Anr (Civil Appeal No. 5590 of 2021), the primary question of law concerned the admission of a claim submitted outside the 90-day window that followed the start of the Corporate Insolvency Resolution Process (CIRP). The issue raised questions on the due process deadlines under the Insolvency and Bankruptcy Code, 2016 (IBC) for bringing claims against a corporate debtor facing bankruptcy proceedings have come under scrutiny in light of this problem.
Arguments raised by the parties
Arguments by appellant.
“The appellant argued that because the High Court of Justice is still considering proceedings under Section 37 of the Arbitration Act, the claim in terms of the judgment was dependent.
Punjab and Haryana oppose the Corporate Debtor’s appeal being rejected. The resolution plan should include a clause regarding contingent claims, as stated in State Tax Officer v. Rainbow Papers Limited. Therefore, the appellant’s claim, if not covered by the contingent claim will be deemed void if the appeal is dismissed and the judgment crystallizes.
Furthermore, it was argued that, under the ruling in the Essar Steel case, the deadline for CIRP completion outlined in Section 12 of the IBC was merely a directory. “Also, the appellant stated that their late claim should be taken into consideration since they were not informed of the CIRP initiation and that the deadlines for submitting claims under the IBC are voluntary rather than required, and respondent No.1 could have easily found this information from the Corporate Debtor’s books of accounts.
Arguments by respondent
“The respondents contended that the Insolvency and Bankruptcy Board of India (IBBI) Regulations require a stringent timeframe for submitting claims. They specifically cited the 2018 amendment to the CIRP Regulations, which limits claim submissions to 90 days following the date of incorporation of the CIRP. They underlined that following this schedule is essential to preventing setbacks in the resolution process and guaranteeing that when the Committee of Creditors (CoC) has adopted the resolution plan, it won’t be undermined by unpaid claims. The IBC’s aim of preserving the CIRP’s predictability and efficiency served as the foundation for the argument”.
Analysis
Judge reasoning
Examining the judge’s reasoning in RPS Infrastructure Ltd. vs. Mukul Kumar & Anr critically entails evaluating how the IBC’s stringent deadlines for claim filings are applied in light of the preference for settlement over liquidation. The ruling emphasizes how crucial following the rules is to ensure that the insolvency process moves as quickly as possible.
Here the Supreme Court held that the appellant was aware of the CIRP initiation process and had sufficient opportunity to file its claim within a stipulated period. Also, the claim amount claimed by the appellant is not a contingent one because it was based on the arbitrational award approved by the Arbitrational Tribunal so the appellant could not invoke sec 60(5) to seek extension [2].
The resolution professional can only act as a person to preserve and protect the assets of a CD and cannot act as an adjudicating authority or a court to grant relief to the late claimants. The resolution plan should bind all the stakeholders, including dissenting creditors and the claimants. Also, the Supreme Court noted that the appellant’s entitlement to enforce its arbitral award against the corporate debtor’s assets that were not included in the resolution plan remained unaffected by the resolution plan.
Arguments
Whereby the SC held in the case Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors[3] that, once the resolution plan has been approved, a successful resolution applicant cannot be confronted with issues that remain unresolved. Also, in the case of Essar steals it was argued that, in light of the ruling, the deadline for CIRP completion outlined in Section 12 of the IBC was only advisory[4]. There are case studies that interpret this case law from both points of view. According to the Adjudicating Authority, “the claim amount would have appeared in the book of account of the CD, and such book of account was not available, and respondent no 1 had a duty to obtain them and verify the financial position”. Also, the announcement through the public newspaper is likely that the appellant missed out.
In the decided case law, Mrs. Ranju Kumari, Mr. Umashankar Singh vs Value Infracon Ind Pvt Ltd, Value Infra Buyers Association, Daimler Financial Services Pvt Ltd, Capri Global Capita Ltd-2024 NCLAT, New Delhi followed the decision of the SC by dismissing the appeal which has been filed after the order much belatedly. A possible weakness or obstacle that emerges from these and related cases is the strict observance of the deadlines for filing claims through the Corporate Insolvency Resolution Process (CIRP). The strict timelines set by the IBC are intended to guarantee promptness and efficiency in the resolution process, but they may unintentionally disadvantage some stakeholders, especially those who may learn about the insolvency proceedings after the deadline for submitting claims has passed for valid reasons.
Based on the objectives of BLRC
To improve efficiency and optimize asset value, the BLRC placed a strong focus on a time-bound insolvency resolution. This is supported by the Supreme Court’s decision in RPS Infrastructure Ltd. vs. Mukul Kumar & Anr. Strict deadlines, however, put the delicate balance between procedural efficiency and equity for all parties especially those who lack knowledge of the CIRP because of inadequacies in information dissemination under jeopardy. This calls into doubt the IBC’s ability to be flexible in addressing extraordinary circumstances and guaranteeing that all creditors are treated fairly, underscoring the necessity for a nuanced strategy that aligns with the larger goals of the BLRC[5].
Rights of the stakeholders
The rights of stakeholders are crucial in the RPS Infrastructure Ltd. vs. Mukul Kumar & Anr. case. According to the provisions of Sections 7, 8, and 9, creditors are entitled to timely submission of claims. By Sections 22 and 23, the Resolution Professional makes sure the procedure follows the IBC timeframes, which are essential to the case’s resolution[6]. The case emphasizes the importance of procedural timeliness and efficiency in the bankruptcy resolution process, as evidenced by the Committee of Creditors’ authority to approve resolution plans, which was created under Section 21.
Constitutionality
The implementation and interpretation of the Insolvency and Bankruptcy Code (IBC), 2016, within the parameters of the Indian Constitution, will determine whether the case of RPS Infrastructure Ltd. vs. Mukul Kumar & Anr. is constitutional. The Supreme Court’s decision, which strikes a compromise between the requirement for an effective bankruptcy resolution system and the right to business, places a strong emphasis on adhering to the IBC’s procedural timetables and protocols. Maintaining this equilibrium is essential to preserving the values of justice and equity entrenched in the Constitution, especially when it comes to economic justice and Article 19(1)'(g) guarantee of the freedom to engage in any profession, trade, or business.
Conclusion
The ruling made by the Supreme Court in the RPS Infrastructure Ltd. vs. Mukul Kumar & Anr. case is appropriate and consistent with the goals of the Insolvency and Bankruptcy Code (IBC) 2016, which emphasizes the prompt and effective handling of bankruptcy cases. The IBC’s goal to resolve insolvencies within a given period is reinforced by the Court’s insistence on following the statutory deadlines for claim submissions. This ensures the debtor’s assets are valued as much as possible and gives the business community and economy as a whole certainty. By rejecting the appeal since the claim was not submitted for 287 days, the Court emphasized how important it is for creditors to be watchful and accountable throughout insolvency proceedings.
References:
[1] ‘M/s. RPS Infrastructure Ltd. v. Mukul Kumar and Anr., Civil Appeal No. 5590 of 2021 – Decided on 11th September 2023’ (23 October 2023) (2023) ibclaw.in 102 SC
[3] Trivedi, Prachi, and Amaan Sheikh. “Essar Steel Insolvency Case: Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors (Judgment Dated 15.11. 2019 in Civil Appeal No. 8766-67 of 2019) (2019) ibclaw.in 07 SC.” Int’l JL Mgmt. & Human. 2 (2019): 133.
[4] IBC, 2016.
[5] ‘M/s. RPS Infrastructure Ltd. Vs. Mukul Kumar & Anr.’ (The Law Tree, 27 October 2023) <https://thelawtree.akmllp.com/apex-rulings/m-s-rps-infrastructure-ltd-vs-mukul-kumar-anr/> accessed 15 March 2024.
