Welfare-Oriented Rehabilitation Policy Cannot Preserve Claims Extinguished Under IBC: Madhya Pradesh High Court

The Madhya Pradesh High Court has held that a rehabilitation policy or agreement with a project-affected person cannot preserve a claim merely because it is welfare-oriented, as the Insolvency and Bankruptcy Code overrides inconsistent laws and policies.

Justice Sanjeev S. Kalgaonkar observed, “Thus, Rehabilitation policy or any agreement with project affected (displaced) person cannot facilitate claim as an exception for the reason that it is welfare oriented. Section 238 of IBC gives Insolvency and Bankrupcy Code overriding effect over all inconsistent laws and policies.”

The court was hearing a petition by Keshav Prasad Jayaswal, who sought rehabilitation benefits after his agricultural land and house were acquired for Essar Power M.P. Limited.

He sought to be declared a “displaced person” under the Madhya Pradesh Ki Adarsh Punarvas Niti, 2002 and sought, among other benefits, a 5,400 sq. ft. residential plot.

During the proceedings, Essar Power M.P. Limited underwent the Corporate Insolvency Resolution Process. A resolution plan submitted by Adani Power Limited was approved by the National Company Law Tribunal on November 1, 2021, after which Essar Power M.P. Limited was converted to Mahan Energen Limited.

The court held that claims not forming part of the approved resolution plan stood extinguished on its approval and could not subsequently be enforced against the successful resolution applicant.

“The approval of resolution plan, submitted by M/s Adani Power for respondent Essar Power M.P. Ltd, on 1.11.2021 by the National Company Law Tribunal triggers statutory 'Clean Slate Doctrine',” the court held.

It further observed that no person could initiate or continue proceedings for a claim that was not part of the approved resolution plan.

The court therefore held that the relief sought was “not executable” against Essar Power M.P. Limited or Mahan Energen Limited.

As against the State authorities, the court found that the Collector had considered the inquiry and inspection report before concluding that Jayaswal did not qualify as a displaced person because he had not been residing within the acquired area for one year before June 9, 2007.

Finding no apparent or jurisdictional error in the Collector's proceedings, the court declined to interfere under Article 226 of the Constitution and dismissed the petition.

For Petitioner: Advocate Mahesh Prasad Shukla

For Respondents: Senior Advocate Sanjay K Agrawal, Advocates Ritwik Parashar, GC, Manoj Jha, P.L and Sahil Sonkusale