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SUPREME COURT OF INDIA
ABHAY S. OKA, UJJAL BHUYAN, JJ.
Electrosteel Steel Limited (Now M/s ESL Steel Limited) – Appellant
Versus
Ispat Carrier Private Limited – Respondent
Civil Appeal No. 2896 of 2024 [Arising Out of SLP (C) No. 15823 of 2023]
Decided On : 21-04-2025
Key Points: - The approved resolution plan extinguishes claims not included therein, rendering related arbitral awards non-executable. (!) (!) - Once the resolution plan is approved under Section 31 of the IBC, all claims not part of the plan stand extinguished and cannot be pursued. (!) (!) - The Facilitation Council lacks jurisdiction to arbitrate on claims that are outside or extinguished by the approved resolution plan, making awards on such claims non-executable. (!) (!) - An award passed without jurisdiction due to the extinguishment of the claim can be challenged in execution under Section 47 CPC as a nullity, within a narrow scope. (!) (!) - The High Court’s view that moratorium or pending proceedings may revive after lifting is incorrect; the resolution plan governs finality of claims. (!) (!)
JUDGMENT :
UJJAL BHUYAN, J.
1. This appeal by special leave is directed against the judgment and order dated 17.07.2023 passed by the High Court of Jharkhand at Ranchi in CMP No. 376 of 2023 filed by the appellant.
2. Appellant had filed CMP No. 376 of 2023 before the High Court of Jharkhand at Ranchi (briefly 'the High Court' hereinafter) under Article 227 of the Constitution of India assailing the order dated 03.03.2023 passed by the learned Presiding Officer, Commercial Court/District Judge-1, Bokaro in Commercial Execution Case No. 21 of 2022 (Execution Case No. 77 of 2018). It may be mentioned that by the aforesaid order dated 03.03.2023, learned Presiding Officer, Commercial Court/District Judge-1, Bokaro (referred to hereinafter as ‘the Executing Court’) had dismissed the application dated 14.05.2019 filed by the judgment debtor (appellant), further directing the judgment debtor (appellant) to comply with the award dated 06.07.2018 passed by the West Bengal Micro, Small and Medium Facilitation Council, Kolkata within fifteen days of the order.
3. Relevant facts may be briefly noted.
4. On 02.12.2014 and 20.12.2014, respondent filed claim petitions before the West Bengal Micro, Small and Medium Facilitation Council (briefly ‘the Facilitation Council’ hereinafter) for a total principal outstanding amount of Rs. 1,59,09,214.00 which were registered as Case No. 330/2014 and Case No. 331/2014. In Case No. 330/2014, the claim amount was Rs. 1,36,69,981.33, whereas in Case No. 331/2014 the claim amount was Rs. 22,39,233.00, thus the total amount being Rs. 1,59,09,214.00. The claims were made under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as ‘the MSME Act’).
5. As per the requirement of the MSME Act, conciliation proceedings were initiated but attempt for conciliation failed. Thereafter, the arbitration proceedings were commenced on 07.06.2017.
6. On 27.06.2017, the financial creditors of the appellant invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’ hereinafter) before the National Company Law Tribunal, Kolkata Bench (NCLT) which was registered as C.P. No. (IB) 361/KB/2017.
7. On 21.07.2017, NCLT imposed moratorium and an interim resolution professional was appointed.
8. On 24.07.2017, the interim resolution professional issued a public announcement calling upon all the creditors to submit their claims before him.
9. In view of the moratorium declared by the NCLT, arbitral proceedings before the Facilitation Council were kept in abeyance.
10. Respondent filed its claim before the resolution professional, who partly admitted the claim of the respondent.
11. On 29.03.2018, a resolution plan was submitted by Vedanta Limited before the NCLT wherein all the claims of operational creditors were settled at nil value.
12. However, claim of the respondent was not included in the resolution plan as approved by the committee of creditors. Ultimately, the resolution plan was approved by NCLT on 17.04.2018 under Section 31 of the IBC on and from which date the moratorium period came to an end.
13. In the order dated 17.04.2018, NCLT declared that the claims of all the operational creditors were settled at nil. No appeal was preferred by the respondent. However, the aforesaid order of the NCLT dated 17.04.2018 was challenged before the National Company Law Appellate Tribunal, New Delhi (NCLAT) in Company Appeal (AT) (Insolvency) No. 175 of 2018 by some of the operational creditors. But the same was dismissed on 10.08.2018. Other creditors also approached NCLAT in Company Appeal (AT) (Insolvency) No. 265/2018 and in analogous appeals. Specific ground taken was that in the resolution plan, the resolution applicant had not taken proper care of the operational creditors. These appeals were also dismissed by the NCLAT vide the order dated 20.08.2018. The matter was carried forward to this Court in Civil Appeal No. 1133 of 2019. However, this Court dismissed the said appeal vid
The approved resolution plan under the IBC extinguishes claims not included, rendering any arbitral award related to such claims non-executable.
Once a resolution plan is approved under the IBC, all claims not part of the plan are extinguished, and the tribunal lacks jurisdiction to adjudicate on such claims.
The main legal principle established in the judgment is the extinguishment of pre-existing and undecided claims upon approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy ....
Execution of an arbitral award is not maintainable during corporate insolvency proceedings as approved resolution plans render prior claims extinguished.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities, ensuring a fresh start for the corporate debtor.
Claims not part of an approved insolvency resolution plan are extinguished and cannot be executed.
The approval of a resolution plan under the IBC extinguishes all claims not included in the plan, including tax liabilities.
(1) Approval of resolution plan – If a claim is submitted by an operational creditor claiming itself as a financial creditor, claim would have to be accorded due consideration in category to which it....
The rejection of a Resolution Plan must comply with statutory requirements, and commercial wisdom of the Committee of Creditors is paramount, limiting the adjudicatory review.
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