1. A corporate debtor sought arbitration of a contract dispute while undergoing insolvency proceedings, resulting in the tribunal rejecting a creditor's counterclaim following the approval of a resolution plan. (Para 3 )
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2026 Supreme(SC) 290
SUPREME COURT OF INDIA
DIPANKAR DATTA, AUGUSTINE GEORGE MASIH, JJ.
Ujaas Energy Ltd. – Appellant
Versus
West Bengal Power Development Corporation Ltd. – Respondent
Civil Appeal No. 3619 of 2026 [Arising out of SLP (Civil) No. 29651 of 2024]
Decided On : 20-03-2026
Advocates appeared:
For the Appellant : Mr. Abhijeet Sinha, Sr. Adv., Mr. Himanshu Satija, Adv., Ms. Neha Mehta Satija, AOR, Mr. Harshit Khanduja, Adv.
For the Respondent: Mr. Kunal Mimani, AOR
For the Appellant : Mr. Abhijeet Sinha, Sr. Adv., Mr. Himanshu Satija, Adv., Ms. Neha Mehta Satija, AOR, Mr. Harshit Khanduja, Adv.
For the Respondent: Mr. Kunal Mimani, AOR
Post-approval of a corporate resolution plan, claims not included therein are extinguished, yet a plea of set-off may be permitted as a defense in arbitration, ensuring fairness without allowing affirmative recovery.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 31(1) and 16 - Arbitration and Conciliation Act, 1996 - Section 31(6) - Corporate insolvency resolution process - The High Court set aside an interim award rejecting a counterclaim based on the resolution plan that extinguished claims not included in it. The core question was the respondent's ability to raise a plea of set-off post resolution plan approval. The court ruled that while the counterclaim could not be pursued, the plea of set-off could be admitted as a defense in arbitration proceedings. (Paras 12, 25, 30)
Facts of the case:
Respondent issued an e-tender for solar power installation, awarding the appellant a contract. The appellant entered Corporate Insolvency Resolution Process due to disputes, invoked arbitration, but its counterclaim was rejected. After the resolution plan approval, the respondent challenged the interim award seeking to present a counterclaim.
Findings of Court:
The counterclaim cannot be pursued due to the resolution plan extinguishing unlisted claims. However, a plea of set-off may be raised, serving as a defense against the appellant’s claim.
Issues: The main issue was whether the respondent could raise a plea of set-off after the approval of the resolution plan.
Ratio Decidendi: The court emphasized that upon approval of the resolution plan, claims not included therein extinguish, but it allowed set-off as a defensive argument given no express prohibition in the resolution plan.
Result: The appeal was partly allowed with the modification that the respondent could raise a plea of set-off.
Legal Category Hierarchy
Table of Contents
2. The debtor argued that creditor claims not submitted before the resolution plan was approved stood extinguished; the creditor argued the clean slate principle should not preclude a set-off plea. (Para 4 , 5 , 6 )
3. The court observed that approval of a resolution plan extinguishes all claims not included therein but does not necessarily bar the use of a set-off plea as a defense. (Para 16 , 17 , 21 , 22 , 23 )
4. Approved resolution plans extinguish claims not therein included, yet defensive pleas of set-off are not specifically barred if they do not seek affirmative relief against the corporate debtor. (Para 11 , 12 , 13 , 25 )
5. The court permitted the respondent to assert a plea of set-off strictly as a defense without the potential for recovery of any surplus amount. (Para 25 , 26 , 27 , 30 , 31 )
6. Does the approval of a corporate insolvency resolution plan extinguish all claims against a corporate debtor that were not submitted to the resolution professional?
Yes, pursuant to Section 31 of the Insolvency and Bankruptcy Code, all claims not specifically included in the approved resolution plan stand frozen and effectively extinguished to maintain the clean slate principle. (Para 10 , 11 , 12 , 13 )
7. Can a creditor whose claim has been extinguished by a resolution plan still raise a plea of set-off in arbitration proceedings concerning the corporate debtor?
Yes, a creditor may raise a plea of set-off solely as a defensive mechanism to defeat, in whole or in part, the claim of the corporate debtor, provided it does not seek affirmative relief or recovery of surplus funds. (Para 14 , 21 , 25 , 26 , 27 )
8. How does the principle of expressio unius est exclusio alterius apply to the interpretation of bar clauses within a resolution plan?
Where a resolution plan specifically bars claims for payment or settlement but remains silent on the defensive use of a set-off, the court may infer that defensive set-off is not excluded. (Para 21 , 22 , 23 )
JUDGMENT :
DIPANKAR DATTA, J.
1. Leave granted.
2. The challenge in this civil appeal, at the instance of a corporate debtor1[Appellant], is to a judgment and order dated 2nd September, 20242[impugned order] of the High Court at Calcutta3[High Court] on an intra-court appeal4[APOT No. 312/2024], whereby the judgment and order dated 21st August, 2024 of a Single Judge (spurning a challenge to an interim award of an Arbitral Tribunal5[Tribunal] laid by a public sector undertaking6[respondent]) was set aside and consequential directions were made.
3. Facts, relevant for the disposal of the present appeal, are as follows:
a. Respondent floated an e-tender on 15th February, 2017, for manufacture, procurement, installation, etc. of grid connected rooftop solar PV power plant etc. at various locations of West Bengal.
b. Appellant, which is an MSME engaged in the business of supply, installation and commissioning of solar PV power plants, successfully participated in the bid process, whereupon a Letter of Award (LOA) dated 12th May, 2017 was issued in its favour.
c. More than three years later, on 17th September, 2020 to be precise, the appellant was admitted into Corporate Insolvency Resolution Process7[CIRP] under the Insolvency and Bankruptcy Code, 20168[IBC].
d. Due to certain disputes relating to performance of the contract, the appellant, through the resolution professional, invoked the arbitration clause vide a notice dated 31st December, 2021. A statement of claim was filed on 17th January, 2023 and the respondent filed its statement of defence as well as a counterclaim on 18th April and 12th May, 2023, respectively.
e. It is apposite to mention here that the claim raised in the counterclaim was never pursued/filed before the Resolution Professional during the CIRP but was priorly raised in course of the proceedings before the Tribunal. As will unfold, the lis in the present case revolves majorly around this fact.
f. National Company Law Tribunal9[NCLT], Indore accepted the resolution plan on 13th October, 2023, thereby concluding the CIRP.
g. Prior to the approval of the resolution plan, the appellant had filed an application under Section 16 of the Arbitration and Conciliation Act, 199610[A&C Act] contending that the Tribunal did not have jurisdiction to take up the counterclaim in view of the moratorium under Section 14 of the IBC. The Tribunal turned down the said application on 22nd December, 2023 and decided to proceed with the statement of claim as well as the counterclaim.
h. On 10th January, 2024, the appellant filed an application under Section 31 (6) of the A&C Act seeking dismissal of the counterclaim on the ground that all claims against the appellant had been extinguished by virtue of approval of the resolution plan. Much emphasis was laid on the fact that once a resolution plan is approved, all claims which did not form part of the resolution plan stood extinguished.
i. On 30th April, 2024, the Tribunal allowed the appellant’s application under Section 31 (6) of the A&C Act and thus rejected the counterclaim vide an interim arbitral award.
j. Aggrieved, the respondent challenged the interim award under Section 34 of the A&C Act, 1996. A Single Judge of the High Court dismissed the same vide its judgment and order dated 21st August, 2024.
k. Respondent thereafter challenged the judgment and order of the Single Judge before the Division Bench of the High Court which, upon perusing the interim award, noted that the same read like a full-fledged judgment and decree with elaborate discussion on facts and evidence. This, in the opinion of the Division Bench, could have been done only upon a full trial, after considering both the claim and the counterclaim. Accordingly, the Division Bench directed the Tribunal to continue the arbitral proceedings. It was clarified that it was open to the Tribunal to decide upon the status of the counterclaim while passing the award.
l. Crestfallen on account of the challenge of the respondent ha
