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.

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 elaborat