Claims not part of an approved insolvency resolution plan are extinguished and cannot be executed.

ORDER

The respondent/judgment debtor in E.P.No.92 of 2024 is the revision petitioner.

2.I have heard Mr.T.Ravichandran, learned counsel for the revision petitioner and Mr.B.Kadhirvelu, learned counsel for the respondent.

3.Mr.T.Ravichandran, learned counsel for the revision petitioner would attack the order of the executing Court allowing the execution petition, without appreciating the valid and tenable objections, with regard to the effect of the proceedings before National Company Law Tribunal (NCLT). He would first and foremost contend that the respondent had approached MSME Council, which passed an award for Rs.34,53,303/- and for recovery of the said amount alone, the execution petition has been filed. However, it is the primordial submission of Mr.T.Ravichandran that the execution petition itself was not maintainable since the petitioner was under Corporate Insolvency Resolution Process (CIRP) under the provisions of the Insolvency and Bankruptcy Code (IBC), 2016. He would state that the resolution plan was also approved by the National Company Law Tribunal, Chennai on 12-07-2023 and when the respondent had admittedly failed to submit his claim, pending the CIRP process, the claims of the petitioner would automatically stand extinguished. Once the resolution plan is approved and the new management cannot be saddled with a liability of past or extinguished and dead claims in terms of Section 31 of the IBC.

4.The learned counsel for the revision petitioner would also invite my attention to the portions of the order dated 12-07-2023, where the NCLT has specifically stated that all proceedings, prior to the effective date, would stand abated, withdrawn, settled and/or extinguished. Mr.T.Ravichandran, learned counsel would therefore state that even though the respondent may have obtained an award from the MSME Council, in view of the award having been passed before the approval of the resolution plan and not recognized, the said claim becomes inexecutable and extinguished.

5.The learned counsel for the petitioner would further state that without properly appreciating the import of the ratio laid down by the Hon’ble Supreme Court and the decisions relied on by the learned counsel for the petitioner before the executing Court, the executing Court has erroneously held that the insolvency proceedings cannot be a valid defence in execution of an arbitration award. He would therefore pray for the revision petition to be allowed. In fact, he has relied on the decision of the Hon’ble Supreme Court in Electrosteel Limited Vs. Ispat Carrier Private Limited , reported in 2025 INSC 525 and Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited , reported in 2021 SCC Online SC 313.

6.Per Contra, Mr.V.Kadhirvelu, learned counsel appearing for the respondent would state that the petitioner has suppressed the valid award passed in the favour of the respondent in the insolvency proceedings and therefore, the petitioner cannot take advantage of his own wrong and contend that the claim has not been brought to the notice of the resolution professional and it does not form part of the resolution plan. He would also invite my attention to the exchange of emails between the parties with regard to the payment of the award amount. He would therefore pray for dismissal of the revision petition.

7.I have carefully considered the submissions advanced by the learned counsel on either side.

8.No doubt, the respondent was successful in obtaining an award in its favour before the MSME Council on 25-02-2022. However, proceedings were set in motion before the National Company Law Tribunal, Special Ben