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Supreme Court of India
Electrosteel Steel Limited (Now M/S Esl … vs Ispat Carrier Private Limited on 21 April, 2025
Author: Abhay S. Oka
Bench: Abhay S. Oka
REPORTABLE
2025 INSC 525
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2896 OF 2024
(arising out of SLP (C) No. 15823 of 2023)
ELECTROSTEEL STEEL LIMITED
(NOW M/S ESL STEEL LIMITED) APPELLANT(S)
VERSUS
ISPAT CARRIER PRIVATE LIMITED RESPONDENT(S)
JUDGMENT
UJJAL BHUYAN, J.
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
Signature Not Verified
Digitally signed by
ANITA MALHOTRA
Date: 2025.04.21
18:34:48 IST
assailing the order dated 03.03.2023 passed by the learned
Reason:
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
2
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.
3
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
4
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 vide the order dated 27.11.2019.
14. It appears that on lifting of the moratorium,
Facilitation Council resumed arbitral proceedings. Appellant
did not contest the arbitral proceedings. Ultimately, an award
was passed on 06.07.2018. As per the award, the Facilitation
Council directed the appellant to pay a sum of
Rs.1,59,09,214.00 along with interest to the respondent in
terms of Section 16 of the MSME Act.
15. Appellant did not challenge the award dated
06.07.2018 under Section 34 of the Arbitration and
Conciliation Act, 1996 (briefly ‘the 1996 Act’ hereinafter).
16. Respondent instituted execution proceeding which
was initially registered as Execution Case No.77 of 2018 and
thereafter as Commercial Execution Case No.21 of 2022
before the Executing Court. At the stage of execution of the
award, appellant filed a petition dated 14.05.2019 contending
5
that the arbitral award was a nullity and hence not
executable as the claim of the respondent was already settled
at nil as per the resolution plan and, therefore, nothing was
payable to the respondent.
17. Executing Court by the order dated 03.03.2023
dismissed the petition of the appellant and directed it to
comply with the award dated 06.07.2018 within fifteen days.
18. As noted above, this came to be challenged by the
appellant before the High Court by filing a petition under
Article 227 of the Constitution of India. High Court framed
the following questions for consideration:
a. The arbitral award having not been challenged
under Section 34 of the Act of 1996, whether the
objection to execution of the arbitral award
referrable to Section 47 of the Civil Procedure
Code, 1908 (CPC) was maintainable by alleging
that the arbitral award itself was a nullity and
hence non-executable?
b. Whether the arbitral award in the present
case could be assailed as a nullity and hence
non-executable within the permissible grounds
of raising such a plea?
c. Irrespective of maintainability of the objection
to the arbitral award under Section 47 of the
CPC, whether on facts, the Facilitation Council6
lost its jurisdiction to proceed and pronounce
the arbitral award in view of the insolvency
resolution plan of the petitioner which was duly
approved under Section 31 of the IBC?
19. Insofar the first question is concerned, High Court
opined that the plea of nullity qua an arbitral award can be
raised in an execution proceeding under Section 47 of the
CPC. However, the scope of interference would be very
narrow. As regards the second question, High Court rejected
the contention of the appellant that since the award suffered
from patent or inherent lack of jurisdiction and therefore was
a nullity, it can be questioned at the stage of execution
without challenging the award under Section 34 of the 1996
Act. High Court answered the third question by holding that
the Facilitation Council did not lose its jurisdiction to procced
and pronounce the arbitral award notwithstanding approval
of the resolution plan by the NCLT under Section 31 of IBC.
Reasoning given by the High Court is that the arbitral
proceedings were initiated prior to the insolvency resolution
date, kept suspended during the moratorium period and
resumed after lifting of the moratorium; the approved
resolution plan simply determined the claim of the
respondent as nil. Accordingly, vide the impugned judgment
7
and order High Court dismissed the petition filed by the
appellant under Article 227 of the Constitution of India.
20. Hence, the present appeal.
21. On 04.08.2023 notice was issued in the related
SLP (C) No.15823/2023. It was submitted on behalf of the
respondent that a sum of Rs.15,48,70,890.00 was withdrawn
but gave an undertaking to deposit the said amount. This
Court directed the respondent to deposit the said amount
with the Executing Court with further direction to the
Executing Court to invest the said amount in an interest
bearing fixed deposit until further orders. In the hearing held
on 20.02.2024, leave was granted.
22. Learned senior counsel for the appellant submits
that the High Court had erroneously held that the resolution
plan did not determine the claim of the respondent at nil and,
therefore, the Facilitation Council had the jurisdiction to
decide on the claim of the respondent.
22.1. He submits that the High Court had misread and
misinterpreted the resolution plan which would be evident
from a perusal of the relevant paragraphs of the resolution
plan. Respondent had submitted its claim as an operational
8
creditor to the resolution professional. Such claim was the
same claim which formed the subject matter of the
proceedings before the Facilitation Council. Resolution
applicant had submitted a resolution plan in respect of the
appellant (corporate debtor) in accordance with the
provisions of Section 30 of the IBC to enable the appellant to
continue as a going concern. A reading of the relevant
paragraphs of the resolution plan i.e. paragraphs 3.2(v),
3.4(ii) and 3.8(i) would indicate that the claims of the
operational creditors including the debt of the respondent
were settled at nil and, therefore, they were not entitled to
any payment.
22.2. On 17.04.2018, NCLT approved the resolution
plan under Section 31 of the IBC. Paragraph 50 of the order
dated 17.04.2018 specifically recorded that the claims of all
the operational creditors were settled at nil. This Court in
Civil Appeal No. 1133 of 2019 after going through the
resolution plan had observed that there was nil payment to
be made to all the operational creditors as per the resolution
plan submitted and approved.
9
22.3. Learned senior counsel submits that on
17.04.2018 when the NCLT had approved the resolution
plan, claims of the operational creditors were settled at nil.
This became binding on the respondent and all other
authorities as per Section 31(1) of the IBC. In this connection,
learned senior counsel has referred to and relied upon the
decision of this Court in Ajay Kumar Radheshyam Goenka
Vs. Tourism Finance Corporation of India Ltd.1 In the said
decision, this Court had made it abundantly clear that the
creditor has no option but to join the process under the IBC.
Once the plan is approved, it would bind everyone under the
sun. He contended that the respondent had submitted its
claim before the resolution professional but the same was not
included in the resolution plan as was approved by the
committee of creditors and then by the adjudicating authority
i.e. NCLT which became binding on the respondent. Even if
the respondent had not submitted its claim before the
resolution professional, the approved resolution plan would
still have been binding on the respondent.
1
(2023) 10 SCC 545
10
22.4. He, therefore, submits that on approval of the
resolution plan by the NCLT, claim of the respondent stood
extinguished. Thus, respondent had no claim against the
appellant (corporate debtor) in law. Respondent was also
estopped from pursuing its claim before the Facilitation
Council and also from seeking execution of the award after
approval of the resolution plan.
22.5. After adverting to the objectives of the IBC, learned
senior counsel submits that the appellant (corporate debtor)
has been given a fresh and clean slate upon approval of the
resolution plan. The same cannot be allowed to be defeated
or frustrated by raising claims relatable to the period covered
by the corporate insolvency resolution process. In this
connection, learned senior counsel has placed reliance on the
following decisions:
(i) Essar Steel India Ltd. Committee of Creditors
Vs. Satish Kumar Gupta2
(ii) Ghanshyam Mishra & Sons (P) Ltd. Vs.
Edelweiss Asset Reconstruction Co. Ltd.3
(iv) RPS Infrastructure Ltd. Vs. Mukul Kumar5
2
(2020) 8 SCC 531
3
(2021) 9 SCC 657
4
(2022) 6 SCC 343
5
(2023) 10 SCC 71811
22.6. On the basis of the above decisions, learned seniorcounsel submits that it would lead to an absurd situation if
the respondent and other operational creditors are permitted
to pursue their individual claims even after the corporate
debtor goes through a successful corporate insolvency
resolution process (CIRP) where the claims of the operational
creditors were settled at nil in the resolution plan which was
approved by the committee of creditors and finally by the
adjudicating authority (NCLT). In such a case, the corporate
debtor would once again have to struggle to sustain itself as
a going concern to satisfy such claims. Thus, the object or
the purport of IBC would be defeated.
22.7. Adverting to a decision of this Court in Adani
Power Ltd. Vs. Shapoorji Pallonji & Co. Pvt. Ltd.6, learned
senior counsel submits that this Court has held that the
resolution plan, as approved, is binding on all and cannot be
made subject matter of arbitration or any other proceedings.
Once the resolution plan is approved, the resolution
applicant cannot be settled with any liability except what is
mentioned in the resolution plan.
6
Civil Appeal No. 1741 of 2023
12
22.8. Learned senior counsel further submits that the
resolution plan or the terms thereof could have been
challenged by the respondent in the manner provided under
Section 32 read with Section 61(3) of the IBC. Further,
Section 63 of the IBC makes it abundantly clear that no civil
court or authority shall have jurisdiction to entertain any suit
or proceedings in respect of any matter over which NCLT or
NCLAT has jurisdiction under the IBC and that a civil court
would not have any jurisdiction.
22.9. He submits that respondent had accepted the
resolution plan as approved and did not prefer any challenge
thereto or the order of the NCLT approving the resolution
plan. On the other hand, some operational creditors
challenged the order dated 17.04.2018 passed by the NCLT
approving the resolution plan. However, those challenges
were dismissed by the NCLAT. When the matter reached this
Court in Civil Appeal No. 1133 of 2019, this Court vide the
order dated 27.11.2019 had clarified that implementation of
the resolution plan was not stayed while dismissing the
appeal.
13
22.10. Thus, the Facilitation Council lacked jurisdiction
in respect of the claim of the respondent which was part of
the subject matter of the resolution plan. Facilitation Council
could not have continued with the arbitration proceedings
and could not have passed the award in view of Section 63
read with Section 238 of the IBC. Therefore, learned senior
counsel would submit that the award passed by the
Facilitation Council is a nullity and non est in the eye of law.
This award has been passed in respect of a claim which stood
extinguished and did not exist in law.
22.11. Learned senior counsel submits that an award can
be challenged in an execution proceeding on the ground of it
being a nullity. In the instant case, Facilitation Council
lacked jurisdiction to pass the award. Even if the appellant
had not challenged the award under Section 34 of the 1996
Act, the issue of nullity could still be raised at the stage of
execution. In this connection, learned senior counsel has
referred to a decision of this Court in Sarwan Kumar Vs.
Madam Lal Aggarwal7. In the circumstances, learned senior
counsel submits that appellant was well within its right to
7
(2003) 4 SCC 147
14
object to execution of the award by contending that the award
itself is a nullity since the Facilitation Council inherently
lacked jurisdiction to arbitrate on the claim of the respondent
post approval of the resolution plan.
22.12. In view of the above, learned senior counsel for the
appellant submits that the execution petition filed by the
respondent for execution of the award ought to have been
dismissed by the Executing Court. High Court committed a
manifest error in declining to entertain the objections filed by
the appellant to execution of the award. That being the
position, impugned order of the High Court is liable to be set
aside, so also the execution proceedings.
23. Learned senior counsel for the respondent on the
other hand supports the impugned order passed by the High
Court.
23.1. He submits that the corporate debtor (appellant)
which was being managed by the resolution professional, had
knowledge of the arbitral award. As a matter of fact, appellant
had taken shelter of the arbitral award to get the revision
petition filed by the respondent before the Calcutta High
Court disposed of. The revision petition was filed against an
15
order passed under Section 14 of the 1996 Act. It was
submitted before the High Court that an arbitral award was
passed by the Facilitation Council and on the basis of such
submission, Calcutta High Court had disposed of the
aforesaid proceedings observing that Section 14 proceedings
had been rendered infructuous leaving the partes to avail
their remedies in accordance with law.
23.2. Learned counsel submits that upon approval of the
resolution plan, the proceedings which were stayed by the
Facilitation Council in view of the moratorium, did not
automatically get terminated. On the contrary those stood
revived. He submits that operational creditors whose claims
were pending adjudication at the time of initiation of the
corporate insolvency resolution process, formed a different
class. Proceedings initiated by them would continue post
lifting of moratorium for the purpose of quantification of their
claims.
23.3. It is evident from the order passed by the Calcutta
High Court that the appellant was aware of the arbitral
award. Appellant did not challenge the award despite liberty
granted by the High Court. Without challenging the award
16
under Section 34 of the 1996 Act, it was not open to the
appellant to challenge the same in a proceeding under
Section 47 of the CPC.
23.4. Learned senior counsel for the respondent
distinguished the case of Ghanshyam Mishra (supra) by
contending that the said judgment was rendered in a
distinguishable factual situation where the creditor had failed
to lodge its claim upon public announcement by the
resolution professional. Therefore, this Court held that such
a creditor cannot file its claim thereafter and such claim gets
extinguished. This judgment does not deal with claims filed
before the interim resolution professional or resolution
professional and not included in the resolution plan. High
Court had noticed this fact and has rightly observed that
since the respondent does not fall in the category of
operational creditors whose claims were rendered nil, there
was no occasion for the respondent to challenge the
resolution plan.
23.5. Learned counsel submits that there is no
inconsistency between IBC and the MSME Act. Therefore,
High Court rightly did not examine the plea of inconsistency.
17
23.6. He has referred to various provisions of the IBC as
well as to the decision of this Court in Ghanshyam Mishra
(supra) and submits that imposition of moratorium and
consequential approval of resolution plan does not terminate
or put an end to pending proceedings but those were merely
stayed. Legislature has not provided that upon approval of a
resolution plan, all pending proceedings would get
extinguished. Therefore, post expiry of the moratorium
period, pending proceedings such as arbitral proceedings
would stand revived and taken to their logical conclusion.
23.7. Learned senior counsel submits that in the present
case, respondent had lodged its claim before the interim
resolution professional and had also informed about the
pendency of proceedings before the Facilitation Council.
Interim resolution professional had published an information
memorandum on 20.10.2017 mentioning therein a list of
claimants which did not include operational creditors whose
claims were sub-judiced before different judicial fora. Validity
of such claims would be decided after the judicial proceedings
were complete. He submits that after lifting of moratorium,
notices were duly issued to the appellant by the Facilitation
18
Council but the appellant decided not to appear and contest
the proceedings. After the award was passed, appellant did
not challenge the same under Section 34 of the 1996 Act.
Having not challenged the award in the forum designated by
law, he could not have challenged the same by filing
objections to the arbitral award in a proceeding under Section
47 of the CPC. Learned counsel asserts that Section 34 of the
1996 Act is the only acknowledged remedy available to
challenge an award. Appellant had the opportunity to assail
the award under Section 34 of the 1996 Act but he did not do
so. Therefore, filing of application to declare the award a
nullity in execution proceedings instituted by the respondent
for execution of the award is a clear abuse of the process of
law and was rightly rejected by the Executing Court which
decision has been upheld by the High Court. Learned counsel
further submits that since the claim of the respondent was
pending before the Facilitation Council and in view of the
information memorandum issued by the interim resolution
professional, there was no need for the respondent to have
challenged the resolution plan. Therefore, the High Court was
fully justified in rejecting the petition filed by the appellant
19
under Article 227 of the Constitution of India. The appeal is
devoid of any merit and should, therefore, be dismissed.
24. Submissions made by learned counsel for the
parties have received the due consideration of the Court.
25. At the outset, let us examine a few relevant
provisions of the IBC. Section 30 provides for submission of
resolution plan. As per sub-section (1), a resolution applicant
may submit a resolution plan alongwith an affidavit stating
that he is eligible under Section 29A to the resolution
professional prepared on the basis of the information
memorandum in terms of Section 29. Sub-section (2) says
that the resolution professional shall examine each
resolution plan received by him to confirm that such
resolution plan complies with the requirement of clauses (a)
to (f) of the said sub-section. Thereafter the resolution
professional is required under sub-section (3) to present the
resolution plans which are in conformity with the
requirements of sub-section (2) to the committee of creditors
for its approval. Sub-section (4) mandates that the committee
of creditors may approve a resolution plan by vote of not less
than 66 percent of the voting share of the financial creditors
20
after considering its feasibility and viability. The resolution
applicant may also attend such meeting of the committee of
creditors though it shall not have the right to vote unless it is
also a financial creditor (sub-section (5)). Once the resolution
plan is approved by the committee of creditors, the resolution
professional shall submit the same to the adjudicating
authority in terms of sub-section (6).
26. Section 31 deals with approval of resolution plan.
As per sub-section (1), if the adjudicating authority is
satisfied that the resolution plan as approved by the
committee of creditors meets the requirement of sub-section
(2) of Section 30, it shall by order approve the resolution plan.
Once the resolution plan is approved by the adjudicating
authority, it shall be binding on the corporate debtor and its
employees, members, creditors including the central
government, any state government or any local authority to
whom a debt including statutory dues are owed, guarantors
and other stakeholders involved in the resolution plan.
However, before passing an order of approval, the
adjudicating authority has to satisfy itself that the resolution
plan has provisions for its effective implementation. Under
21
sub-section (2), if the adjudicating authority is satisfied that
the resolution plan does not conform to the requirements
referred to in sub-section (1), it may by an order reject the
resolution plan. Sub-section (3) provides that once the
resolution plan is approved under sub-section (1), the
moratorium order passed by the adjudicating authority
under Section 14 shall cease to have effect.
27. Under Section 32, any appeal from an order
approving the resolution plan shall be in the manner and on
the grounds laid down in sub-section (3) of Section 61.
Section 61 provides for appeals and appellate authority. Sub-
section (1) says that any person aggrieved by an order of the
adjudicating authority may prefer an appeal to the National
Company Law Tribunal (NCLT) within thirty days as provided
in sub-section (2). Be it stated that National Company Law
Tribunal (NCLT) constituted under Section 408 of the
Companies Act, 2013 is the adjudicating authority as defined
in Section 5(1) of IBC. Sub-section (3) deals with an appeal
against an order approving a resolution plan under Section
31. It says that such an appeal can be filed on the following
grounds:
22
(i) the approved resolution plan is in contravention
of the provisions of any law for the time being in
force;
(ii) there has been material irregularity in exercise of
the powers by the resolution professional during
the corporate insolvency resolution period;
(iii) the debts owed to operational creditors of the
corporate debtor have not been provided for in the
resolution plan in the manner specified by the
Insolvency and Bankruptcy Board of India
established under Section 188(1);
(iv) the insolvency resolution process costs have not
been provided for repayment in priority to all other
debts; or
(v) the resolution plan does not comply with any
other criteria specified by the Insolvency and
Bankruptcy Board of India.
28. Section 238 of IBC clarifies that provisions of IBC
shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in
force or any instrument having effect by virtue of any such
law.
29. In Essar Steel India Ltd. (supra), a three-Judge
Bench of this Court examined amongst others the role of
resolution applicants, resolution professionals and the
committee of creditors constituted under the IBC as well as
23
the jurisdiction of NCLT and NCLAT qua resolution plans
approved by the committee of creditors. After an elaborate
and exhaustive analysis of various provisions of the IBC, the
Bench concluded that a successful resolution applicant
cannot suddenly be faced with ‘undecided’ claims after the
resolution plan submitted by him has been accepted. This
would amount to a hydra head popping up which would
throw into uncertainty amounts payable by a prospective
resolution applicant. All claims must be submitted to and
decided by the resolution professional so that a prospective
resolution applicant knows exactly what has to be paid in
order that it may then take over and run the business of
corporate debtor. Paragraph 107 of the said decision reads
as under:
107. For the same reason, the impugned NCLAT
judgment [Standard Chartered Bank v. Satish Kumar
Gupta, 2019 SCC OnLine NCLAT 388] in holding that
claims that may exist apart from those decided on
merits by the resolution professional and by the
Adjudicating Authority/Appellate Tribunal can now be
decided by an appropriate forum in terms of Section
60(6) of the Code, also militates against the rationale of
Section 31 of the Code. A successful resolution
applicant cannot suddenly be faced with “undecided”
claims after the resolution plan submitted by him has24
been accepted as this would amount to a hydra head
popping up which would throw into uncertainty
amounts payable by a prospective resolution applicant
who would successfully take over the business of the
corporate debtor. All claims must be submitted to and
decided by the resolution professional so that a
prospective resolution applicant knows exactly what has
to be paid in order that it may then take over and run
the business of the corporate debtor. This the successful
resolution applicant does on a fresh slate, as has been
pointed out by us hereinabove. For these reasons, NCLAT
judgment must also be set aside on this count.
30. An important question arose for consideration in
Ghanshyam Mishra (supra). Again a three-Judge Bench of
this Court examined a question as to whether any creditor
including the central government, state government or any
local authority is bound by the resolution plan once it is
approved by the adjudicating authority under sub-section (1)
of Section 31 of IBC? Corollary to the above question was the
issue as to whether after approval of the resolution plan by
the adjudicating authority, a creditor including the central
government, state government or any local authority is
entitled to initiate any proceeding for recovery of any of the
dues from the corporate debtor which are not a part of the
resolution plan approved by the adjudicating authority. In
25
that case, the Bench concluded by holding that once a
resolution plan is duly approved by the adjudicating
authority under sub-section (1) of Section 31, the claims as
provided in the resolution plan shall stand frozen and will be
binding on the corporate debtor and its employees, members,
creditors, including the central government, any state
government or any local authority, guarantors and other
stakeholders. On the date of approval of the resolution plan
by the adjudicating authority, all such claims which are not
a part of the resolution plan shall stand extinguished and no
person will be entitled to initiate or continue any proceeding
in respect to a claim which is not part of the resolution plan.
The Bench declared that all dues including statutory dues
owed to the central government, any state government or any
local authority if not part of the resolution plan shall stand
extinguished and no proceeding in respect of such dues for
the period prior to the date on which the adjudicating
authority grants its approval under Section 31 could be
continued. Paragraph 102 of the aforesaid decision reads
thus:
102 In the result, we answer the questions framed
by us as under:
26
102.1. That once a resolution plan is duly approved by
the adjudicating authority under sub-section (1) of
Section 31, the claims as provided in the resolution
plan shall stand frozen and will be binding on the
corporate debtor and its employees, members,
creditors, including the central government, any state
government or any local authority, guarantors and
other stakeholders. On the date of approval of
resolution plan by the adjudicating authority, all such
claims, which are not a part of the resolution plan,
shall stand extinguished and no person will be entitled
to initiate or continue any proceedings in respect to a
claim, which is not part of the resolution plan.
* * * * * * *
102.3. Consequently all the dues including the
statutory dues owed to the central government, any
state government or any local authority, if not part of
the resolution plan, shall stand extinguished and no
proceedings in respect of such dues for the period prior
to the date on which the adjudicating authority grants
its approval under Section 31 could be continued.
31. In Ruchi Soya Industries Ltd. (supra), a two-Judge
Bench of this Court referred to the decision in Ghanshyam
Mishra (supra) and thereafter declared that on the date on
which the resolution plan was approved by the NCLT, all
claims stood frozen and no claim, which is not a part of the
resolution plan, would survive.
27
32. A three-Judge Bench of this Court in Ajay Kumar
Radheshyam Goenka (supra) held that a creditor has no
option but to join the process under the IBC. Once the plan
is approved, it would bind everyone under the sun. The
making of a claim under the IBC and accepting the same and
not making any claim will not make any difference in the light
of Section 31 of IBC. Both the situations will lead to Section
31 and the finality and binding value of the resolution plan.
Paragraph 62 of the said decision is extracted hereunder:
62. Thus, from the aforesaid, it is evident that the
creditor has no option but to join the process under the
IBC. Once the plan is approved, it would bind everyone
under the sun. The making of a claim and accepting
whatever share is allotted could be termed as an
“Involuntary Act” on behalf of the creditor. The making
of a claim under the IBC and accepting the same and
not making any claim, will not make any difference in
light of Section 31 IBC. Both the situations will lead to
Section 31 and the finality and binding value of the
resolution plan.
33. In a recent decision, a two-Judge Bench of this
Court decided a contempt application in M/s. JSW Steel Ltd.
Vs. Pratishtha Thakur Haritwal8. Contention of the petitioner
was that respondents had wilfully disobeyed the judgment of
8
2025 INSC 401
28
this Court in Ghanshyam Mishra (supra) by issuing demand
notices pertaining to the period covered by the corporate
insolvency resolution process. In the above context, the
Bench reiterated what was held in Ghanshyam Mishra
(supra) which has been followed in subsequent decisions and
thereafter declared that all claims which are not part of the
resolution plan shall stand extinguished. No person will be
entitled to initiate or continue any proceeding in respect to a
claim which is not part of the resolution plan. Though the
Bench did not take any action for contempt in view of the
unconditional apology made by the respondents nonetheless
the Bench reiterated the proposition laid down in
Ghanshyam Mishra (supra) clarifying that even if any
stakeholder is not a party to the proceedings before the NCLT
and if such stakeholder does not raise its claim before the
interim resolution professional/resolution professional, the
resolution plan as approved by the NCLT would still be
binding on him.
34. Having noticed the relevant provisions of IBC and
the judgments of this Court, let us now deal with the
challenge made in this appeal.
29
35. Respondent had supplied telescopic and type
mounted cranes, 75 ton crawler cranes, hydra and trailors
on hiring basis to the appellant pursuant to two purchase
orders dated 02.06.2011 and 06.06.2011. Case No. 330 of
2014 pertains to 138 numbers of bills under eight work
orders in which the disputed amount was Rs.
1,36,69,981.33; on the other hand Case No. 331 of 2014
pertains to 158 numbers of bills under nine work orders
where the disputed amount was Rs. 22,39,233.00. Thus, the
total disputed amount was Rs. 1,59,09,214.33. Buyer
(appellant) did not make any payment so the entire amount
was claimed as outstanding and due. Initially conciliation
proceedings were initiated by the Facilitation Council but the
buyer unit was not present though it had filed written
submissions stating that on the request of the supplier it had
appointed an arbitrator whereafter arbitration proceedings
had commenced. As an independent arbitration agreement
existed between the parties, Facilitation Council should not
proceed under Section 18(3) of the MSME Act. Already
arbitration process was going on as per the arbitration
agreement. Facilitation Council in its proceedings dated
31.07.2017 noted that it appeared from newspaper reports
30
and order copy of the NCLT that moratorium was declared
under Section 14 of IBC in the matter of State Bank of India
Vs. Electrosteel Steels Ltd. It was decided that the matter
should be kept in abeyance till the moratorium period was
over.
36. We shall now deal with the resolution plan and
revert back to the proceedings of the Facilitation Council
thereafter. The resolution plan was submitted by Vedanta
Ltd. as resolution applicant and is dated 29.03.2018.
Clause 3 contained the mandatory contents of the resolution
plan. Clause 3.2(v) declared that while the liquidation value
of the corporate debtor was Rs. 2,899.98 crores, the admitted
debts of the financial creditors aggregated to approximately
Rs.13,395.25 crores. The liquidation value was not sufficient
to cover the debts of the financial creditors in full. Therefore,
the liquidation value of the operational creditors or the other
creditors or stakeholders of the corporate debtor including
dues of the employees (other than workmen), government
dues, taxes etc. and other creditors and stakeholders was nil.
As such, they would not be entitled to any payment. The
dissenting financial creditors would be entitled to receive
31
21.65 percent of the value of their admitted debt which would
be paid in priority to any payment to the assenting financial
creditors.
37. Clause 3.2(xii)(A) is relevant. It says that
notwithstanding what is contained in the mandatory
contents of the resolution plan, upon approval of the
resolution plan by the NCLT under Section 31 of the IBC, on
and from the effective date all pending proceedings relating
to the winding up of the company i.e. the corporate debtor
shall stand irrevocably and unconditionally abated in
perpetuity and claims in connection with all violation or
breach of any agreement by the corporate debtor shall be
settled at nil value at par with operational creditors.
38. Clause 3.4 provides for a proposal for operational
creditors (excluding employees and workmen). Sub-clause (ii)
says that since the liquidation value is not sufficient to cover
the debts of the financial creditors in full, therefore, the
liquidation value of the operational creditors or the other
creditors etc. was taken as nil. Thus nil payment was
proposed under the resolution plan towards claims of
operational creditors whether filed or not, whether admitted
32
or not and whether or not set out in the provisional balance
sheet or the list of creditors etc. Thus, no source was
identified for such payment under the resolution plan.
39. Heading of Clause 3.8 is treatment of amounts
claimed under ongoing litigations. Clause 3.8(i) states that all
claims arising out of enquiries, investigations, notices,
causes of action, suits, litigations, arbitrations, claims of the
top 30 operational creditors against the corporate debtor in
relation to any period prior to the effective date etc. shall be
settled at nil.
40. The resolution plan as submitted by Vedanta Ltd.
was examined by NCLT and by order dated 17.04.2018
approved the same. It was mentioned in the said order that
the resolution plan had the approval of the committee of
creditors with a voting share of 100 percent. It was clarified
that the moratorium order passed under Section 14 IBC
would cease to have effect as the approved resolution plan
had come into force with immediate effect. Adjudicating
authority i.e. NCLT declared that the approved resolution
plan would be binding on the corporate debtor, its employees,
33
members, creditors, coordinators and stakeholders involved
in the resolution plan.
41. Reverting back to the proceedings before the
Facilitation Council, it is seen that on 16.05.2018,
Facilitation Council noted that the moratorium period of the
corporate insolvency resolution process had expired. The
buyer did not appear in the conciliation process as well as in
the arbitration proceeding. Thereafter, the Facilitation
Council passed the award dated 06.07.2018 holding that
claim of the respondent was genuine. The buyer unit was
liable to pay the outstanding amount of Rs. 1,59,09,214.33
with interest at the rate of 3 times of the prevailing bank rate.
42. At this stage, we may mention that respondent did
not challenge the resolution plan before the NCLAT or before
any other forum. On the other hand, a number of other
operational creditors had challenged the order of the NCLT
dated 17.04.2018 before the NCLAT in Company Appeal (AT)
(Insolvency) No. 175 of 2018. However, the said appeal was
dismissed on 10.08.2018. Similar appeal being Company
Appeal (AT) (Insolvency) No. 265 of 2018 was also dismissed
by the NCLAT vide the order dated 20.08.2018. These orders
34
were challenged before this Court in Civil Appeal No. 1133 of
2019 which was dismissed on 27.11.2019.
43. The decree holder i.e. the respondent filed an
execution petition before the Executing Court for execution
of the award dated 06.07.2018. In the said execution
proceedings being Commercial Execution Case No. 21/2022
(Execution Case No. 77/2018), appellant had filed an
application for declaring the award as a nullity and hence
non-executable in view of the resolution plan approved by the
NCLT. By the order dated 03.03.2023, the Executing Court
noted that the judgment debtor (appellant) had not preferred
any appeal against the award dated 06.07.2018. Instead of
filing such an appeal, appellant had filed application dated
14.05.2019 for dismissing the execution proceedings on the
ground that the award passed by the Facilitation Council was
illegal and non est in the eye of law. Since the appellant did
not file any application under Section 34 of the 1996 Act, the
Executing Court dismissed the application of the appellant
dated 14.05.2019 observing that the appellant was trying to
deprive the decree holder of the fruits of the award by
unnecessarily delaying the execution.
35
44. This order came to be challenged by the appellant
before the High Court in a proceeding under Article 227 of
the Constitution of India. We have already noted the three
issues framed by the High Court for consideration. In so far
the first issue is concerned, High Court is of the view that an
award can be challenged in a proceeding under Section 47
CPC on the very limited ground of the award being a nullity
or void ab intio or suffering from inherent lack of jurisdiction.
However, the High Court opined that if an aggrieved party
does not challenge an award under Section 34 of the 1996
Act, it cannot be permitted to object to its execution by
alleging it to be a nullity though such a plea of nullity can be
entertained if it is of such a grave nature that it is not even
capable of being waived by one or the other party. Therefore,
High Court concluded that the plea of nullity qua an arbitral
award can be raised in a proceeding under Section 47 CPC
but such a challenge would lie within a very narrow compass.
45. In so far the second issue is concerned, High Court
rejected the contention of the appellant that since the award
suffered from patent or inherent lack of jurisdiction,
objection to the award can be taken at the stage of execution
36
without challenging the award under Section 34 of the 1996
Act. While rejecting the said contention, High Court held that
the arbitral proceedings culminating in the award cannot be
said to be suffering from inherent lack of jurisdiction.
46. As regards issue No. 3, High Court examined as to
how the claim of the respondent was dealt with in the
resolution plan. After observing that the respondent was not
included in the top 30 operational creditors whose claims
were settled at nil, High Court held that the Facilitation
Council had the jurisdiction to proceed and pronounce the
award even after approval of the resolution plan. The arbitral
proceedings were initiated prior to the resolution insolvency
date, suspended during the moratorium period and resumed
upon expiry of the moratorium period. High Court further
observed that the approved resolution plan did not determine
the claim of the respondent as nil and that the proceedings
before the Facilitation Council was taken note of in the
resolution plan.
47. High Court is correct in answering the first issue
that a plea of nullity qua an arbitral award can be raised in
37
a proceeding under Section 47 CPC but such a challenge
would lie within a very narrow compass.
48. Section 36 of the 1996 Act deals with enforcement
of arbitral awards. Sub-section (1) says that where the time
for making any application to set aside an arbitral award
under Section 34 has expired, then subject to the provisions
of sub-section (2), such award shall be enforced in
accordance with the provisions of CPC in the same manner
as if it were a decree of the court. As per sub-section (2),
where an application to set aside an arbitral award has been
filed under Section 34, the filing of such an application shall
not by itself render an award unenforceable unless an order
of stay is granted by the court. Therefore, in terms of Section
36 of the 1996 Act, an award can be enforced in accordance
with the provisions of CPC in the same manner as if it were
a decree of a civil court.
48.1. Section 47 CPC deals with questions to be
determined by the court executing decree. As per sub-
section (1), all questions arising between the parties to the
suit in which the decree was passed and relating to the
execution, discharge or satisfaction of the decree shall be
38
determined by the court executing the decree and not by a
separate suit. Execution of decrees and orders is provided for
in Order XXI CPC. The law is well settled that at the stage of
execution, an objection as to executability of the decree can
be raised but such objection is limited to the ground of
jurisdictional infirmity or voidness. The law laid down by this
Court in Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul
Rehman9 is that only a decree which is a nullity can be the
subject matter of objection under Section 47 CPC and not
one which is erroneous either in law or on facts. The aforesaid
proposition of law continues to hold the field.
49. Objection to execution of an award under Section
47 CPC is not dependent or contingent upon filing a petition
under Section 34 of the 1996 Act. High Court was not
justified in taking the view that since the appellant did not
file a petition under Section 34 of the 1996 Act, therefore, it
was precluded from filing an application before the Executing
Court to declare the award as void and hence non-
executable.
9
(1970) 1 SCC 670
39
50. In so far the second and third issues are
concerned, it is by now well settled that once a resolution
plan is duly approved by the adjudicating authority under
sub-section (1) of Section 31, all claims which are not part of
the resolution plan shall stand extinguished and no person
will be entitled to initiate or continue any proceeding in
respect to a claim which is not part of the resolution plan. In
fact, this Court in Essar Steel India Ltd. (supra) had
categorically declared that a successful resolution applicant
cannot be faced with undecided claims after the resolution
plan is accepted. Otherwise, this would amount to a hydra
head popping up which would throw into uncertainty the
amount payable by the resolution applicant. In so far the
resolution plan is concerned, the resolution professional, the
committee of creditors and the adjudicating authority noted
about the claim lodged by the respondent in the arbitration
proceeding. However, the respondent was not included in the
top 30 operational creditors whose claims were settled at nil.
This can only mean that the three authorities conducting the
corporate insolvency resolution process did not deem it
appropriate to include the respondent in the top 30
operational creditors. If the claims of the top 30 operational
40
creditors were settled at nil, it goes without saying that the
claim of the respondent could not be placed higher than the
said top 30 operational creditors. Moreover, the resolution
plan itself provides that all claims covered by any suit, cause
of action, arbitration etc. shall be settled at nil. Therefore, it
is crystal clear that in so far claim of the respondent is
concerned, the same would be treated as nil at par with the
claims of the top 30 operational creditors.
50.1. Lifting of the moratorium does not mean that the
claim of the respondent would stand revived notwithstanding
approval of the resolution plan by the adjudicating authority.
Moratorium is intended to ensure that no further demands
are raised or adjudicated upon during the corporate
insolvency resolution process so that the process can be
proceeded with and concluded without further
complications. View taken by the High Court cannot be
accepted in the light of the clear cut provisions of the IBC as
well as the law laid down by this Court. In view of the
resolution plan, as approved, the claim of the respondent
stood extinguished. Therefore, the Facilitation Council did
not have the jurisdiction to arbitrate on the said claim. Since
41
the award was passed without jurisdiction, the same could
be assailed in a proceeding under Section 47 CPC. View taken
by the High Court that because the appellant did not
challenge the award under Section 34 of the 1996 Act,
therefore, it was precluded from objecting to execution of the
award at the stage of Section 47 of CPC is wholly
unsustainable.
51. Consequently, the view taken by the High Court
that notwithstanding approval of the resolution plan by the
NCLT, the Facilitation Council did not lose jurisdiction to
proceed and pronounce the arbitral award, is erroneous and
contrary to the law laid down by this Court.
52. In that view of the matter, we have no hesitation
to hold that upon approval of the resolution plan by the
NCLT, the claim of the respondent being outside the purview
of the resolution plan stood extinguished. Therefore, the
award dated 06.07.2018 is incapable of being executed.
Consequently, the order dated 03.03.2023 passed by the
Presiding Officer, Commercial Court/District Judge-1,
Bokaro in Commercial Execution Case No. 21 of 2022
(Execution Case No. 77 of 2018) is hereby set aside.
42
Execution proceedings in Commercial Execution Case No. 21
of 2022 (Execution Case No. 77 of 2018) pending in the Court
of Presiding Officer, Commercial Court/District Judge-1,
Bokaro, are hereby quashed. Resultantly, impugned order of
the High Court dated 17.07.2023 is also set aside.
53. Appeal is accordingly allowed. However, there
shall be no order as to cost.
………………………………J.
[ABHAY S. OKA]
.……………………………J.
[UJJAL BHUYAN]
NEW DELHI;
APRIL 21, 2025.
43
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