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Electrosteel Steel Limited (Now M/S ESL Steel Limited) v. Ispat Carrier Private Limited

Civil Appeal · 2025 INSC 525Decided 21 Apr 2025
Civil Appeal No. 2896 of 2024 (arising out of SLP (C) No. 15823 of 2023)
Justice Abhay S. Oka · Justice Ujjal Bhuyan

Background

The respondent had an outstanding payment claim against the appellant company before the West Bengal MSME Facilitation Council, and arbitration on that claim began in mid-2017. Around the same time, insolvency proceedings were initiated against the appellant, triggering a moratorium that paused the arbitration. A resolution plan was later approved by the NCLT in April 2018, which settled all claims of the operational creditors (including, in effect, the respondent's) at nil value. Once the moratorium lifted, the Facilitation Council resumed the arbitration (which the appellant did not contest) and passed an award in July 2018 directing payment of over Rs. 1.59 crore. The appellant did not challenge that award directly but resisted it at the execution stage; the executing court and later the High Court both held the award was still enforceable.

Decision Breakdown

The Supreme Court held that once an insolvency resolution plan is approved under Section 31 of the IBC, every claim not included in that plan stands permanently extinguished, and no one may continue any proceeding on such a claim: this "clean slate" principle had already been established in the Court's earlier Essar Steel judgment. Since the respondent's claim was not part of the approved plan, the Facilitation Council lost jurisdiction to arbitrate on it once the plan was approved, making the resulting award void for want of jurisdiction. The Court also held that a judgment debtor can raise this kind of jurisdictional objection at the execution stage under Section 47 of the Civil Procedure Code even without having separately challenged the award earlier. The award and the execution proceedings were both quashed.

Lesson Learnt

Once a company's insolvency resolution plan is approved, any creditor claim left out of it is wiped out for good. It cannot be revived through a separate arbitration or enforced later, no matter how that arbitration was proceeding when the insolvency process began.

Official source (sci.gov.in)View Judgment (PDF)

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