Resolution plan extinguishes pre-approval statutory dues and bars recovery proceedings against the successful resolution applicant.

Approval of a resolution plan under the Insolvency and Bankruptcy Code freezes covered claims and binds all stakeholders, including governmental authorities. Statutory dues relating to the period before approval that are not included in the plan stand extinguished, and recovery or demand proceedings for those pre-approval dues cannot be continued against the successful resolution applicant. The Code's overriding effect supports a clean slate for the applicant. Continued pursuit of such demands after the plan's binding effect was brought to notice was treated as contemptuous in nature, though the apology was accepted and no punitive action was taken. The impugned demand notices and related recovery proceedings were quashed.

---

---

Issues: (i) Whether claims and recovery proceedings for statutory dues pertaining to the period prior to approval of the resolution plan could be continued against the successful resolution applicant, and whether such dues stood extinguished if not included in the plan; (ii) Whether continuation of demand and recovery proceedings after the binding effect of the resolution plan was brought to notice amounted to contempt, and what consequential relief followed.

Issue (i): Whether claims and recovery proceedings for statutory dues pertaining to the period prior to approval of the resolution plan could be continued against the successful resolution applicant, and whether such dues stood extinguished if not included in the plan.

Analysis: Once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, the claims covered by the plan stand frozen and bind the corporate debtor, its creditors, and all other stakeholders, including governmental authorities. Claims not forming part of the approved plan stand extinguished, and no proceedings can be initiated or continued for such pre-approval dues. The Code has overriding effect by virtue of Section 238, and the successful resolution applicant is entitled to run the business on a clean slate. The demand notices for the pre-approval period were therefore inconsistent with the approved resolution plan.

Conclusion: The continuation of demands for pre-approval dues was impermissible and illegal, and the impugned recovery action could not be sustained.

Issue (ii): Whether continuation of demand and recovery proceedings after the binding effect of the resolution plan was brought to notice amounted to contempt, and what consequential relief followed.

Analysis: Despite being informed of the governing legal position and the earlier decision covering the petitioner's case, the authorities proceeded with recovery notices and related proceedings. Such continuation was found to be contemptuous in nature. At the same time, the authorities were given the benefit of doubt and the unconditional apology tendered by them was accepted, so no punitive action was taken.

Conclusion: The proceedings were held contemptuous, but no contempt action was directed and the apology was accepted.

Final Conclusion: The impugned demand notices and all proceedings founded on them were quashed, and the petitioner obtained relief against recovery of the pre-resolution-plan dues.

Ratio Decidendi: After approval of a resolution plan, all claims not included in the plan stand extinguished and cannot be pursued by any stakeholder, including governmental authorities, for the period prior to approval.

---