2025 (9) TMI 877 - AT - IBC

Approved resolution plan under Section 31(1) IBC extinguishes prior SICA/BIFR scheme rights; clean-slate principle binds stakeholders

NCLAT: The Tribunal held that an approved resolution plan under s.31(1) IBC supersedes and extinguishes rights under a prior sanctioned SICA/BIFR scheme; ... Approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code (IBC) supersedes and/or extinguishes the rights and concessions granted under a prior sanctioned scheme under the erstwhile SICA/BIFR regime - alleged failure of the BIFR scheme, pertaining to which allegations and counter allegations are being labelled by the parties against each other - HELD THAT:- It appears to be admitted to the parties that after approval of the BIFR scheme the same could not be acted upon by the parties and due to the pressure on the appellant, he was compelled to move an application under Section 10 of the IBC. Section 31(1) of the IBC stipulates that an approved resolution plan is binding on all the stakeholders including creditors. The clean slate principle ensures that the SRA, which assumes control of the CD, free from undisclosed or unaddressed liabilities should receive the CD without any further encumbrance and it is on the principle of value maximisation and revival of the CD and also on the principle that SRA must not come across a situation which was not contemplated by it, any past claim could not be claimed. Hon’ble Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Assets Reconstruction Company Ltd. & Ors. [2021 (4) TMI 613 - SUPREME COURT] categorically held that all claims not forming part of the approved resolution plan stand extinguished upon approval of the same. In CoC of Essar Steel India Ltd. vs. Satish Kumar Gupta & Ors., [2019 (11) TMI 731 - SUPREME COURT], Hon’ble Supreme Court again highlighted the binding nature of the resolution plan so far as all stakeholders are concerned, affirming that the CoC’s commercial wisdom in approving the plan is paramount and not subject to judicial interference unless seems violative of Section 30(2) of the Code. In Ebix Singapore Pvt. Ltd. vs. CoC of Educomp Solutions Ltd., [2021 (9) TMI 672 - SUPREME COURT], the Hon’ble Supreme Court reinforced the finality of approved resolution plans holding that modifications or withdrawals therein after its approval is impermissible extending the principle of clean slate to the extinguishment of uncrystallised or omitted claims, also. Hon’ble Supreme Court in Vaibhav Goyal & Anr. vs. Deputy Commissioner of Income tax, [2025 (3) TMI 1052 - SUPREME COURT] again reaffirm the clean slate principle by holding that even uncrystallised statutory dues are extinguished, if the same have not been claimed during the course of CIRP. The BIFR originated claim, have merged into the IBC framework and should have been claimed during the CIRP and when these claims/dues have not been claimed by either side they stand extinguished, by the approval of resolution plan and could not be claimed now. Now after the approval of the resolution plan, can only claim their rights under the resolution plan and not otherwise. In view of above no error appears to have been made by Ld. Tribunal in holding that the resolution plan approved by it has surpasses and supersedes the BIFR scheme and the terms in the resolution plan, qua the Respondent Bank shall be binding on it. However, we extend this proposition by adding that appellant would also be bound by the terms of the resolution plan which has been approved by none other than the appellant itself, having more than 96% of voting share in the CoC and subsequently by the adjudicating authority. There are no merit in the appeal. In result the appeal is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code (IBC) supersedes and/or extinguishes the rights and concessions granted under a prior sanctioned scheme under the erstwhile SICA/BIFR regime. 2. Whether financial claims arising prior to commencement of CIRP (including differential interest credited/debited by a creditor) that are not included in or crystallised under the approved resolution plan survive approval of the plan or stand extinguished by the 'clean slate' principle. 3. Whether a creditor who held dominant voting share in the Committee of Creditors and had opportunity to file/quantify its claim during CIRP can resurrect a pre-CIRP financial claim after approval of the resolution plan. 4. Proper interpretation of expressions in the approved resolution plan such as specific term sheets for a creditor (dated from admission) and provisions under the heading 'Contingent Liabilities' - whether they incorporate and preserve all unimplemented provisions of the earlier BIFR scheme or only certain statutory/unsecured liabilities. 5. Whether the adjudicating authority erred in partially allowing refund/adjustment of differential interest for a specified pre- and peri-CIRP period where the approved resolution plan expressly fixed interest rate and effective date for the concerned creditor. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Supremacy of an approved resolution plan over a prior BIFR/SICA-sanctioned scheme Legal framework: Section 31(1) IBC makes an approved resolution plan binding on the corporate debtor and all stakeholders; Section 238 IBC provides for overriding effect over inconsistent laws; transitional provisions deal with migration from SICA/BIFR regimes. Precedent treatment: Followed and applied - principles in Ghanashyam Mishra & Sons (finality and clean slate), CoC of Essar Steel (binding nature and commercial wisdom of CoC), Ebix Singapore (extinguishment of omitted/uncrystallised claims), Swiss Ribbons (IBC's objective replaces SICA), and related Appellate Tribunal jurisprudence (Jet Airways). Interpretation and reasoning: The approved resolution plan expressly set out terms qua the creditor with an operative date from admission (25.05.2017), distinct from the effective date in the BIFR scheme; absence of an explicit provision in the resolution plan adopting BIFR terms indicates the CoC did not intend to carry forward the BIFR scheme in toto. Allowing the continued application of BIFR concessions in addition to the resolution-plan obligations would permit selective acceptance of benefits without corresponding obligations, defeating the negotiated trade-offs and the plan's finality. Ratio vs. Obiter: Ratio - an approved resolution plan supersedes a prior BIFR scheme to the extent it addresses the same rights/obligations and is binding under Section 31(1); Obiter - observations on policy reasons for not allowing selective retention of BIFR concessions without reciprocal compliance. Conclusion: The resolution plan approved under IBC supersedes the prior BIFR scheme insofar as the plan contains explicit and separate terms for the creditor; unadopted BIFR concessions do not continue automatically post-approval. Issue 2 - Extinguishment of pre-CIRP claims not included in the approved resolution plan (Clean Slate Principle) Legal framework: Section 31(1) IBC; regulations governing claims submission during CIRP; clean slate principle underlying IBC's objective to provide the resolution applicant a CD free from undisclosed/unaddressed liabilities. Precedent treatment: Followed - Ghanashyam Mishra (claims not part of approved plan stand extinguished), Ebix (no post-approval modifications/withdrawals), Essar (binding nature of plan), Jet Airways (contingent/undecided claims barred if not incorporated). Interpretation and reasoning: Financial claims existing prior to CIRP, including differential interest, are within the ambit of 'claims' under IBC and must be lodged/quantified during CIRP. The creditor having dominant CoC share had the opportunity to include such claims; approval without inclusion thereby freezes claims and extinguishes omitted pre-CIRP claims to preserve finality and viability of plan. Treating failed prior-scheme claims as independent post-approval causes of action would undermine the code's objectives and the 'clean slate' principle. Ratio vs. Obiter: Ratio - pre-CIRP claims not incorporated in an approved resolution plan are extinguished and cannot be resurrected post-approval; Obiter - references to the transitional interplay between SICA repeal and IBC are explanatory. Conclusion: The differential interest claim arising from the prior BIFR scheme, which was not part of the approved resolution plan, stood extinguished upon approval of the plan and cannot be revived thereafter. Issue 3 - Resurrecting claims by a creditor who had opportunity to participate in CIRP/CoC Legal framework: Claim filing/verification regime during CIRP and Regulation 12 (proof of claim); voting and decision-making powers of CoC; Section 31(1) binding effect. Precedent treatment: Applied - courts emphasise that claims must be tabled in CIRP and cannot be belatedly raised after plan approval; Ghanashyam Mishra reasoning that omission is fatal post-approval. Interpretation and reasoning: Where a creditor holding significant voting share in CoC had both knowledge and opportunity to marshal/quantify its claim in the CIRP and did not ensure its inclusion in the approved plan, it cannot be permitted later to reclaim that claim. Permitting resurrection would negate the negotiated allocations and commercial assessments underpinning the approved plan. Ratio vs. Obiter: Ratio - a creditor who had opportunity in CIRP to include a claim and did not do so cannot later resurrect it after plan approval. Conclusion: The creditor's demand for refund/recovery of amounts credited pre-CIRP was barred because the creditor had opportunity during CIRP/CoC to include the claim in the resolution process and the approved plan did not incorporate it. Issue 4 - Construction of resolution-plan clauses: specific creditor terms v. 'Contingent Liabilities' clause Legal framework: Principles of contractual and commercial interpretation of resolution plans; requirement that plan terms be explicit to be binding; distinction between specific operative clauses and general contingent-liability provisions. Precedent treatment: Consistent with Tribunal and Supreme Court emphasis on the specific terms of approved plans governing obligations; not departed from. Interpretation and reasoning: Clauses in the resolution plan that explicitly stipulate the creditor's interest rate and effective date (from admission) demonstrate the intended regime governing that creditor. The 'Contingent Liabilities' heading, by its language and placement, pertains to statutory liabilities and unsecured creditors; it cannot be read to re-import all concessions of the prior BIFR scheme in the absence of express incorporation. A contrary reading would permit selective appropriation of BIFR benefits without compliance with reciprocal conditions, which the plan's separate treatment of creditor terms rebuts. Ratio vs. Obiter: Ratio - resolution-plan terms must be read as a whole; specific operative terms supersede prior inconsistent concessions; contingent-liabilities clause construed narrowly as addressing statutory/unsecured claims unless expressly broader. Conclusion: The resolution plan's specific terms govern the creditor relationship and do not incorporate the BIFR scheme's concessions in full; contingent-liabilities language is confined to statutory/unsecured liabilities and does not preserve all unimplemented BIFR concessions vis-à-vis the creditor. Issue 5 - Liability for differential interest for specific periods despite plan terms Legal framework: Binding terms of approved resolution plan (interest rate, effective date), and the obligation to refund interest charged contrary to the plan for dates post-admission if deviation occurred. Precedent treatment: Applied - plan terms are binding and deviations must be remedied to conform to the plan; yet pre-plan deviations that were not claimed remain extinguished. Interpretation and reasoning: The Tribunal correctly held that overcharging of interest in deviation from the approved plan for the period from admission to a specified date (25.05.2017 to 28.08.2018 as found) warranted refund/adjustment to the extent inconsistent with the plan's express terms. However, amounts credited pre-CIRP (earlier differential credited prior to admission) which were not incorporated in the approved plan could not be reclaimed or re-characterised post-approval by either party. Thus, partial allowance for peri-CIRP deviations (where plan governs) and rejection for pre-CIRP omitted claims align with IBC's finality principle. Ratio vs. Obiter: Ratio - where an approved resolution plan prescribes interest and effective date, deviations from those terms during the plan-applicable period are remediable; pre-CIRP claims omitted from plan are extinguished. Conclusion: The Tribunal's partial direction to refund differential interest for the plan-applicable period is tenable; claims for differential interest arising prior to admission and not included in the plan could not be sustained and were properly held extinguished. Overall Conclusion The Court affirmed that an approved resolution plan under Section 31(1) IBC supersedes prior BIFR/SICA-sanctioned schemes with respect to rights and obligations expressly dealt with in the plan; the clean slate principle extinguishes pre-CIRP claims not incorporated into the approved plan; a creditor with the opportunity to include claims in CIRP cannot resurrect them post-approval; resolution-plan clauses must be read as a whole and contingent-liability language construed in context; and remediation is limited to deviations within the plan-applicable period, while omitted pre-admission claims stand extinguished. The appellate court dismissed the challenge to the Tribunal's order subject to the limited refund direction for peri-plan overcharging as recorded by the Tribunal.