Approved resolution plan extinguishes covered claims and bars continuation of arbitration on settled insolvency claims.

An approved resolution plan under the Insolvency and Bankruptcy Code binds the corporate debtor and all stakeholders under Section 31(1), and claims not surviving within the plan stand extinguished. Where the plan specifically covers contingent or sub judice claims and assigns them nil value, such claims cannot continue independently in arbitration after approval. The Delhi High Court also noted that writ interference may be justified where an arbitral tribunal proceeds despite inherent lack of jurisdiction. On that basis, proceedings founded on claims already dealt with and extinguished under the resolution process were held unable to continue.

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Issues: (i) Whether the claims covered by the approved resolution plan stood extinguished so as to bar continuation of the arbitral proceedings; (ii) whether the arbitral tribunal's refusal to terminate the proceedings suffered from patent lack of jurisdiction warranting interference under Articles 226 and 227 of the Constitution of India.

Issue (i): Whether the claims covered by the approved resolution plan stood extinguished so as to bar continuation of the arbitral proceedings?

Analysis: The resolution process under the Insolvency and Bankruptcy Code, 2016 is a collective proceeding in rem, and once a resolution plan is approved under Section 31(1), it binds the corporate debtor and all stakeholders. Claims not forming part of the resolution plan stand extinguished, and a successful resolution applicant cannot be confronted with undecided or residual claims after approval. The plan in the present case specifically dealt with contingent and sub judice claims, including the respondent's claim, and treated such claims as operational debt payable at nil value. The claim was therefore not left outside the resolution framework merely because it was described as contingent or pending adjudication.

Conclusion: Yes. The respondent's claim stood governed by the approved resolution plan and could not survive independently to support continuation of the arbitration.

Issue (ii): Whether the arbitral tribunal's refusal to terminate the proceedings suffered from patent lack of jurisdiction warranting interference under Articles 226 and 227 of the Constitution of India?

Analysis: While writ interference in arbitral matters is ordinarily circumspect, it remains available where the impugned order is patently perverse or suffers from inherent lack of jurisdiction. Once the resolution plan had attained finality and extinguished the claim, the arbitral tribunal had no jurisdiction to proceed as if the claim survived dehors the plan. The tribunal's approach treated the contingent status of the claim as a reason to disregard the binding effect of the resolution plan, which was inconsistent with the statutory scheme and the approved plan's terms. The challenge was therefore not a mere dispute on merits but one going to jurisdiction.

Conclusion: Yes. The impugned order was vulnerable for patent lack of inherent jurisdiction and was liable to be set aside.

Final Conclusion: The approved resolution plan prevailed over the pending arbitral claims, and the arbitral proceedings could not be allowed to continue in respect of claims already dealt with and extinguished under the insolvency resolution process.

Ratio Decidendi: Once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, all claims not surviving within the plan stand extinguished, and any adjudicatory forum lacking insolvency jurisdiction cannot continue proceedings on such extinguished claims.

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