Approved resolution plans bar omitted counterclaims, but set-off may still be raised defensively in arbitration absent clear exclusion.

An approved resolution plan under the Insolvency and Bankruptcy Code extinguishes claims not incorporated in the plan, so a counterclaim omitted from the plan cannot be pursued for affirmative recovery after approval. The resolution-plan clause barring further payments and settlements was read strictly and did not expressly exclude the limited defensive use of the same claim by way of set-off in pending arbitration. The counterclaim therefore remained barred as an independent monetary claim, but set-off could still be raised only as a defence without any positive relief.

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Issues: Whether, after approval of a resolution plan under the Insolvency and Bankruptcy Code, a respondent whose counterclaim was not included in the plan can still be permitted to raise set-off before the arbitral tribunal as a defence.

Analysis: The binding effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 freezes claims as provided in the plan and extinguishes claims not forming part of it. A counterclaim not incorporated in the resolution plan cannot survive as an independent claim or be pursued for affirmative monetary relief after approval of the plan. However, the relevant clause in the resolution plan barred further payments and settlements on such claims, including counterclaims, but did not expressly bar use of the same facts or claim as a defensive plea of set-off in pending arbitration. Reading the plan strictly, and applying the principle that exclusion of one thing may imply exclusion only of what is clearly covered, the defensive use of set-off was held to be distinct from an enforceable counterclaim.

Conclusion: The respondent cannot independently prosecute the counterclaim after approval of the resolution plan, but may raise set-off only as a defence, without obtaining any positive or affirmative relief.

Final Conclusion: The impugned order was modified, and the appeal was allowed only to the limited extent of permitting set-off as a defensive plea while preserving the extinguishment of any independent claim for recovery.

Ratio Decidendi: An approved resolution plan extinguishes non-included claims for purposes of affirmative recovery, but a resolution-plan clause that bars payments and settlements does not necessarily exclude the limited use of set-off as a defence unless such exclusion is expressed or clearly implied.

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