Clean-slate insolvency resolution extinguishes unclaimed pre-resolution claims and restricts collateral proceedings against the corporate debtor.
A writ petition may be entertained despite an alternative remedy where the impugned action is alleged to be wholly without jurisdiction and contrary to a statutory embargo. Under the Insolvency and Bankruptcy Code, approval of a resolution plan is treated as a clean-slate resolution: pre-resolution claims not included in the plan stand extinguished, and Sections 31, 32A and 238 give the Code overriding effect. Continuation of pre-resolution civil or revenue proceedings against the corporate debtor was treated as an impermissible collateral attack on the approved plan, with maintainability required to be examined first by the concerned forum before further action.
Issues: (i) whether the writ petition was maintainable despite the availability of an alternative remedy, where the impugned proceedings were alleged to be without jurisdiction and contrary to the Insolvency and Bankruptcy Code, 2016; (ii) whether approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016 extinguished pre-resolution claims and barred continuation or initiation of collateral proceedings against the corporate debtor in its new avatar.
Issue (i): Whether the writ petition was maintainable despite the availability of an alternative remedy, where the impugned proceedings were alleged to be without jurisdiction and contrary to the Insolvency and Bankruptcy Code, 2016.
Analysis: The availability of an alternative efficacious remedy is not an absolute bar where the impugned action is alleged to be wholly without jurisdiction and in direct contravention of a statutory embargo. On that basis, the Court found force in entertaining the petition at the threshold.
Conclusion: The writ petition was held maintainable for consideration.
Issue (ii): Whether approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016 extinguished pre-resolution claims and barred continuation or initiation of collateral proceedings against the corporate debtor in its new avatar.
Analysis: Upon approval of a resolution plan, the statutory scheme under Section 31, Section 32A and Section 238 of the Insolvency and Bankruptcy Code, 2016 contemplates a clean-slate resolution, with prior claims not forming part of the plan standing extinguished and the code operating with overriding effect. The Court treated continuation of pre-resolution civil and revenue proceedings as an impermissible collateral attack on the approved resolution plan and directed that maintainability must first be examined by the concerned forum before any further action. Liberty was also reserved to seek vacation of adverse interim orders.
Conclusion: Pre-resolution claims not included in the approved resolution plan were treated as extinguished, and continuation of collateral proceedings was held impermissible without first examining maintainability.
Final Conclusion: The petition was disposed of with directions requiring the concerned courts and authorities to decide maintainability at the first instance in light of the Insolvency and Bankruptcy Code, 2016, while leaving the merits of the impugned proceedings open.
Ratio Decidendi: After approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016, claims not forming part of the plan stand extinguished and collateral proceedings cannot continue without first testing their maintainability in light of the statutory embargo and overriding effect of the Code.
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