Permitting Claims To Be Reopened Once Resolution Plan Is Approved By CoC & Adjudicating Authority Violates IBC: Supreme Court

The Supreme Court held that once the Resolution Plan is approved by the Committee of Creditors (CoC) and the Adjudicating Authority, permitting claims to be reopened which were not a part of the RfRP (Request for Resolution Plan) or Resolution Plan, violates the Insolvency and Bankruptcy Code, 2016 (IBC).

The Court held thus in a batch of six Civil Appeals preferred under Section 62 of the IBC by erstwhile promoters and various Operational Creditors of the Corporate Debtor against the common final Judgment of the National Company Law Appellate Tribunal (NCLAT).

The three-Judge Bench comprising Chief Justice of India (CJI) B.R. Gavai, Justice Satish Chandra Sharma, and Justice K. Vinod Chandran observed, “Once the Resolution Plan has been approved by the CoC and the Adjudicating Authority under Section 31(2), permitting any claims to be reopened which were not a part of the RfRP or Resolution Plan, in our view, will be doing violence to the provisions of IBC. In that view of the matter, the arguments of the CoC as well as the original promoters in this regard are liable to be rejected.”

The Bench elucidated that once a Resolution Plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31 of the IBC, the claims as provided in the Resolution Plan shall stand frozen and will be binding on the Corporate Debtor, its employees, members, creditors including the Central Government etc.

Senior Advocates Dhruv Mehta, Balbir Singh, Advocates Arjun Asthana, and Manu Beri appeared for the Appellants while Solicitor General Tushar Mehta, Senior Advocates Navin Pahwa, Pinaki Misra, Neeraj Kishan Kaul, and Gopal Jain appeared for the Respondents.

Court’s Observations

The Supreme Court after hearing the contentions of the counsel, noted, “It can thus be seen that an appeal against an order approving a Resolution Plan would be available before the NCLAT only when it is found that the approved resolution plan is in contravention of the provisions of any law for the time being in force or there has been any material irregularity in exercise of powers by the resolution professional during the corporate insolvency resolution period or that the debts owed to OCs of the Corporate Debtor have not been provided for in the resolution plan in the manner specified by the Board or that the insolvency resolution process costs have not been provided for repayment in priority to all other debts or the resolution plan does not comply with any other criteria specified by the Board.”

The Court said that Section 32A of the IBC which begins with a non-obstante clause provides that the liability of the Corporate Debtor for an offence committed prior to the commencement of the CIRP shall cease, and the Corporate Debtor shall not be prosecuted for such an offence from the date the Resolution Plan has been approved by the Adjudicating Authority under Section 31 of the IBC, if the Resolution Plan results in the change in the management or control of the Corporate Debtor or if the erstwhile promoter or any other person who has been retained has not been found to have abetted or conspired in the commission of the offence.

“It further provides that no action shall be taken against the properties of the Corporate Debtor in relation to an offence committed prior to the commencement of the CIRP of the Corporate Debtor, where such property is covered under a Resolution Plan approved by the Adjudicating Authority under Section 31 of the IBC”, it added.

The Court further observed that as per the IBC and as is the common experience, after the Resolution Plan is accepted under Section 31 of the IBC by the Adjudicating Authority, the same does not achieve finality unless the Appeals under Section 61 of the IBC by the Appellate authority and by the Apex Court under Section 62 of the IBC are decided.

“It also cannot be ignored that in certain cases, the Resolution Plan may not be implemented and the matter may lead to liquidation proceedings. … In the present matter itself, it can be seen that when the matter was first decided by this Court by judgment and order dated 2nd May 2025, this Court had directed the liquidation proceedings to be initiated against the Corporate Debtor”, it remarked.

The Court said that the dominant purpose of the IBC is to resort to the liquidation proceedings as the last option and if the contention of the erstwhile promoters-cum-directors that the CoC ceases to exist after the Resolution Plan is accepted, then, it will lead to an anomalous situation.

“It may lead to a situation wherein though the Resolution Plan is approved by the Adjudicating Authority, however it is not implemented for ‘a’ reason or ‘b’ reason thereby leaving the creditors high and dry. If the contention is accepted, the creditors would not be in a position to take any steps that are found necessary for realizing its dues from the Corporate Debtor. The said situation may lead to a state of limbo. Such cannot be the intention of the legislature which has enacted the law with the dual purpose of making the Corporate Debtor an on-going concern and realizing the dues of the Corporate Debtor”, it added.

Conclusion

The Court observed that the SRA cannot be forced to deal with claims that are not a part of the RfRP issued in terms of Section 25 of the IBC or a part of its Resolution Plan.

“We therefore do not find any merit in the contention of either the ex-promoters-cum-directors of the Corporate Debtor or the CoC in that regard. If such a contention is accepted, it will frustrate the very purpose for which the IBC came to be enacted”, it concluded.

Accordingly, the Apex Court dismissed the Appeals and upheld the NCLAT’s Judgment.

Cause Title- Kalyani Transco v. M/s Bhushan Power and Steel Limited and Others (Neutral Citation: 2025 INSC 1165)

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