Extinguishment of Pre-CIRP Claims Post Resolution Plan Approval: DVC Barred from Recovery Beyond Plan Allocation

NCLAT held that upon approval of the Resolution Plan, all pre-CIRP claims stood extinguished, thereby barring DVC from recovering any amount beyond what was allocated to it under the Plan.

The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, recently adjudicated an appeal and reaffirmed that once a Resolution Plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, all pre-CIRP claims not incorporated in the plan stand extinguished. Any attempt by a creditor—including statutory authorities—to recover such claims post-approval is legally impermissible. Further, the execution of a new agreement post-resolution does not revive or legitimise claims that have already been extinguished under the approved plan.

In the appeal before the National Company Law Appellate Tribunal (NCLAT), the Appellant, Damodar Valley Corporation (DVC), challenged the order of the National Company Law Tribunal (NCLT), Kolkata, dated 14.09.2023, which had allowed I.A. No. 1336/2022 and I.A. No. 463/2022. These applications had been filed in a pending proceeding under Section 7 of the Insolvency and Bankruptcy Code (IBC) against Mackeil Ispat & Forging Ltd., initiated by the State Bank of India. The dispute centred around electricity dues that arose prior to the commencement of the Corporate Insolvency Resolution Process (CIRP) on 03.02.2020 under a Power Purchase Agreement entered into in 2009. During CIRP, DVC’s claim for ₹2.32 crore was admitted, but only ₹4.64 lakh was provided under the Resolution Plan, which was approved on 21.09.2021.

Following the plan's approval, DVC demanded the full pre-CIRP dues and delayed payment surcharges as a condition for resuming electricity supply. Under protest, the Successful Resolution Applicant (SRA) paid ₹1.88 crore and subsequently sought a refund by filing I.A. No. 463/2022. The Adjudicating Authority, relying on the Supreme Court’s judgment in Ghanashyam Mishra and Sons private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534, held that once a Resolution Plan is approved under Section 31(1) of the IBC, all prior claims not incorporated therein stand extinguished. Accordingly, DVC was directed to refund the excess amount recovered, and further disconnection threats were restrained.

DVC argued on appeal that a new Power Purchase Agreement dated 03.01.2022 had created independent obligations and that the Adjudicating Authority lacked jurisdiction to entertain the refund claim. The NCLAT, however, affirmed the jurisdiction of the Adjudicating Authority under Section 60(5)(c) of the IBC, noting that the dispute related to the implementation of the Resolution Plan and post-approval conduct. The Tribunal rejected the argument based on estoppel, clarifying that entering a new PPA did not revive extinguished claims and that DVC could not benefit from forcing the Respondent to make payments under duress.

While upholding the NCLT’s core findings, the NCLAT modified the order to limit the refund direction strictly to pre-CIRP dues, observing that the record lacked clarity or bifurcation of amounts pertaining to the CIRP period. It was held that any dues attributable to the CIRP period were not refundable. Consequently, DVC was directed to refund only the pre-CIRP portion of the amount collected, within 30 days from the date of the order.

The appeal was thus disposed of with a clear reaffirmation that post-approval recovery of pre-CIRP claims is barred under the IBC and that operational creditors, including statutory authorities such as DVC, are bound by the terms of the Resolution Plan.

Ms. Madhumita Bhattacharjee, Advocate, represented the Appellant.

Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra and Mr. Karan Bhootra, Advocates, appeared for Respondent No. 1.

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Judgment