M/S TATA STEEL LTD
Vs.
VARSHA AND ANOTHER
( Before : Manoj Misra and Manmohan, JJ. )
Civil Appeal Nos. 9052-9053 of 2026 (Arising out of SLP(C) Nos. 24000-24001 of 2026) (@Diary No.36520 of 2019)
Decided on : 17-07-2026
Once Resolution Plan is approved under Section 31 IBC, only claims incorporated therein survive; all others stand extinguished under the "clean slate" doctrine.
A. Insolvency and Bankruptcy Code, 2016 — Section 31 — 'Clean slate' doctrine — Effect of approved Resolution Plan on claims — Upon approval under S. 31(1), claims provided in the Plan stand frozen and are binding on the Corporate Debtor and all stakeholders — Claims not incorporated in the Plan stand extinguished, withdrawn or abated — Resolution Applicant entitled to commence operations free from unforeseen liabilities — Ghanashyam Mishra & Sons v. Edelweiss ARC, (2021) 9 SCC 657, followed. [Para 51]
B. Insolvency and Bankruptcy Code, 2016 — Commercial wisdom of Committee of Creditors — Non-justiciability — Treatment of Operational Creditors' claims and sub-classification thereof, as approved by the Committee of Creditors, held non-justiciable — NCLT/NCLAT jurisdiction circumscribed by the Code; they cannot act as courts of equity — K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 and Essar Steel, (2020) 8 SCC 531, relied on. [Paras 51, 53]
C. Insolvency and Bankruptcy Code, 2016 — Finality of Operational Creditors' List — Notional value of Re. 1 — Final List of Creditors, admitting sub-judice claims at notional value of Re. 1, attained finality as unchallenged by Respondent-Creditor; Intervenor's challenge dismissed as withdrawn and never assailed — Deletion of the qualifying note (subjecting the notional value to adjudication) in the Final List, replaced by a note without such qualification, held to convert the claim into a quantified Re. 1 claim, not one kept alive pending litigation. [Paras 52, 54]
D. Insolvency and Bankruptcy Code, 2016 — Resolution Plan — Treatment of sub-judice claims — Amount payable — Liquidation value being NIL, no amount statutorily payable to Operational Creditors — Plan voluntarily earmarked a Settlement Amount, of which only a specified pro-rata pool was payable to claims crystallised and admitted as on the date of the Final List — Only crystallised claims as on the effective date payable pro-rata; indeterminate/sub-judice claims not entitled to further payment. [Paras 55-56, 61]
E. Insolvency and Bankruptcy Code, 2016 — Resolution Plan — Extinguishment clauses — Sub-judice claims and pending proceedings — Clauses providing for withdrawal/abatement/extinguishment of legal proceedings by Operational Creditors, save to the extent of the Settlement Amount, held to extend to sub-judice claims — No express carve-out found protecting such claims from extinguishment — Pending civil suit and arbitration proceedings held abated/extinguished upon Plan approval. [Para 57]
F. Insolvency and Bankruptcy Code, 2016 — CIRP Regulations, 2016 — Regulation 12(2) — Cut-off for filing/crystallisation of claims — Operational Creditors permitted to file claims only until approval of the Resolution Plan by the Committee of Creditors — Corporate Debtor's liability required to be crystallised and quantified by that date — Subsequent increase in verified claims held impermissible as it would disrupt pro-rata distribution already effected. [Para 58]
G. Insolvency and Bankruptcy Code, 2016 — Rule 11, NCLT Rules, 2016 — Allegation of fraud in securing Plan approval — Allegation of manipulation/fraud in procuring NCLT approval held unsubstantiated in absence of any application filed under Rule 11 seeking recall of the approval order — Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, (2024) 6 SCC 767, distinguished on facts. [Para 53]
H. Insolvency and Bankruptcy Code, 2016 — Operational Creditors, particularly MSMEs — Structural disadvantage — Judicial observation — Court observed that the Code, despite being an improvement over the earlier regime, does not adequately protect small Operational Creditors and MSMEs placed at the bottom of the repayment waterfall — Legislature/Law Commission urged to examine a fair and balanced repayment mechanism. [Paras 62-63]
I. Contract Interpretation — Contra proferentem — Applicability — Principle of contra proferentem and 'face value reservation mechanism' proposed by a party held inapplicable in absence of any ambiguity in the Resolution Plan, which was not itself under challenge. [Paras 59-60]
