The Hon’ble Supreme Court, in the recent case of Electrosteel Steel Ltd. v. Ispat Carrier (P) Ltd., 2025 SCC OnLine SC 829, held that an arbitral award passed post the Corporate Insolvency Resolution Process (“CIRP”), wherein the underlying claim stood extinguished under an approved resolution plan, is void and non-executable.

Brief Facts
In the present case, the Respondent, a micro-enterprise supplier, had initiated arbitration under the MSME Act, 2006, before the West Bengal Facilitation Council for outstanding dues amounting to ₹1.59 Crore. However, the proceedings were stayed in view of the moratorium imposed by the NCLT in July, 2017, after initiation of CIRP against the Appellant.

A resolution plan submitted by Vedanta Ltd. was approved in April, 2018, under Section 31 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), wherein the claims of all operational creditors, including the Respondent, were settled at ‘Nil’. Post-CIRP, the Facilitation Council resumed proceedings and passed an arbitral award in July, 2018. The Appellant never challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”), but resisted its execution under Section 47 of the CPC, citing it as a nullity in view of the binding resolution plan.

The Commercial Court and the Jharkhand High Court rejected the Appellant’s objections, holding that since no Section 34 challenge was filed, the award could not be questioned at the execution stage under Section 47 of the CPC.

Supreme Court’s Verdict
The Hon’ble Supreme Court clarified that the award passed was without jurisdiction, as the claim, not being part of the approved resolution plan, stood extinguished. The Court, relying on precedents, such as Ghanashyam Mishra & Sons v. Edelweiss ARC (2021) 9 SCC 657, COC of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531, and Ajay Kumar Radheyshyam Goenka v. TFCI Ltd., (2023) 10 SCC 545, reaffirmed that once a resolution plan is approved, it binds all stakeholders, and any claims not forming part of the plan stand extinguished and are not revived by lifting of the moratorium. Therefore, the Court held that the Facilitation Council lacked jurisdiction to adjudicate a claim that had stood extinguished post-resolution.

Further, the Court, relying on Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman, (1970) 1 SCC 670), also held that such an award could indeed be challenged at the execution stage under Section 47 of the CPC on grounds of nullity, even without recourse to Section 34 of the A&C Act. Lastly, the Court reiterated the “clean slate” doctrine for resolution applicants, cautioning that permitting extinguished claims to be enforced post-resolution would defeat the objectives of the IBC.

Conclusion
This judgment underscores the finality and binding effect of resolution plans under IBC, reiterates the supremacy of IBC over other statutes, and reinforces the limited but effective scope of challenging arbitral awards at the execution stage where jurisdiction is lacking.

By - Gurdev Singh Tung