The Supreme Court has held that while claims not included in an approved resolution plan stand extinguished, a limited plea of set-off may still be raised as a defence in arbitration.
The bench of Justice Dipankar Datta and Justice Augustine George Masih reaffirmed the settled principle under Section 31 of the IBC that once a resolution plan is approved, it becomes binding on all stakeholders, and any claim not included in the plan stands extinguished. Relying on its earlier ruling in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., the Court emphasized the “clean slate” doctrine.
The issue revolved around whether a counterclaim—never submitted during the Corporate Insolvency Resolution Process (CIRP)—could survive after approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case arose from a 2017 contract for setting up grid-connected rooftop solar power plants in West Bengal. Subsequently, disputes emerged between the parties regarding performance of contractual obligations, leading to arbitration proceedings initiated by the corporate debtor through its resolution professional.
During the pendency of arbitration, the respondent filed a counterclaim. However, crucially, this claim was never submitted before the Resolution Professional during the CIRP, which concluded with approval of a resolution plan by the National Company Law Tribunal (NCLT) in October 2023.
Later, the arbitral tribunal rejected the counterclaim through an interim award, holding that all claims not forming part of the resolution plan stood extinguished. This view was upheld by a Single Judge of the Calcutta High Court. However, the Division Bench reversed the decision, directing continuation of arbitral proceedings and leaving the issue open for final determination.
The Court held that the respondent’s counterclaim could not be independently pursued or enforced, as it was not part of the resolution plan.
Examining the terms of the resolution plan, particularly Clause 12.4.1, the Court noted that while it expressly barred all claims and counterclaims for payment or settlement, it did not explicitly prohibit raising a set-off as a defence.
Taking an equitable approach, the Court permitted the respondent to raise the plea of set-off in arbitration proceedings—but strictly as a defensive mechanism.
The court held that no affirmative relief or recovery can be sought on the basis of the extinguished claim, set-off is limited to reducing or negating the appellant’s claim. Any surplus in favour of the respondent cannot be recovered. If arbitration is withdrawn, the set-off plea also fails.
The Supreme Court partly allowed the appeal, holding that while the IBC extinguishes claims not included in a resolution plan, it does not completely bar their limited use as a defence, unless expressly prohibited.
Case Details
Case Title: Ujaas Energy Ltd. Versus West Bengal Power Development Corporation Ltd.
Citation: JURISHOUR-455-SC-2026
Case No.: SLP (CIVIL) NO. 29651 OF 2024
Date: 20/03/2026
