2026 INSC 717 Civil Appeal Nos.9052-9053 of 2026 Page 1 of 29

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos . 9052-9053 OF 2026 (Arising out of SLP(C) Nos. 24000-24001 OF 2026)

(@Diary No.36520 Of 2019)

M/S TATA STEEL LTD. .…. APPELLANT

VERSUS

VARSHA & ANR. ….RESPONDENTS

J U D G M E N T

MANMOHAN, J.

1. Delay condoned

2. Leave granted.

3. Present Civil Appeals have been filed by the Appellant-Successful

Resolution Applicant (‘Appellant-SRA’) challenging the orders dated 28

th

March

2019 and 9

th

July 2019 passed by the High Court of Bombay, Nagpur Bench in

W.P.(C) No.8620 of 2018 and Miscellaneous Civil Application No. 649 of 2019.

By the said orders, the High Court dismissed the Writ Petition and Review

Application filed by the Appellant-SRA and permitted the recovery suit being Civil

Suit No. 153 of 2011 filed by one of the Operational Creditors (Respondent No.1-

Varsha), to proceed notwithstanding the approval of the Resolution Plan.

Civil Appeal Nos.9052-9053 of 2026 Page 2 of 29

4. By order dated 27

th

August 2021, this Court permitted another Operational

Creditor, Masyc Projects Private Limited (‘Intervenor-Masyc’) to address

submissions confined to the limited issue as to whether the Operational Creditors

may enforce claims for past dues by way of civil suit/arbitration, subsequent to

approval of the Resolution Plan?

BRIEF FACTS

5. Prior to the initiation of Corporate Insolvency Resolution Process (‘CIRP’)

against the corporate debtor, Bhushan Steel Limited (‘BSL’), Respondent No.1-

Varsha instituted a summary Civil Suit against BSL seeking recovery of Rupees

Thirty-Eight Lakh Eighty-Nine Thousand Six Hundred Seventy-Four and Fourteen

Paise only (₹38,89,674.14/-) together with interest at the rate of 18 per cent (18%)

from date of institution of suit till realisation. The said summary suit was

subsequently converted to Civil Suit No. 153 of 2011.

6. Similarly, Intervenor-Masyc initiated six separate arbitral references before

two independent arbitral tribunals in respect of goods engineered and supplied to

BSL. The said arbitration proceedings remained pending as on the date of approval

of the Resolution Plan.

7. During the pendency of the aforesaid Civil Suit and Arbitration proceedings,

CIRP was initiated against BSL at the instance of State Bank of India. Both

Respondent No.1-Varsha and Intervenor-Masyc submitted to the jurisdiction of

Insolvency and Bankruptcy Code, 2016 (‘Code’) and lodged claim as Operational

Creditors before the Interim Resolution Professional to the tune of Rupees Thirty-

Civil Appeal Nos.9052-9053 of 2026 Page 3 of 29

Four Lakh Twenty-Seven Thousand Eight Hundred Ninety-Five only

(₹34,27,895/-) and Rupees Thirty -One Crore Thirty Lakh Sixty-Seven Thousand

and Three Hundred Fifty-Four only ( ₹31,30,67,354/-) respectively.

8. On 17

th

January 2018, the Resolution Professional compiled an Interim List

of Creditors. In this list, the claims of Respondent No.1-Varsha and Intervenor–

Masyc were admitted only at a notional value of Rupee One (₹1) each, though

Respondent No.1-Varsha’s claim was later modified to Rupees One Crore Sixty-

Six Lakh Sixty-Six Thousand and Seven Hundred Seven only (₹1,66,66,707/- )

upon inclusion of compound interest. Significantly, Note 3 appended to the Interim

List of Creditors recorded that, ‘Claims are subject to disputes pending before

various authorities, and have been admitted/ marked as verified with a notional

amount of INR 1(Indian Rupee One only) and the liability is subject to the outcome

of the ongoing proceedings.’

9. On 3

rd

February 2018, the Appellant-SRA submitted its Resolution Plan on

the basis of the Information Memorandum prepared by the Resolution Professional .

Since claims of financial creditors exceeded the liquidation value, the Operational

Creditors were held entitled to NIL payment . Nevertheless, the Appellant-SRA

provided for an Operational Creditors Settlement Amount of Rupees Twelve

Hundred Crore (₹12,00,00,00,000/-) of which Rupees One Thousand Crore

(₹10,00,00,00,000/-) was earmarked for essential and critical Operational Creditors

and the balance Rupees Two Hundred Crore (₹2,00,00,00,000/-) was to be

Civil Appeal Nos.9052-9053 of 2026 Page 4 of 29

distributed pro-rata among other Operational Creditors whose claims had been

admitted.

10. On 20

th

March 2018, the Resolution Professional prepared the Final List of

Creditors for claims received up to 20

th

March 2018 (‘Final List of Creditors’). In

this List, the claims of Respondent No.1-Varsha and Intervenor-Masyc were again

admitted at the notional value of Rupee One (₹1) each. The aggregate claims of

Operational Creditors stood at approximately

Rupees One Thousand Four Hundred

Twenty-Two Crore only (₹14,22,00,00,000/-). Notably, Note 3 appended to Interim

List of Creditors was omitted and, in its place, Note 2 was appended, stating,

‘Claims which are subject to disputes pending before various authorities have been

verified with a notional amount of INR 1 (Indian Rupee One only).’

11. On the same day, the Committee of Creditors approved the Resolution Plan

submitted by the Appellant-SRA. By Order dated 15

th

May 2018, the National

Company Law Tribunal (‘NCLT’) sanctioned the Resolution Plan of Appellant-

SRA under Section 30 read with Section 31 of the Code. Appeals preferred by

aggrieved parties were dismissed by the National Company Law Appellate

Tribunal (‘NCLAT’) on 10

th

August 2018. Intervenor-Masyc’s challenge to the

treatment of its claim was dismissed as withdrawn by NCLT on 25

th

October 2018.

12. On 11

th

September 2018, the Appellant-SRA moved an application under

Section 151 of the Code of Civil Procedure, 1908 (‘CPC’) seeking dismissal of the

Civil Suit. The Trial Court rejected the application by Order dated 25

th

October

2018. Similarly, an application filed before the Sole Arbitrator seeking termination

Civil Appeal Nos.9052-9053 of 2026 Page 5 of 29

of the arbitral proceedings initiated by Intervenor-Masyc was dismissed by Order

dated 12

th

January 2019.

13. The Appellant-SRA thereafter filed W.P.(C) No. 8620 of 2018 challenging

the order dated 25

th

October 2018 passed by the Trial Court. The High Court of

Bombay, Nagpur Bench, dismissed the Writ Petition by order dated 28

th

March

2019. A Review Petition filed by the Appellant-SRA met the same fate by Order

dated 9

th

July 2019.

14. The Appellant-SRA also instituted CWP No. 37286 of 2019 before the

Punjab and Haryana High Court challenging the Order dated 12

th

January 2019

passed by the Sole Arbitrator. By Order dated 30

th

January 2020, the High Court

dismissed the Writ Petition while directing that the final award shall not be

pronounced without leave of the Court.

15. As noted hereinabove, Intervenor-Masyc filed an Intervention Application

being I.A. No. 34503 of 2020 before this Court contending that in the arbitral

proceedings to which it is a party, a question of law substantially similar to that

arising in the present Civil Appeals was likely to arise. This Court by O rder dated

27

th

August 2021 allowed the said application.

ARGUMENTS ON BEHALF OF THE APPELLANT-SRA

16. Mr. Ramji Srinivasan, learned senior counsel appearing for the Appellant-

SRA stated that in the present matters, the Resolution Professional had collated all

claims which were disputed and pending adjudication before various fora. He

pointed out that in the Interim List of Creditors dated 17

th

January 2018, the

Civil Appeal Nos.9052-9053 of 2026 Page 6 of 29

Resolution Professional admitted the disputed claims of Respondent No.1-Varsha

and Intervenor-Masyc at a notional value of Rupee One ( ₹1) each, in conformity

with the judgment of this Court in Committee of Creditors of Essar Steel India

Limited v. Satish Kumar Gupta and Others, (2020) 8 SCC 531. In that decision,

this Court upheld the practice of admitting claims at a notional value of Rupee One

(₹1) where such claims were sub -judice. The relevant passages of Essar Steel

(supra) are reproduced hereinbelow:

“107. For the same reason, the impugned NCLAT judgment [Standard Chartered

Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims

that may exist apart from those decided on merits by the resolution professional and

by the Adjudicating Authority/Appellate Tribunal can now be decided by an

appropriate forum in terms of Section 60(6) of the Code, also militates against the

rationale of Section 31 of the Code. A successful resolution applicant cannot

suddenly be faced with “undecided” claims after the resolution plan submitted by

him has been accepted as this would amount to a hydra head popping up which

would throw into uncertainty amounts payable by a prospective resolution applicant

who would successfully take over the business of the corporate debtor. All claims

must be submitted to and decided by the resolution professional so that a prospective

resolution applicant knows exactly what has to be paid in order that it may then take

over and run the business of the corporate debtor. This the successful resolution

applicant does on a fresh slate, as has been pointed out by us hereinabove. For these

reasons, NCLAT judgment must also be set aside on this count.

xxx xxx xxx xxx

155. So far as Dakshin Gujarat Vij Co. (Respondent 11 in Civil Appeal Diary No.

24417 of 2019), State Tax Officer (Respondent 12 in Civil Appeal Diary No. 24417

of 2019), Gujarat Energy Transmission Corporation Ltd. (Respondent 17 in Civil

Appeal Diary No. 24417 of 2019) and Indian Oil Corporation Ltd. (Respondent 18

in Civil Appeal Diary No. 24417 of 2019) are concerned, the resolution professional

admitted the claim of the abovementioned respondents notionally at INR 1 on the

ground that there were disputes pending before various authorities in respect of the

said amounts. However, NCLT through its judgment dated 8- 3-2019 [Resolution

Professional v. Essar Steel (India) Ltd., 2019 SCC OnLine NCLAT 750] directed the

resolution professional to register the entire claim of the said

respondents. NCLAT in paras 44, 45 and 201 of the impugned judgment upheld

[Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388]

the order passed [Resolution Professional v. Essar Steel (India) Ltd., 2019 SCC

OnLine NCLAT 750] by NCLT as aforesaid and admitted the claim of the

abovementioned respondents. We therefore hold that this part of the impugned

judgment deserves to be set aside on the ground that the resolution professional was

Civil Appeal Nos.9052-9053 of 2026 Page 7 of 29

correct in only admitting the claim at a notional value of INR 1 due to the pendency

of disputes with regard to these claims.”

17. Learned senior counsel further stated that on 3

rd

February 2018, the

Appellant-SRA tendered its Resolution Plan. He drew attention to Clause 6.1 of the

approved Resolution Plan which categorically stipulated that since the liquidation

value was NIL, there was no obligation to make any payment to Operational

Creditors. He emphasised, however, that notwithstanding such stipulation, the

Approved Resolution Plan, under Clause 8.2.2, nonetheless provided for an

Operational Creditors Settlement Amount of Rupees Twelve Hundred Crore

(₹12,00,00,00,000/-). Of this, Rupees One Thousand Crore (₹10,00,00,00,000/-)

was earmarked for essential and critical Operational Creditors, while the remaining

Rupees Two Hundred Crore (₹2,00,00,00,000/-) was allocated for distribution on a

pro-rata basis among other Operational Creditors whose claims had been admitted.

Clauses 6.1 and 8.2.2 of the approved Resolution Plan are extracted hereinbelow:

“6.1. Overview

Based on the information provided by the Resolution Professional, Tata Steel

understands that:

6.1.1. The Resolution Debt Amount is ₹ 57,160 Crore.

6.1.2. The total Outstanding Financial Debt of the Company admitted as of

February 1, 2018, is ₹ 5,60,51,46,40,323 (Indian Rupees Fifty Six Thousand and

Fifty One Crore Forty Six Lakh Forty Thousand Three Hundred and Twenty Three),

and details of the same are set out in Annexure 7 of this Plan.

6.1.3. The total Outstanding Operational Debt of the Company (excluding claims

of workmen and employees and Other Creditors) verified and admitted amount, as

of January 8, 2018, is ₹ 10,50,88,68,566 (Indian Rupees One Thousand Fifty Crore

Eighty Eight Lakh Sixty Eight Thousand Five Hundred and Sixty Six), and details of

the same are set out in Annexure 8 of this Plan.

6.1.4. The total Outstanding Operational Debt of the Company to its workmen and

employees, admitted as of January 8, 2018, is ₹ 27,00,000 (Indian Rupees Twenty

Civil Appeal Nos.9052-9053 of 2026 Page 8 of 29

Seven Lakhs) (“Outstanding Employees Dues”), and details of the same are set out

in Annexure 8 of this Plan.

6.1.5. The Liquidation Value of the Company is ₹ 1,45,41,00,00,000 (Indian

Rupees Fourteen Thousand Five Hundred and Forty One Crores).

xxx xxx xxx

8.2.2. Amounts to be paid to Operational Creditors pursuant to this Plan.

(i) As per the Information Memorandum, the Liquidation Value of the

Company is less than the Outstanding Financial Debt and therefore the

Liquidation Value available to Operational Creditors is NIL . Accordingly,

no amounts are due to be paid to the Operational Creditors.

(ii) Pursuant to the terms of the Plan, the following amounts are

proposed to be paid to certain Operational Creditors, even though no such

amounts are due and payable to such Operational Creditors under the IBC:

(a) The Outstanding Employees Dues shall be paid to the employees

and workmen on the Closing Date; and

(b) an amount equivalent to ₹ 200 crores shall be paid to the

Operational Creditors (excluding Related Party Creditors and

Operational Creditors being employees and workmen) on a pro

rata basis within 12 (twelve) months from the Closing Date.

(iii) In addition to (ii) above, the Resolution Applicant, based on the

criticality vis-a-vis the continued business viability of the Company,

proposes to pay the following Operational Creditors as stated below within

12 months from the Closing Date:

Category of Operational

Creditors

Amount to be paid within

12 months from the

Closing Date.

Capital and Sundry Trade

Creditors

₹ 1,000 crore#

Related Party Creditors NIL

Statutory Creditors NIL

Employees and Workmen NIL

Total ₹ 1,000 Crores

#It is clarified that the Resolution Applicant shall pay the above mentioned amount at its discretion, to be exercised based on the following criteria:

(A) Those required to complete the existing capital projects of the Company or those who may be required during the growth

projects of the Company.

(B) Those who are supplying essential and critical goods and

services and are critical for the continued business viability of

the Company;

Civil Appeal Nos.9052-9053 of 2026 Page 9 of 29

(C) Those who are involved with critical operations and

maintenance of the company.

(iv) It is clarified that the amounts proposed to be paid to the Capital

Creditors, Sundry Trade Creditors, Statutory Creditors, and the employees

and workmen forming part of the Operational Creditors, shall be paid by the

Resolution Applicant only to the extent of valid claim amounts.

(v) The aggregate amount to be paid to the Operational Creditors (excluding

Operational Creditors being employees and workmen and Related Party

Creditors) based on the details set out in this Section is ₹ 1,200 crore (Indian

Rupees One Thousand Two Hundred Crore) (“Operational Creditors

Settlement Amount”).

(vi) If any further claims of Operational Creditors (other than employees and

workmen), relating to the period prior to the Effective Date, arise and/or are

made and/or are admitted, prior to approval of this Plan by the Adjudicating

Authority, then the Operational Creditors Settlement Amount shall remain

unaltered and shall be paid to the relevant Operational Creditors as

specified above (whose claims have been admitted by the Resolution

Professional, including those set out in Annexure 8 ) in accordance with the

terms set out hereinabove”

18. He pointed out that Clause 8.2.2(ii) of the Approved Resolution Plan

expressly stipulated that the Operational Creditors Settlement Amount was to be

disbursed to ‘certain’ Operational Creditors on pro-rata basis within a period of

twelve (12) months from the closing date i.e. 15

th

May 2018. He stated that the List

of Creditors compiled up to 20

th

March 2018 attained finality as the ‘Final List of

Creditors’. He emphasised that this Final List of Creditors did not incorporate any

note that the liability was contingent upon the outcome of pending proceedings.

19. He submitted that in any event, the List of Creditors serves merely as

information for prospective Resolution Applicants. He argued that incorporation of

disputed claims was entirely within the discretion of the Appellant-SRA, who had

consciously elected not to allocate any payment towards claims that were sub -

Civil Appeal Nos.9052-9053 of 2026 Page 10 of 29

judice. He underscored that such treatment of disputed claims was duly approved

by the Committee of Creditors, whose commercial wisdom is final and binding. In

support of this submission, reliance was placed on the judgment of this Court in

Uttar Pradesh Power Corporation Ltd. and Another v. Bhushan Steels and Strips

Ltd., 2025 SCC OnLine SC 2275.

20. He further drew attention to Clause 8.2.4 read with Clause 8.6.10 of the

Approved Resolution Plan which specifically provided the treatment of claims

pending adjudication. He submitted that Clauses 8.2.2, 8.2.4 and 8.6.10, read

conjointly, categorically provided that, in law, the Appellant-SRA was under no

obligation to discharge any sub-judice claims beyond the amounts payable under

the Operational Creditors Settlement Amount. He stated that it was an admitted

position that the Appellant-SRA had duly disbursed the Operational Creditors

Settlement Amount within twelve (12) months from the closing date. Relevant

portion of Clauses 8.2.4 and 8.6.10 of the Approved Resolution Plan are extracted

hereinbelow:

“8.2.4. Treatment of Claims by Operational Creditors on Matters that are Sub

Judice

Tata Steel understands that in addition to the list of claims in Annexure 9 and

Annexure 10, there are claims submitted by certain persons (including Operational

Creditors), including but not limited to the claims set out in Annexure 12 hereto,

relating to matters which are sub judice before various judicial forums. The matters

set out in Annexures 9, 10, and 12 (and the corresponding claims against the

Company), together with all other monetary claims against the Company which may

be pending or sub judice before any forum as on the Effective Date (whether or not

such claims are included in the list of claims of Operational Creditors as set out in

Annexures 9, 10 and 12, and, including but not limited to any proceedings in relation

to Taxes initiated against the Company), are collectively the “Sub Judice Claims".

Each such Sub Judice Claim, is a "claim" and "debt" each as defined under the IBC,

and would consequently qualify as “operational debt” (as defined under the IBC)

and therefore the full amount of such Sub Judice Claims shall be deemed to be owed

Civil Appeal Nos.9052-9053 of 2026 Page 11 of 29

and due as of the Insolvency Commencement Date, the Liquidation Value of which

is NIL and therefore no amount is payable in relation thereto other than the payment

of Operational Creditors Settlement Amount as set out herein.

xxx xxx xxx

8.6.10 Effect on Operational Creditors and Other Creditors

(i) Except to the extent of the Operational Creditors Settlement Amount

proposed to be paid (without an obligation to pay) payable to the relevant

Operational Creditors in accordance with the terms of Section 8.2.2, the

Company shall have no Liability towards any Operational Creditors and

Other Creditors with regard to any claims (as defined under the IBC)

relating in any manner to the period prior to the Effective Date (whether

under Annexures 8, 9, 10, 11, 12 or otherwise). Any such Liability shall be

deemed to be owed and due as of the Insolvency Commencement Date, the

Liquidation Value of which is NIL and therefore no amount is payable in

relation thereto. All such Liabilities shall immediately, irrevocably and

unconditionally stand fully and finally discharged and settled with there

being no further claims whatsoever, and all forms of security created or

suffered to exist, or rights to create such a security, to secure any obligations

towards the Operational Creditors and Other Creditors whether by way of

guarantee, bank guarantee, letters of credit or otherwise) shall

immediately, irrevocably and unconditionally stand released and

discharged, and the Operational Creditors and Other Creditors shall waive

all rights to invoke or enforce the same. In accordance with the foregoing,

all claims (whether final or contingent, whether disputed or undisputed, and

whether or not notified to or claimed against the Company) of all

Governmental Authorities (including in relation to Taxes, and all other dues

and statutory payments to any Governmental Authority), relating to the

period prior to the Effective Date, shall stand fully and finally discharged

and settled.

(ii) Any and all legal proceedings (including any notice, show cause,

adjudication proceedings, assessment proceedings, regulatory orders, etc.)

initiated before any forum by or on behalf of any Operational Creditor

(whether under Annexures 8, 9, 10, 11, 12 or otherwise, and including

Governmental Authorities) or any Other Creditors to enforce any rights or

claims against the Company shall immediately, irrevocably and

unconditionally stand withdrawn, abated, settled and/or extinguished, and

the Operational Creditors and Other Creditors shall take all necessary steps

to ensure the same. Except to the extent of the Operational Creditors

Settlement Amount payable to the relevant Operational Creditors in

accordance with the terms of Section 8.2.2, the Operational Creditors of the

Company (whether under Annexures 8, 9, 10, 11, 12 or otherwise, and

including Governmental Authorities) and Other Creditors shall have no

further rights or claims against the Company (including but not limited to,

in relation to any past breaches by the Company, in respect of the period

prior to the Effective Date, and all such claims shall immediately,

irrevocably and unconditionally stand extinguished.”

Civil Appeal Nos.9052-9053 of 2026 Page 12 of 29

21. Learned senior counsel emphasised that Clause 8.6.10(ii) of the Approved

Resolution Plan specifically barred the continuation of any legal proceedings,

including those involving sub-judice claims, insofar as they pertained to the period

prior to approval of the Resolution Plan. He submitted that the Resolution Plan

must be construed as an integrated whole and cannot be read in a piecemeal manner

to suit the interpretation advanced by the Respondents.

22. He further submitted that sub- classification among Creditors is permissible,

as affirmed by this Court in Essar Steel (supra) and Kalyani Transco vs. Bhushan

Power and Steel Limited and Others, 2025 SCC Online SC 2093. Relevant portion

of the judgment in Kalyani Transco (supra) is reproduced hereinbelow:

“179. It can thus be seen that this court has held that the Legislature purposefully

did not include a means to challenge the commercial wisdom exercised by the CoC.

This makes a challenge to the same non- justiciable. It has been further held that a

challenge cannot be raised against the decision making of the CoC unless and until

the grounds for challenge as given in the Code are satisfied. Any interference in the

paramount objective of the CoC of exercising its commercial wisdom would amount

to the court rewriting the law and going against the very objectives of the IBC.

180. We are therefore of the opinion that in the present matter as well, the CoC

exercised its commercial wisdom while approving the resolution plan whereby the

appellant-Jaldhi was classified as a contingent creditor and such a decision is

deemed to be non-justiciable by this court in view of K. Sashidhar v. Indian

Overseas Bank [(2019) 213 Comp Cas 356 (SC); (2019) 12 SCC 150; (2019) 4 SCC

(Civ) 222; 2019 SCC OnLine SC 257.] , which has been subsequently followed in a

catena of judgments. The NCLT, and the NCLAT have also approved the resolution

plan, and in light of the settled principle of law, we find no question of law being

raised by the appellant-Jaldhi and therefore, the appeal filed by it is liable to be

dismissed.”

23. Learned senior counsel further contended that Intervenor-Masyc had earlier

challenged the treatment of its claims and the Approved Resolution Plan, but such

challenge was dismissed as withdrawn by O rder dated 25

th

October 2018 passed by

the NCLT. He pointed out that the said O rder was never assailed thereafter and

Civil Appeal Nos.9052-9053 of 2026 Page 13 of 29

consequently, Intervenor-Masyc cannot now, in an indirect manner, seek to reopen

or question either the commercial wisdom of the Committee of Creditors or the

validity of the Approved Resolution Plan, as is sought to be done in the present

Appeals.

24. He strongly urged that, in view of the ‘clean slate’ doctrine, a Corporate

Debtor cannot be burdened with undecided or unresolved claims once the

Resolution Plan has been approved. He relied upon the decision of this Court in

Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Co.

Ltd. (2021) 9 SCC 657, wherein it was categorically held that upon approval of the

Resolution Plan, all claims not forming part thereof stand extinguished and no

person is thereafter entitled to initiate or continue any proceeding in respect of a

claim excluded from the Plan. The relevant paragraphs of the judgment in

Ghanshyam Mishra (supra) are reproduced hereinbelow:

“93. As discussed hereinabove, one of the principal objects of the I&B Code is

providing for revival of the corporate debtor and to make it a going concern. The

I&B Code is a complete Code in itself. Upon admission of petition under Section 7

there are various important duties and functions entrusted to RP and CoC. RP is

required to issue a publication inviting claims from all the stakeholders. He is

required to collate the said information and submit necessary details in the

information memorandum. The resolution applicants submit their plans on the basis

of the details provided in the information memorandum. The resolution plans

undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held

between CoC and the resolution applicant, various modifications may be made so

as to ensure that while paying part of the dues of financial creditors as well as

operational creditors and other stakeholders, the corporate debtor is revived and is

made an on- going concern. After CoC approves the plan, the adjudicating authority

is required to arrive at a subjective satisfaction that the plan conforms to the

requirements as are provided in sub- section (2) of Section 30 of the I&B Code. Only

thereafter, the adjudicating authority can grant its approval to the plan. It is at this

stage that the plan becomes binding on the corporate debtor, its employees,

members, creditors, guarantors and other stakeholders involved in the resolution

plan. The legislative intent behind this is to freeze all the claims so that the

resolution applicant starts on a clean slate and is not flung with any surprise claims.

Civil Appeal Nos.9052-9053 of 2026 Page 14 of 29

If that is permitted, the very calculations on the basis of which the resolution

applicant submits its plans would go haywire and the plan would be unworkable.

xxx xxx xxx xxx

102. ….

102.1. That once a resolution plan is duly approved by the adjudicating authority

under sub- section (1) of Section 31, the claims as provided in the resolution plan

shall stand frozen and will be binding on the corporate debtor and its employees,

members, creditors, including the Central Government, any State Government or

any local authority, guarantors and other stakeholders. On the date of approval of

resolution plan by the adjudicating authority, all such claims, which are not a part

of resolution plan, shall stand extinguished and no person will be entitled to initiate

or continue any proceedings in respect to a claim, which is not part of the resolution

plan.

102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and

declaratory in nature and therefore will be effective from the date on which the I&B

Code has come into effect.

102.3. Consequently all the dues including the statutory dues owed to the Central

Government, any State Government or any local authority, if not part of the

resolution plan, shall stand extinguished and no proceedings in respect of such dues

for the period prior to the date on which the adjudicating authority grants its

approval under Section 31 could be continued.”

25. Learned senior counsel further submitted that once the Adjudicating

Authority approves a Resolution Plan under Section 31(1) of the Code, the claims

provided for therein stand frozen and become binding upon the Corporate Debtor

as well as all stakeholders.

26. He lastly contended that the continuation of proceedings against the

Appellant-SRA, despite approval of the Resolution Plan, militates against the

doctrine of ‘clean slate’. According to him, since the claims of Respondent No.1-

Varsha and Intervenor-Masyc had been duly addressed under the Resolution Plan,

proceedings before various fora could not be permitted to continue thereafter.

Civil Appeal Nos.9052-9053 of 2026 Page 15 of 29

ARGUMENTS ON BEHALF OF RESPONDENT NO.1-VARSHA

27. Mr. Garvesh Kabra, learned counsel appearing for Respondent No.1-Varsha

submitted that the Appellant-SRA procured approval of the Resolution Plan by

perpetrating serious fraud and misleading both the Resolution Professional and the

NCLT. He argued that under the scheme of the Code, the Resolution Professional

alone is entrusted with the duty to collect, collate and verify claims. The List of

Operational Creditors prepared under Regulation 13 and incorporated into the

Information Memorandum constituted the very foundation of the Resolution Plan.

He contended that the Successful Resolution Applicant had no authority to alter,

suppress or selectively adopt a verified claim. He pointed out that Note 3 of the

Interim List of Operational Creditors dated 17

th

March 2018 expressly recorded

that sub-judice claims were admitted subject to adjudication. However, in the Final

List dated 20

th

March 2018, the Appellant-SRA deliberately omitted Note 3. Such

alteration, he argued, violated Respondent No.1-Varsha’s legitimate rights and

amounted to ‘ an egregious breach of the Code’.

28. According to the learned counsel, the issue at hand was not one of

interpretation but of a clear violation of statutory process. He contended that the

Appellant-SRA was bound to base its Resolution Plan on verified claims

maintained by the Resolution Professional and any selective incorporation or

omission struck at the root of Sections 18 and 25 of the Code as well as Regulations

13 and 36. Such manipulation, he argued, rendered the plan non- compliant with

Section 30(2)(e) of the Code.

Civil Appeal Nos.9052-9053 of 2026 Page 16 of 29

29. He further highlighted that the Resolution Plan earmarked Rupees Twelve

Hundred Crore (₹12,00,00,00,000/-) for Operational Creditors against admitted

claims of Rupees One Thousand Fifty Crore Eighty-Eight Lakh Sixty -Eight

Thousand Five and Hundred Sixty- Six only (₹1,050,88,68,566/-), thereby leaving

a surplus of Rupees One Hundred Forty-Nine Crore Eleven Lakh only

(₹1,49,11,00,000/-). This surplus, he argued, ought to have been placed in escrow

for satisfaction of sub-judice claims upon adjudication by the appropriate forum.

30. He submitted that the ‘clean slate ’ theory presupposes legality of the

Resolution Plan. Since the Plan was vitiated by manipulation, its binding nature

could not be invoked to defeat Respondent No.1-Varsha’s legitimate claims.

31. He contended that this was a fit case for recall of the NCLT’s O rder dated

15

th

May 2018 approving the Resolution Plan, by exercise of inherent powers,

under Rule 11 of the NCLT Rules. In support of his contention, he relied upon the

judgment of this Court in Greater Noida Industrial Development Authority v s.

Prabhjit Singh Soni & Anr., (2024) 6 SCC 767.

32. He emphasised that allowing the present Appeals would set a dangerous

precedent enabling Corporate Debtors to raise disputes with Operational Creditors

during insolvency proceedings and, thereafter, deny their claims on the ground of

being sub-judice, thereby resulting in a travesty of justice.

ARGUMENTS ON BEHALF OF INTERVENOR-MASYC

33. Mr. Neeraj Kishan Kaul, learned senior counsel for the Intervenor-Masyc,

submitted that the arguments of the Appellant-SRA essentially rested upon the

Civil Appeal Nos.9052-9053 of 2026 Page 17 of 29

‘clean slate’ theory. He contended, however, that the Resolution Plan itself

contained an express carve-out protecting sub -judice claims from extinguishment.

He pointed out that Clause 8.7.3(i) of the Resolution Plan, dealing with

‘Extinguishment and Waiver of Other Claims & Liabilities’, explicitly provided

that all claims and obligations relating to the period prior to the closing date stood

extinguished, save those set out in Annexures 8, 9, 10, 11 and 12. Since the

Intervenor-Masyc’s claims were specifically recorded in Annexure 10 (sub-judice

claims) and Annexure 8 (Operational Creditor claims), he argued that such claims

did not stand extinguished upon approval of the Plan. Clause 8.7.3(i) of the

Resolution Plan is extracted hereinbelow:-

“8.7.3. Extinguishment and Waiver of Claims & Liabilities

(i) Extinguishment and Waiver of Other Claims & Liabilities: The Resolution Applicant

does not have any knowledge of any liabilities or claims against the Company other

than those set out in Annexures 8, 9, 10, 11 and 12. Accordingly, other than the

obligations, claims and l iabilities set out in Annexures 8, 9, 10, 11 and 12; (i) all

obligations, claims and Liabilities (whether final or contingent, whether disputed or

undisputed, and whether or not notified to or claimed against the Company) of the

Company; (ii) all outstanding disputes or legal proceedings against the Company;

and (iii) all rights or claims of any person against the Company; in each case,

relating to the period prior to the Closing Date, shall immediately, irrevocably and

unconditionally stand extinguished, waived, withdrawn and abated on and from the

Closing Date, and no person shall have any further rights or claims against the

Company in this regard.”

34. He further submitted that Clauses 8.6.10(ii) and 8.2.4 did not extinguish

sub-judice claims, inasmuch as, Clause 8.6.10(ii) provided that legal proceedings

stood withdrawn, abated, settled and/or extinguished, except to the extent of the

Operational Creditors Settlement Amount payable under Clause 8.2.2. Clause 8.2.4

dealing with treatment of claims of Operational Creditors on matters sub -judice

incorporated a carve-out by stipulating that no amount was payable ‘other than the

Civil Appeal Nos.9052-9053 of 2026 Page 18 of 29

payment of Operational Creditors Settlement Amount as set out herein’, necessarily

referring to Clause 8.2.2 which earmarked Rupees Twelve Hundred Crore

(₹12,00,00,00,000/-) for Operational Creditors.

35. He emphasised that Section 3(6)(a) of the Code defines ‘claim’ broadly to

include ‘a right to payment, whether or not such right is reduced to a judgment,

fixed, disputed, undisputed, legal, equitable, secured or unsecured’. Thus, even

uncrystallised rights fall within the ambit of a claim.

36. He argued that abatement of proceedings was expressly conditional upon

settlement of claims from the Operational Creditors Settlement Amount. He stated

that proceedings could not be extinguished while underlying claims remained

unpaid and uncrystallised.

37. He contended that the Appellant-SRA consciously adopted the Resolution

Professional’s notional value of Rupee One ( ₹1), thereby preserving pending

litigation from extinguishment. He pointed out that the Interim List of Creditors

dated 17

th

January 2018 verified Intervenor-Masyc’s claim at a notional value of

Rupee One (₹1) and appended Note 3, recording that liability was subject to the

outcome of ongoing proceedings. In the Final List of Creditors, the claim was again

admitted at Rupee One (₹1) with a note stating that ‘claims which are subject to

disputes pending before various authorities have been verified with a notional

amount of INR 1’. He submitted that the Appellant-SRA with full knowledge of

these notes could have rejected sub -judice claims or treated the notional value as

extinguished, but chose not to. By drafting Clause 8.2.4 and carving out Annexures

Civil Appeal Nos.9052-9053 of 2026 Page 19 of 29

8 and 10 under Clause 8.7.3(i) the Appellant- SRA consciously preserved pending

litigations.

38. He contended that the Intervenor-Masyc was entitled to payment from

Rupees Two Hundred Crore Only (₹2,00,00,00,000/-) earmarked under Clause

8.2.2 for Operational Creditors (excluding related parties and

employees/workmen), including those with sub -judice claims. He argued that

Clause 8.2.2 was not confined to undisputed claims. He stated that the voluntary

earmarking of Rupees Twelve Hundred Crore ( ₹12,00,00,00,000/-) as the

Operational Creditors Settlement Amount was a commercial decision aimed at

making the P lan more comprehensive and attractive to the Committee of Creditors .

39. He pointed out that the NCLT by order dated 15

th

May 2018 approved the

Resolution Plan and the NCLAT by O rder dated 10

th

August 2018 dismissed the

Appeal, specifically recording the statement that the Rupees Twelve Hundred Crore

(₹12,00,00,00,000/-) pool was payable to all Operational Creditors without

qualification. He contended that earmarking this amount demonstrated clear intent

to pay and that the Appellant-SRA voluntarily committed the amount to secure

overwhelming approval (99.80%) of the Committee of Creditors and NCLT

sanction.

40. He argued that having obtained control of the Corporate Debtor on the

strength of a Plan expressly providing for sub-judice claims, the Appellant- SRA

could not now contend that such claims stood extinguished. This, he submitted,

amounted to approbation and reprobation.

Civil Appeal Nos.9052-9053 of 2026 Page 20 of 29

41. He submitted that under Section 31(1) of the Code , the Resolution Plan,

including obligations to settle sub-judice claims from the Rupees Twelve Hundred

Crore (₹12,00,00,00,000/-) fund, was binding on the Appellant-SRA.

42. He stated that the Appellant-SRA was reneging on its obligation to pay by

contending that adjudication could not be concluded within twelve (12) months.

However, it was the Appellant-SRA who chose to include sub-judice Creditors

without providing any mechanism for interim treatment. Invoking the principle of

contra proferentem, he argued that ambiguity in drafting must be resolved against

the drafter. The Appellant-SRA could have drafted the one year clause to expressly

limit eligibility to crystallised claims, but having failed to do so, cannot now rely

on its own drafting lacunae to defeat Intervenor-Masyc’s claim.

43. He argued that a harmonious reading of the Resolution Plan demonstrated

that the obligation to settle sub -judice claims within one year was satisfied by

computing pro-rata shares and ring-fencing the designated reserve, not necessarily

by immediate disbursement.

44. He submitted that a ‘face value reservation mechanism’ ought to have been

adopted to reconcile the plain language of the Resolution Plan with the interests of

all Operational Creditors. He explained that computation should have been based

on the face value of each sub -judice claim, with the corresponding pro-rata share

ring-fenced in a designated account pending adjudication. Surplus amounts, if any,

could then be redistributed among other creditors.

Civil Appeal Nos.9052-9053 of 2026 Page 21 of 29

45. He added that if the crystallised award was less than the reserved share, the

surplus could be redistributed, thereby ensuring no wastage and protecting all

interests.

46. He pointed out that the Appellant-SRA’s own conduct undermined its

interpretation of Clause 8.2.2, as it sought dismissal of arbitration proceedings even

before expiry of the twelve (12) month period.

47. He contended that continuation of arbitral proceedings did not violate the

‘clean slate’ doctrine, since the claims were known, recorded and preserved in the

Resolution Plan. The doctrine, he argued, was intended to protect against surprise

claims, not those expressly carved out.

48. He further argued that the ‘clean slate ’ doctrine could not override the

Resolution Plan which expressly provided for continuation of certain litigations

through Clause 8.7.3(i) and Clause 8.2.4. He noted that the Appellant-SRA had not

challenged the Sole Arbitrator’s Order dated 12

th

January 2019 rejecting its

application under Section 16 of the Arbitration and Conciliation Act, 1996.

49. He emphasised that the Code was not intended to serve as a statutory shield

for unjust enrichment. He stated that the Intervenor -Masyc, being a Micro, Small

and Medium Enterprise (‘MSME’), had supplied critical capital infrastructure to

the Corporate Debtor, who continues to enjoy the same under the management of

the Appellant-SRA while bypassing the Rupees Twelve Hundred Crore

(₹12,00,00,00,000/-) settlement fund. This, he argued, amounted to unjust

enrichment.

Civil Appeal Nos.9052-9053 of 2026 Page 22 of 29

50. He concluded that the Code was designed to facilitate corporate resolution,

not to operate as a legal guillotine arbitrarily severing pending claims of MSMEs

who bore the brunt of insolvency.

REASONING

PROPOSITIONS OF LAW APPLICABLE TO THIS CASE NOT IN DISPUTE

51. Upon hearing learned counsel for the parties, this Court is of the considered

view that the propositions of law applicable to the present controversy are not in

dispute. In JSW Steel Ltd. vs. Pratishtha Thakur Haritwal & Ors., (2025) 9 SCC

673, this Court categorically held that ‘ all claims must be submitted to and decided

by the resolution professional so that a prospective resolution applicant knows

exactly what has to be paid in order that it may then take over and run the business

of the corporate debtor.’ The parties are ad idem that the treatment of claims of

Creditors must be prescribed in the Resolution Plan approved by the Committee of

Creditors, whose commercial wisdom is non-justiciable. It is equally admitted that

the Code has an overriding effect in the event of inconsistency with any other law

for the time being in force and once a Resolution Plan is approved under Section

31(1) of the Code the claims therein stand frozen and are binding on all

stakeholders, including the Corporate Debtor, its Creditors, the G overnmental

Authorities, Local Authorities, Employees and any other stakeholder

1

. Claims not

1

See: Ghanashyam Mishra and Sons Pvt. Ltd. through the Authorised Signatory vs. Edelweiss Asset Reconstruction

Company Ltd. through the Director and Ors., (2021) 9 SCC 657, Principal Commissioner of Income Tax Vs. Monnet

Ispat and Energy Ltd., (2018) 18 SCC 786 and Kalyani Transco vs. Bhushan Power and Steel Ltd. and Ors., 2025

SCC OnLine SC 2093

Civil Appeal Nos.9052-9053 of 2026 Page 23 of 29

incorporated in the Resolution Plan stand extinguished, withdrawn or abated,

consistent with the legislative intent of enabling the Resolution Applicant to

commence on a ‘clean slate’, free from unforeseen liabilities. It is further

undisputed that the jurisdiction of statutory authorities such as the NCLT and

NCLAT is circumscribed by the Code and they cannot assume the role of a court

of equity or exercise plenary powers

2

.

OPERATIONAL CREDITORS LIST IN APPROVED PLAN IS FINAL

52. The admitted position is that the Final List of O perational Creditors prepared

by the Resolution Professional was never challenged by Respondent No.1-Varsha.

The Intervenor-Masyc did assail the treatment of its claims in the Approved

Resolution Plan, but its challenge was dismissed as withdrawn by the NCLT on 25

th

October 2018. That Order was never impugned and has attained finality.

Consequently, the Resolution Plan in the present Appeals is final and binding on

all parties.

RESOLUTION PLAN NOT VITIATED BY MANIPULATION AND FRAUD

53. Although learned counsel for Respondent No.1-Varsha urged that the

Resolution Plan was vitiated by manipulation and fraud in securing approval from

the NCLT, relying upon Greater Noida Industrial Development Authority (supra),

this Court finds the said allegation to be baseless inasmuch as it is the treatment of

creditors under the Approved Resolution Plan which is determinative and binding.

2

See: K. Sashidhar vs. Indian Overseas Bank and Ors., (2019) 12 SCC 150

Civil Appeal Nos.9052-9053 of 2026 Page 24 of 29

This Court also finds that no application under Rule 11 of the NCLT Rules, 2016

has been filed till date. In the absence of such proceedings, allegations of fraud and

manipulation cannot be entertained, particularly in an appeal preferred by the

Successful Resolution Applicant. The aforesaid judgment, therefore, affords no

assistance to the Operational Creditors.

VALUE OF ₹ 1 WAS NOT ASSIGNED TO KEEP THE CLAIMS ALIVE

54. Additionally, this Court also finds that the Final List of Operational Creditors

dated 20

th

March 2018 did not contain Note 3 which had been appended to the

Interim List dated 17

th

January 2018. Instead, Note 2 to the F inal List stipulated

that ‘claims which are subject to disputes pending before various authorities have

been verified with a notional amount of INR 1 only.’ By virtue of the deletion of

Note 3 and incorporation of Note 2 to the Final List, the claims of Respondent

No.1-Varsha and the Intervenor-Masyc stood altered from a ‘notional’ Rupee One

(₹1), subject to adjudication, into a ‘quantified’ Rupee One (₹1) claim with

apparent finality. Consequently, the argument of the Intervenor-Masyc that the

assignment of value of Rupee One (₹1) was intended, in the present Appeals, to

keep its claim alive pending litigation is contrary to the Resolution Plan.

₹ 200 CRORE WAS AVAILABLE FOR QUANTIFIED CLAIMS

55. This Court is further of the view that no Resolution Plan can succeed if

uncertain or unquantified claims are permitted to linger and resurface against the

Successful Resolution Applicant years after approval. Such a situation would be

akin to a hydra-headed recurrence and is antithetical to the ‘clean slate ’ principle.

Civil Appeal Nos.9052-9053 of 2026 Page 25 of 29

56. Moreover, as rightly submitted by learned counsel for the Appellant-SRA

while the Resolution Professional is the author of the L ist of Creditors, the

treatment of claims must conform to the Approved Resolution Plan prepared by the

Successful Resolution Applicant. In the present case, the Appellant-SRA was

informed that the total verified and admitted claims of O perational Creditors as on

20

th

March 2018 aggregated approximately Rupees One Thousand Four Hundred

Twenty-Two Crore only (₹14,22,00,00,000/-), with the claims of Respondent No.1-

Varsha and the Intervenor-Masyc quantified at Rupee One ( ₹1) each. The

Appellant-SRA , in its Resolution Plan, expressly stated that since there was no

surplus and the liquidation value was NIL, there was no legal obligation to pay any

amount to Operational Creditors. Nevertheless, the Appellant-SRA provided a

corpus of Rupees Twelve Hundred Crore only (₹12,00,00,00,000/-) (upper limit)

against claims of Rupees One Thousand Four Hundred Twenty-Two Crore only

(₹14,22,00,00,000/-) to be distributed in accordance with Clause 8.2.2. To place

matters beyond controversy, Clause 8.2.4 clarifies that since the liquidation value

of the Corporate Debtor is NIL, no amount is payable in respect of sub -judice

claims, save for the Operational Creditors Settlement Amount as set out therein.

Further, Clause 8.2.2(ii) mandates that the settlement amount be paid to ‘certain’

Operational Creditors on a pro-rata basis within twelve (12) months from the

closing date i.e. 18

th

May 2018. Consequently, only Rupees Two hundred Crore

only (₹2,00,00,00,000/- ) was available for payment to Operational Creditors like

the Respondent No.1-Varsha and the Intervenor-Masyc on a pro-rata basis within

Civil Appeal Nos.9052-9053 of 2026 Page 26 of 29

twelve (12) months and that too for claims crystallised and approved by the

Committee of Creditors as on 20

th

March 2018.

PLAN PROVIDED FOR EXTINGUISHMENT OF ALL SUB-JUDICE CLAIMS

57. Additionally, Clauses 8.7.3 and 8.6.10 of the Resolution Plan unequivocally

stipulate that all legal proceedings initiated by or on behalf of O perational

Creditors, whether under Annexure 8 or Annexure 10 (which includes Respondent

No.1-Varsha and the Intervenor-Masyc), ‘shall immediately, irrevocably and

unconditionally stand withdrawn, abated, settled and/or extinguished.’ Further,

except to the extent of amounts payable under Clause 8.2.2, O perational Creditors

shall have no rights or claims against the C orporate Debtor in respect of the period

prior to the effective date i.e. 15

th

May 2018, when the NCLT approved the

Resolution Plan. Consequently, the Resolution Plan read in its entirety did not

provide for an express carve-out protecting sub -judice claims from extinguishment.

On the contrary, a ll such claims stood extinguished.

58. Regulation 12(2) of the CIRP Regulations, as applicable at the relevant time,

permitted Operational Creditors to file claims only until the date of approval of the

Resolution Plan by the Committee of Creditors. This Court holds that Regulation

12(2), as it then stood, requires that the Corporate Debtor’s liability towards

Operational Creditors be crystallised and quantified by that date. The Resolution

Professional accordingly prepared the F inal List of Creditors as on 20

th

March 2018

which was duly intimated to the NCLT. Clause 8.2.2(vi) fortifies this position by

providing that claims verified and admitted prior to approval of the P lan by the

Civil Appeal Nos.9052-9053 of 2026 Page 27 of 29

NCLT (15

th

May 2018) would not alter the Operational Creditors Settlement

Amount. Consequently, any subsequent increase in verified claims would disrupt

the pro-rata distribution already effected as on date.

NEITHER THE ‘FACE VALUE RESERVATION MECHANISM’ NOR THE PRINCIPLE OF CONTRA PROFERENTEM IS APPLICABLE

59. This Court is further of the opinion that there is no ambiguity in the

Resolution Plan prepared by the Appellant-SRA. Consequently, neither the

principle of contra proferentem is applicable to the present case nor the Intervenor-

Masyc’s ‘face value reservation mechanism’ has any relevance, particularly when

the Resolution Plan is not under challenge.

60. This Court concurs with the submission of learned counsel for the Appellant-

SRA that it would be illogical and commercially unsound for an approved

Resolution Plan to prescribe a twelve (12) months payment timeline for certain

Operational Creditors, while simultaneously permitting indeterminate claims to

remain pending until crystallisation. Such an interpretation would undermine both

the terms of the Resolution Plan and the ‘clean slate ’ as well as ‘fresh start’

principles underlying the Code.

CONCLUSION

61. Consequently, upon a harmonious reading of the Resolution Plan, this Court

is of the opinion that all legal proceedings, including arbitration and civil suits

which had not culminated in determinable, quantifiable claims by the date of

approval of the Resolution Plan by the NCLT stand abated, extinguished, waived

Civil Appeal Nos.9052-9053 of 2026 Page 28 of 29

or withdrawn. Only crystallised claims as on the effective date (i.e. 18

th

May 2018)

are payable on a pro-rata basis. Accordingly, no amount beyond Rupee One (₹1)

each was payable to Respondent No.1-Varsha and the Intervenor-Masyc, whose

pending arbitration and civil proceedings stood abated /waived/

extinguished/withdrawn upon approval of the Resolution Plan.

AN AFTERWORD

62. Before parting with the matter, this Court would like to observe that it is of

the considered view that the present cases underscore the impact of the Code on

small operational creditors such as MSMEs. There can be no doubt that the Code

marks a substantial improvement over the regime under the Sick Industrial

Companies (Special Provisions) Act, 1985, which followed a debtor-in-possession

model and was often susceptible to misuse by promoters. While the distinction

between financial creditors and operational creditors has been upheld in Swiss

Ribbons Private Limited and Anr. v. Union of India & Ors., 2019 (4) SCC 17, as

resting on an ‘intelligible differentia’, this Court is nevertheless of the view that the

Code does not adequately account for the position of small operational creditors,

including MSMEs and statutory local bodies, who stand significantly

disenfranchised under the present framework by being placed at the bottom of the

repayment waterfall.

63. Most such entities are ill-equipped to absorb even a minor financial setback

and are therefore often compelled to adopt an aggressive and disruptive stance, as

the facts of the present matters demonstrate. Since this issue lies within the

Civil Appeal Nos.9052-9053 of 2026 Page 29 of 29

legislative domain, this Court observes that the Law Commission and the

Legislature may usefully examine the matter to ensure a fair and balanced

repayment mechanism alongside an efficient insolvency regime.

RELIEF

64. Keeping in view the law as it stands today and the aforesaid conclusions , the

present Civil Appeals are allowed and the impugned Judgment and Orders passed

by the Bombay High Court and Order dated 25

th

October 2018 passed in Regular

Civil Suit No. 153/2011 are set aside. Further, the Suit for recovery filed by

Respondent No.1-Varsha (Civil Suit No. 153/2011) pending before 13

th

Joint Civil

Judge, Senior Division, Nagpur as well as arbitration proceedings initiated by

Intervenor-Masyc are dismissed. Pending applications, if any, stand disposed of.

……………………J.

[MANOJ MISRA]

…………………J.

[MANMOHAN]

New Delhi;

July 17, 2026